Inventions, commercialization strategies, and knowledge spillovers in SMEs

Despite the comprehensive previous research on different aspects of inventions and externalities spanning both the micro- and macrolevels, no prior studies have, to our knowledge, examined the relationship between the commercialization strategies of inventions/patents and social knowledge spillovers. To bridge this gap in the literature, we examine how such spillovers, measured as forward citations, covary with four commercialization modes: (1) setting up a new firm, (2) commercialization within an existing firm where the inventor either is employed or (3) has an ownership stake, and (4) licensing/selling patents to other firms. Alternatively, an inventor may refrain from commercialization. Utilizing unique survey data on patents owned by small- and medium-sized enterprises and individuals, we provide evidence that commercialization through licensing/selling is the most efficient way of generating knowledge diffusion. We also find some support for new ventures being an important source of knowledge spillovers. Plain English Summary New inventions and discoveries, here defined as patents, are instrumental in promoting growth and increasing societal prosperity. To contribute to a benevolent development of societies, it is imperative that new findings and new knowledge also is disseminated to a large group of users and producers. We investigate how such diffusion is affected by the chosen strategy to commercialize patents: through a new firm, within an existing firm, or licensing/selling patents to other firms. We provide evidence that commercialization through licensing/selling, closely followed by setting up a new firm, appears to be the most efficient way to generate knowledge diffusion. Policymakers should therefore not only support technological development and encourage new firms but also facilitate for firms to interact and enhance their networks.