Industrial Designs and Firm Performance
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Industrial Designs and Firm Performance: Evidence from Canadian Firms Presentation by Robert Embree – March 11, 2021
Transcript of Industrial Designs and Firm Performance
Industrial Designs and Firm Performance:
Evidence from Canadian Firms
Presentation by Robert Embree – March 11, 2021
By Robert Embree 2/9
Motivation for this Research▪ Industrial designs (ID) are a specialized form of intellectual
property (IP) that protect unique designs
▪ ID has gained prominence in recent years, highlighted by the IP battle between Apple and Samsung that featured four design rights that belonged to Apple
▪ An internal study conducted for CIPO by the OECD indicated that designs was the IP area where Canadians lagged leading countries the most in terms of use
By Robert Embree 3/9
Positioning Study in the Literature
▪ There is a large literature on the effect of patents on firms, but a fairly small literature on designs
▪ The primary studies were conducted by or for other IP offices, including the UKIPO and European IP Office (EUIPO)
▪ This paper estimates the effect of holding IDs on firm revenue per employee and on net income per employee
By Robert Embree 4/9
Data▪ We exploit a unique Canadian data set obtained with the
assistance of Dr. Michael King from the Ivey School of Business at the University of Western Ontario
▪ The data set included over 500 firms, operating over a 25 year period from 1990 to 2014
▪ We control for firm equity, number of employees, sector, and firm-specific effects
▪ We also control for patents by constructing a patent index that includes international patents
By Robert Embree 5/9
Methodology
We use two main approaches: nearest-neighbour matching and a fixed effect regression
Nearest-neighbour matching compares each ID firm with a zero-ID firm that has similar characteristics, and calculates the average difference in revenue or profitability
A fixed effects regression controls for firm-specific effects, and lets us consider the marginal effect of each additional ID
By Robert Embree 6/9
Key Questions
▪ What effect does holding an ID have on revenue per employee?
▪ What effect does holding an ID have on net income (profitability) per employee?
▪ What effect does having more IDs have on revenue per employee?
▪ Is this an ID effect or an IP effect?
By Robert Embree 7/9
Results and Comparison to Existing Literature
StudyBascavusoglu-Moreau
and Tether (UKIPO, 2011)
European IP Office (2015)
Embree, Collette, Santilli (2020)
Premium in Revenue per Employee for firms with ID
17% 15% 19%
Premium in Net Income per Employee for firms with ID
N/A N/A 23%
Effect on Revenue per employee of 10% more ID
N/A 0.7% 1%
By Robert Embree 8/9
Effect of a 10% increase in IP stock on revenue per employee when controlling for patenting
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
EUIPO (2015) ECS (2020)
IDs Patents
By Robert Embree 9/9
Discussion▪ One limitation to this work: not controlling for R&D,
advertising or marketing expenditures▪ This is partially mitigated through controlling for
patenting, which is correlated with R&D▪ Our main conclusion is that being “design oriented” as
defined by holding, or having ever held, IDs is beneficial for firms
▪ This suggests that form can matter as well as function for many consumers
By Robert Embree 10/9
Thank-you for Listening!
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IP Rights, Business Profitabilityand Market Competition
Alissar HassanDeputy Chief Economist, IP Australia
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Introduction
• The IP system: role, trade off and balance
• Evidence of IP’s role promoting economic growth?
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IP ownersDescriptive statistics
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• IP rights owners doubled in the 15 year period analysed
• IP rights owners have more employees and a longer life
• IPR owners have higher profits
• Large businesses are more likely to have IP rights (mostly trade marks)
• IP rights owners are concentrated in manufacturing and whole trade industries.
Firm Characteristics
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IP Rights and profitabilityEconometric analysis
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Harvard Business Review, November 2014cartoon by Bill Abbott
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IP Rights and profitabilityKey findings
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IP rights increase profits for profitable firms
• IPR ownership contributes to business average profitability
• Different types or combinations of IPRs have a positive impact on business profitability
• There is no overall significant impact of a business’s number of IPRs on its profitability
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IPRs and market concentration or competitionMethodology
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High market concentration / less market competition
* A marketplace is generally considered to be competitive if it has a HHI of less than 0.15, while an HHI of 0.15 to 0.25 is considered to be a moderately concentrated marketplace, and an HHI of 0.25 or greater, a highly concentrated marketplace.
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Do IP rights affect market concentration?No conclusive evidence
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IP businesses holding trade marks and other IP rightscontribute more to
business profitability
Key findings
No conclusive evidence that IP
rights affect market
concentration
IP rights increase profits for profitable
businesses
Manufacturing and Wholesale Trade attract
most IPR usage
On average, IP owners are
larger and more profitable than
non-owners
IPR use doubled in 15 years since
2001-02
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Future IP Australia ResearchTrade mark filings through COVID-19
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Future IP Australia ResearchTrade marks and exports
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Thank you!
https://www.ipaustralia.gov.au/about-us/research-and-data/office-chief-economist
INNOVATION AND THE INTERNATIONALIZATION OF
BUSINESS
4TH ANNUAL IP DATA & RESEARCH CONFERENCE
Aaron SydorMarch, 2021
OUTLINE
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• From high-level perspective of Canada as a location of choice for innovation, commercialization and trade
• To firm-level perspective of the link between innovation and the internationalization of Canadian business
CANADA IS A NET EXPORTER OF R&D AND NET IMPORTER OF IP
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0
2
4
6
8
10
12
14
16
18
Canadian Trade in IP and R&D(Payments for use of IP, Payments for R&D services, Balance of Payments)
Data: Statistics Canada Source: Office of the Chief Economist, Global Affairs Canada
$ Billions
0
1
2
3
4
5
6
7
8
9$ Billions
Imports IP
Exports IP
Imports R&D
Exports R&D
0 5,000 10,000 15,000 20,000
Exports
Imports
MOST EXPORT GROWTH IS WITH U.S. WHILE IMPORTS INCREASINGLY COME FROM EUROPE
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Canadian Balance of Tradein IP and R&D
Data: Statistics Canada Source: Office of the Chief Economist, Global Affairs Canada
$ Millions
Pate
nts
Trad
emar
ks
Fran
chis
es
Copy
right
Soft
war
e
R&D
Pate
nts
Trad
emar
ksFr
anch
ises
Copy
right
Soft
war
e
R&D
0
2
4
6
8
10
12
2010 2019
Canadian Trade in R&D
2010 2019 2010 2019
2010 20192010 20190
2
4
6
8
10
12
2010 2019
Canadian Trade in IPRoW
RoW
X M X M X M X M X M
X M X M X M X M X M X M
ALTHOUGH GROWING FASTER THAN EXPORTS OVERALL THERE IS A LARGE DEFICIT IN IP GOODS
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Patent Intensive Goods*
Data: Statistics Canada Source: Office of the Chief Economist, Global Affairs Canada
0
100
200
300
400
500
600$ Billions
Patent Intensive Goods Exports
Patent intensive goods based on definition from “Intellectual Property and the U.S. Economy: Industries in Focus” U.S. Patent Office and Trademark Office 2012, excluding petro-chemicals
0 50 100 150 200$ Billions
All Other Goods Exports
14.6% 15.6%16.1%
2011
2020
Imports
Exports
Exports
Imports
COMPLEX RELATIONSHIP BETWEEN EXPORTING, IP AND INNOVATION
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Innovation and ExportingAmong SMEs
Data: Statistics Canada Source: Office of the Chief Economist, Global Affairs Canada
0 20 40 60 80Percent
Innovator
Non-Innovator
Doesn’t Export
Exports
Exports
Doesn’t Export
Use of IP and ExportingAmong SMEs
0 5 10 15 20 25
Percent
Patent
Trademark
Industrial Design
Trade Secret
Doesn’t Export
Doesn’t Export
Exports
Exports
Exports
CONSTRUCT FIRM-LEVEL MEASURES OF EACH INNOVATION AND INTERNATIONAL INTENSITY
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Imports
Exports
Exports
Imports
Firm attributes byinternationalization intensity
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Totalemployment
Value-addedoutput per
worker
Capital-labourratio
age
Aver
age
firm
= 1
0 int'l activity 1-3 int'l activities 4 int'l activities
Firm attributes by innovation intensity
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Totalemployment
Value-addedoutput per
worker
Capital-labourratio
age
Aver
age
firm
-=1
0 1-4 5-8
STRONG CORRELATION BETWEEN INNOVATION AND INTERNATIONALIZATION
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Imports
Exports
Exports
Imports
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0 1 2 3 4
Aver
age
num
ber o
fin
nova
tion
activ
ities
Number of international activities
Average number of innovation activities by internationalization intensity
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0 1-4 5-8
Aver
age
num
ber o
f in
tern
atio
nal a
ctiv
ities
Number of innovation activities
Average number of international activities by innovation intensity
HYPOTHESIS: AN UNSEEN “INTERNAL CAPABILITY” DRIVES BOTH INNOVATION AND INTERNATIONALIZATION
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Exports
InternationalizationInnovation
Firms’ internal capability
Internal Capability
Ability to overcome obstacles:
• Index 1: Measures taken to overcome obstacles to innovation (0-9)
Ability to mobilize resources:
• Index 2: Use of ten government programs at 3 levels of govermnet (0-30)
DYNAMIC CAPACITY OF FIRM AND INTERNATIONALIZATION AND INNOVATION
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InternationalizaionIntensity
Innovation Intensity
Dynamic Capacity 0.04* 0.53*
Log (Employment) 0.35* 0.35*
Log (Labour Productivity) 0.26* 0.12
Log (Cap-Lab Ratio) 0.04* 0.01
Age -0.004 -0.01
Obs 4019 4019
R-squared 0.424 0.248
Adj/ R-Squared 0.421 0.244
CONCLUSIONS
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• High-level perspective:
• Canada is an attractive location from which to perform R&D, and increasingly commercialize
• Patent-intensive goods play a modest role in Canadian exports
• Firm-level perspective:
• There is a strong link between innovation and internationalization
• In large part because these firms have the dynamic internal capability
