The propensity to patent: An empirical analysis at the innovation level *

This study seeks to shed new light on the complex relationship between innovations and patents. The objective of the study is to contribute to our understanding of which innovations are patented—and which are not—by analyzing the patenting decision for circa 800 Finnish product innovations. The data is drawn from the Sfinno database compiled at VTT Technical Research Centre of Finland. The econometric analysis indicates that various characteristics of the innovation, the market, and the innovating firm have a significant effect on the propensity to patent. First, there appears to be a Ushaped relationship between firm size and the propensity to patent, which can be attributed to a relatively large extent to economies of scale in the patenting activity as well as to the relatively important role of patenting in start-up ventures. Second, the estimation results suggest that larger—that is, more novel and significant—innovations are patented more frequently than smaller ones. Third, technologically very complex innovations appear to be patented less often than others, while the fragmentation of intellectual property rights to cumulatively developing technology seems to entail high propensities to patent.