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Presentation to ‘Opening Doors to Innovation’ 7th November 2012 by Professor Gavin C Reid Director, CRIEFF University of St Andrews

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Presentation on theme: "Presentation to ‘Opening Doors to Innovation’ 7th November 2012 by Professor Gavin C Reid Director, CRIEFF University of St Andrews"— Presentation transcript:

1 Presentation to ‘Opening Doors to Innovation’ 7th November 2012 by Professor Gavin C Reid Director, CRIEFF University of St Andrews

2 High-Tech Enterprise & Entrepreneurship: Outline Evidence on High Technology Firms in Scotland Modelling the High Tech Firm Key Findings of Modelling Some Case Study Insights References Further Relevant Work

3 Sectors Focus is on the following sectors: Software Life sciences Microelectronics Optoelectronics Digital media.

4

5 The sampled firms Best characterised as being small (viz. micro-firms and SMEs) knowledge intensive (largely graduate staff) research intensive (mean spend on R&D approaching £1m.) internationalised (mainly selling to markets beyond Europe)

6 Key Points from Modelling Estimates suggest a short-run equilibrium size of just 100 employees, but a long-run optimum size of about 1000 employees (denoted S* below). To achieve the ‘Schumpeterian effect‘(of marked scale economies in R&D), estimates suggest that firms have to grow to very much larger sizes of beyond 3,000 employees (denoted S** below).

7 Short Run Equilibrium Firm Size: Ranges for a Variety of Model Specifications Turnover £2.9 – £3.4 m Employment 109 – 137 Productivity 55.7 – 86.5 (£1000’s sales per head)

8 The Envelope of Firm Size On the horizontal axis is size (S) (e.g. by employment, assets, sales etc.). On the vertical axis is innovative intensity (I) (e.g. ratio of R&D expenditure to sales, patent count per employees etc.) The firm size for optimal innovative intensity is denoted S * (estimated at 1000 employees, using the employment measure of size) The point beyond which size offers increasing returns to R & D is denoted by S** (estimated at 3000 employees) Note: S** is very much larger than S*

9 I S*S* O S ** S

10 Brief Company Case Studies Prostrakan – (200 employees) rapid growth; acquired by Kyowa Hakko Kirin in Microemmissive Displays (50 employees) – victim of the recession, called in the administrators in Lesson: Rapid growth is important, and may need to be driven by merger, acquisition, etc. rather than just by retentions.

11 References to Recent Publications Reid, G.C. (with J A Smith), Risk Appraisal and Venture Capital in High Technology New Ventures, London, Routledge, 2008, ISBN: , (248 pages). Paperback edn Reid, G.C. (and V. Ujjual) (2011), ‘Performance and Optimality for High Technology Firms: an empirical analysis of growth and innovation’. Chapter 3 in R.J. Fairchild (ed.) Entrepreneurship: Motivation, Performance and Risk/Reward, Nova Publishing, Hauppage, NY, USA. ISBN

12 New Findings The increasing importance of trade secrecy over other means of protecting intellectual property (e.g. patenting, copyright) See: Gavin C. Reid (with Nicola Searle) (2012), ‘What’s it worth to keep a secret? IP protection under the Economic Espionage Act’, CRIEFF discussion paper, School of Economics & Finance, University of St Andrews, No

13 CRIEFF Discussion Papers


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