Innovation and IP falling off SME's radar
Innovation and IP falling off SME's radar - Griffith Hack
|25 July 2012|
|Statistics recently released by the Australian Bureau of Statistics (ABS) have shown that the percentage of Australian businesses engaged in innovative activity in the 2011 financial year fell from 2010. Interestingly, the figures also highlight a discrepancy between the level of innovative activities undertaken by large businesses and small to medium enterprises (SMEs).|
ABS reported that, across Australia businesses with ‘some level of innovative activity’ fell to 39.1% in the 2011 year, down from 43.8% in the previous year. More significant was the decrease in the level of innovation within SMEs, the level of small companies (0-4 employees) involved in innovative activity in 2011 falling to 30%, down from 36%. This figure was in contrast to large business, with 66% recording some level of innovative activity in 2011. The ABS data also draws attention to the fact that 63% of large businesses avail themselves of some form of intellectual property protection as opposed to just 16% of small businesses. These two facts, when considered in concert, necessitate the conclusion that, not only are SMEs undertaking less R&D (thus creating less IP), but are also less likely to protect any IP that they do generate or acquire.
While the decrease in innovative activity, in part, can be attributed to broader economic influences, the data does appear to underline an underlying need to provide additional encouragement to SMEs and incentivise them to undertake R&D activity regardless of the economic climate.
Research tells us that the most innovative companies are not necessarily the biggest spenders on innovation. In fact in a 2011 Global Innovation 100 Study, it was identified that seven of the top 10 innovators were not among the top 10 spenders on innovation. Factors such as developing the right ideas, fulfilling a consumer need (regardless of whether consumers themselves are currently aware of this need) and smart commercialisation and protection strategies are just as important (if not more important) than simply spending money on innovation. Based on these observations, two relevant points can be made. Firstly, despite of the fact that there appears to be no correlation between spending on innovation and being innovative, the simple observation needs to be made that you still need to be engaged in innovation on some level to be innovative. Secondly, if you are engaged in innovation, taking a holistic approach to your R&D program materially increases your likelihood of success. In fact, the ABS data highlights the fact that innovative companies are three times as likely to generate and protect intellectual property, a mechanism that rewards companies for innovation and R&D and fosters further innovation through promoting competition in start-up industries.
A potential reason for the disparity in IP protection levels between large and small firms could be explained as a simple lack of awareness within SMEs as to the benefits of engaging in innovation and the importance of adequately protecting the IP that you create. It could just as easily be explained as a resourcing issue. Either way, it does present a case for additional government support, not simply monetary, but also a program aimed at raising awareness of the importance of developing a structured approach to a company’s R&D program, as well as protecting IP.
There are a range of government funding opportunities available to companies engaging in the generation, protection and commercialisation of IP. Commercialisation Australia funding and the Export Market Development Grant Program have historically been popular. In addition, the recently revamped R&D Tax Incentive program will provide a significantly greater benefit to SMEs undertaking R&D activities which may begin to address this significant imbalance in the level of innovative activity in Australian businesses. This is courtesy of the introduction of a 45c cash refund for every R&D dollar spent by companies with annual turnover less than $20 million. In addition, loss making SMEs can now ‘cash out’ their eligible R&D tax expenditure under the new R&D Tax Incentive program, providing a material increase in the size of the refundable cash offset available to them when compared against the old R&D Tax Concession program.
The changes to the tax incentives in the field of R&D will certainly encourage SMEs to pursue innovation despite the challenging economic climate. In addition, encouraging and assisting SMEs to take advantage of intellectual property protection will go a long way to addressing an area of arguable historical weakness in an SME’s R&D development cycle.
Griffith Hack Consulting
|Griffith Hack Consulting has long been aware of the strong link between R&D activities and intellectual property protection in the ‘cycle of innovation’ within a company and provides expertise in both R&D tax services and intellectual property management. As part of the wider Griffith Hack group, GHC has access to a network of expertise in intellectual property protection and legal services and is well positioned to assist and facilitate the cycle of innovation within SME’s in Australia.|
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