The Journal of Technology Transfer

, Volume 37, Issue 5, pp 732–754 | Cite as

Small business innovation: firm level evidence from Sweden

  • Martin AnderssonEmail author
  • Hans Lööf


This paper examines innovation among very small firms and provides new insights into both internal and external determinants of patenting. Applying a non-linear panel data approach to about 160,000 observations on manufacturing firms in Sweden for the period 2000–2006, the following facts emerge: (i) in contrast to larger firms, innovation in micro firms with 1–10 employees is not sensitive to variation in internal financial resources, (ii) skilled labour is even more important for innovation among micro firms compared to other firms, (iii) affiliation to a domestically owned multinational enterprise group increases the innovation capacity of small businesses, (iv) small firms’ innovation is closely linked to participation in international trade and exports to the G7-countries, and (v) there is no statistically significant evidence that proximity to metropolitan areas, or presence in a specialized cluster, increases the innovativeness of the smallest firm.


Innovation Innovative firms Entrepreneurship Small firms Intellectual property rights Technology transfer Location 

JEL Classification

F43 L26 M13 O31 O34 


  1. Acharya, R. C., & Keller, W. (2007). Technology transfer through imports. NBER Working Paper.Google Scholar
  2. Acs, Z., Anselin, L., & Varga, A. (2002). Patents and innovation counts as measures of regional production of new knowledge. Research Policy, 31, 1069–1085.CrossRefGoogle Scholar
  3. Acs, Z. J., & Audretsch, D. B. (1988). Innovation in large and small firms: an empirical analysis. American Economic Review, 78, 678–690.Google Scholar
  4. Acs, Z. J., & Audretsch, D. B. (1991). Innovation and size at the firm level. Southern Economic Journal, 57, 739–744.CrossRefGoogle Scholar
  5. Acs, Z. J., Audretsch, D. B., Braunerhjelm, P., & Carlsson, B. (2006). The knowledge spillover theory of entrepreneurship. CESIS WP, Royal Institute of Technology, Stockholm.Google Scholar
  6. Acs, Z. J., Audretsch, D. B., & Feldman, M. P. (1994). R&D spillovers and recipient firm size. Review of Economics and Statistics, 76, 336–340.CrossRefGoogle Scholar
  7. Aghion, P., Van Reenen, J., & Zingales, L. (2009). Innovation and institutional ownership. NBER WP 14769.Google Scholar
  8. Almeida, P., & Kogut, B. (1999). The localization of knowledge and the mobility of engineers. Management Science, 45, 905–917.CrossRefGoogle Scholar
  9. Andersson, M., & Johansson, B. (2008). Innovation ideas and regional characteristics—innovations and export entrepreneurship by firms in Swedish regions. Growth and Change, 39, 193–224.CrossRefGoogle Scholar
  10. Andersson, M., Lööf, H., & Johansson, S. (2008). Productivity and international trade—firm-level evidence from a small open economy. Review of World Economics, 144, 774–801.CrossRefGoogle Scholar
  11. Arundel, A., & Kemp, R. (2009). Measuring eco-innovation. UNU-MERIT Working Paper 2009-017.Google Scholar
  12. Audretsch, D. B. (2002). The dynamic role of small firms—evidence from the US. Small Business Economics, 18, 13–40.CrossRefGoogle Scholar
  13. Audretsch, D. B., & Feldman, M. P. (1996). R&D spillovers and the geography of innovation and production. American Economic Review, 86, 630–640.Google Scholar
  14. Baptista, R. (2000). Do innovations diffuse faster within geographical clusters? International Journal of Industrial Organization, 18, 515–535.CrossRefGoogle Scholar
  15. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120.CrossRefGoogle Scholar
  16. Bartel, A. P., & Lichtenberg, F. R. (1987). The comparative advantage of educated workers in implementing new technology. Review of Economics and Statistics, 69, 1–11.CrossRefGoogle Scholar
  17. Baumol, W. J. (2002). Entrepreneurship, innovation and growth: the David-Goliath symbiosis. Journal of Entrepreneurial Finance and Business Ventures, 7, 1–10.Google Scholar
  18. Berman, E., Bound, J., Griliches, Z., & Machin, S. (1998). Implications of skill biased technical change: international evidence. Quarterly Journal of Economics, 113, 1245–1279.CrossRefGoogle Scholar
  19. Breitzman, A., & Hicks, D. (2008). An analysis of small business patents by industry and firm size. Small Business Administration, Office of Advocacy.Google Scholar
  20. Brown, J. R., Fazzari, S. M., & Petersen, B. C. (2009). Financing innovation and growth: Cash-flow, external equity, and the 1990 s R&D boom. Journal of Finance, 64, 151–185.CrossRefGoogle Scholar
  21. Coe, D., & Helpman, E. (1995). International R&D spillovers. European Economic Review, 39, 859–887.CrossRefGoogle Scholar
  22. Cohen, W. (1995). Empirical studies in innovative activity. In P. Stoneman (Ed.), Handbook of the economics of innovation and technological change (pp. 182–264). Oxford: Blackwell.Google Scholar
  23. Cohen, W., & Levin, R. (1989). Empirical studies of innovation and market structure. In R. Schmalensee & R. Willig (Eds.), Handbook of industrial organisation (Chap. 18, pp. 1060–1107). North-Holland.Google Scholar
  24. Cohen, W., & Levinthal, D. (1990). Absorptive capacity—a new perspective on learning and innovation. Administrative Science Quarterly, 35, 128–152.CrossRefGoogle Scholar
  25. Crépon, B., Duguet, E., & Mairesse, J. (1998). Research, innovation, and productivity: An econometric analysis at the firm level. Economics of Innovation and New Technology, 7, 115–156.CrossRefGoogle Scholar
  26. Dachs, B., Ebersberger, B., & Lööf, H. (2008). The innovative performance of foreign-owned enterprises in small open economies. Journal of Technology Transfer, 33, 393–406.CrossRefGoogle Scholar
  27. Davidsson, P., Lindmark, L., & Olofsson, C. (1994). New firm formation and regional development in Sweden. Regional Studies, 28, 395–410.CrossRefGoogle Scholar
  28. de Jong, P. (2007). The relationship between capital investment and r&d spending: A panel cointegration analysis. Applied Financial Economics, 17, 871–880.CrossRefGoogle Scholar
  29. Duranton, G., & Puga, D. (2001). Nursery cities: Urban diversity, process innovation, and the life cycle of products. American Economic Review, 91, 1454–1477.CrossRefGoogle Scholar
  30. Ejermo, O. (2007). Regional innovation measured by patent datadoes quality matter? CIRCLE Working Paper 2007-8.Google Scholar
  31. Fang, W., Tian, X., & Tice, S. (2010). Does stock liquidity enhance or impede firm innovation? Working Paper, Rutgers University.Google Scholar
  32. Fazzari, S. M., Hubbard, R. G., & Petersen, B. C. (1988). Financing constraints and corporate investment. Brookings Papers on Economic Activity, 1, 141–195.CrossRefGoogle Scholar
  33. Feldman, M. (1999). The new economics of innovation, spillovers and agglomeration—a review of empirical studies. Economics of Innovation and New Technology, 8, 5–25.CrossRefGoogle Scholar
  34. Granstrand, O., & Sjölander, S. (1990). The acquisition of technology and small firms by large firms. Journal of Economic Behavior & Organization, 13, 367–386.CrossRefGoogle Scholar
  35. Greenaway, D., & Kneller, R. (2007). Firm heterogeneity, exporting and foreign direct investment. Economic Journal, 117, 134–161.CrossRefGoogle Scholar
  36. Griliches, Z. (1990). Patent statistics as economic indicators—a survey. Journal of Economic Literature, 28, 1661–1707.Google Scholar
  37. Griliches, Z. (1995). Econometric results and measurement issues. In P. A. Stoneman (Ed.), Handbook of the economics of innovation and technological change (pp. 52–89). Cambridge, MA: Blackwell.Google Scholar
  38. Griliches, Z., Pakes, A., & Hall, B. H. (1988). The value of patents as indicators of inventive activity. NBER WP 2083.Google Scholar
  39. Hall, B. H. (2005). The financing of innovation. In S. Shane (Ed.), Blackwell handbook of technology and innovation management. Oxford: Blackwell.Google Scholar
  40. Harhoff, D. (2009). The role of patents and licenses in securing external finance for innovation. EIB papers volume 14 n°2/2009, European Investment Bank, Luxemburg.Google Scholar
  41. Himmerlfarb, C., & Petersen, B. (1994). R&D and internal finance—a panel study of small firms in high-technology industries. Review of Economics and Statistics, 76, 38–51.CrossRefGoogle Scholar
  42. Hoover, E. (1937). Location theory and the shoe and leather industries. Cambridge: Harvard University Press.Google Scholar
  43. Hulten, C. R. (2002). Total factor productivity: A short biography. In E. R. Dean, & M. J. Harper (Eds.), New developments in productivity analysis. National Bureau of Economic Research (Studies in Income and Wealth).Google Scholar
  44. Jaffe, A. (1989). Real effects of academic research. American Economic Review, 79, 957–970.Google Scholar
  45. Jaffe, A., Trajtenberg, M., & Henderson, R. (1993). Geographic localization of knowledge spillovers as evidenced by patent citations. Quarterly Journal of Economics, 63, 577–598.CrossRefGoogle Scholar
  46. Johansson, B., & Lööf, H. (2008). Innovation activities explained by firm attributes and location. Economics of Innovation and New Technology, 17, 533–552.CrossRefGoogle Scholar
  47. Keller, W. (2004). International technology diffusion. Journal of Economic Literature, 42, 752–782.CrossRefGoogle Scholar
  48. Kleinknecht, A., & Mohnen, P. (Eds.). (2002). Innovation and firm performance: econometric explorations of survey data. Basingstoke: Palgrave.Google Scholar
  49. Klette, T. J., & Kortum, S. (2004). Innovating firms and aggregate innovation. Journal of Political Economy, 112, 896–1018.CrossRefGoogle Scholar
  50. Lööf, H., & Andersson, M. (2010). Imports, productivity and the origin markets–the role of knowledge intensive economies. World Economy, 33, 458–481.CrossRefGoogle Scholar
  51. Machin, S., & van Reenen, J. (1998). Technology and changes in skill structure: Evidence from seven OECD countries. Quarterly Journal of Economics, 113, 1215–1244.CrossRefGoogle Scholar
  52. Malerba, F., & Orsenigo, L. (1993). Technological regimes and firm behavior. Industrial and Corporate Change, 2, 45–74.CrossRefGoogle Scholar
  53. Marshall, A. (1920). Principles of economics. London: MacMillan.Google Scholar
  54. OECD. (2009). Science, technology and industry scoreboard 2009. OECD Publishing. doi:  10.1787/sti_scoreboard-2009-en.
  55. Ohlin, B. (1933). Interregional and international trade. Cambridge: Harvard University Press.Google Scholar
  56. Patel, P., & Pavitt, K. (1991). Large firms in the production of the world’s technology: An important case of non-globalisation. Journal of International Business Studies, 22, 1–21.CrossRefGoogle Scholar
  57. Pavitt, K. (1984). Sectoral patterns of technical change—towards a taxonomy and a theory. Research Policy, 134, 343–373.CrossRefGoogle Scholar
  58. Penrose, E. T. (1959). The theory of the growth of the firm. New York: Wiley.Google Scholar
  59. Phaffermayr, M., & Bellak, C. (2002). Why foreign-owned firms are different: A conceptual framework and empirical evidence for Austria. In R. Jungnickel (Ed.), Foreign-owned firms: Are they different? (pp. 13–57). Basingstoke: Palgrave Macmillan.Google Scholar
  60. Rivera-Batiz, L., & Romer, P. (1991). International trade with endogenous technological change. European Economic Review, 35, 971–1001.CrossRefGoogle Scholar
  61. Rothwell, R. (1989). Small firms, innovation and technological change. Small Business Economics, 1, 51–64.CrossRefGoogle Scholar
  62. Scellato, G. (2007). Patents, firm size and financial constraints: An empirical analysis for a panel of Italian manufacturing firms. Cambridge Journal of Economics, 31, 55–76.CrossRefGoogle Scholar
  63. Scherer, F. M. (1999). New perspectives on economic growth and technological innovation. Washington: Brookings Institution Press.Google Scholar
  64. Schumpeter, J. A. (1934). The theory of economic development (8th ed.). Cambridge: Harvard University Press.Google Scholar
  65. Thoma, G., Torrisi, S., Gambardella, A., Guellec, D., Hall, B. H., & Harhoff, D. (2010). Harmonizing and combining large datasetsan application to firm-level patent and accounting data. NBER WP 15851.Google Scholar
  66. van Marrewijk, C. (2002). International trade and the world economy. Oxford: Oxford University Press.Google Scholar
  67. Vernon, R. (1966). International investment and international trade in the product cycle. Quarterly Journal of Economics, 80, 190–207.CrossRefGoogle Scholar
  68. Wagner, J. (2007). Exports and productivity—a survey of the evidence from firm level data. World Economy, 30, 60–82.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Centre of Excellence for Science and Innovation Studies (CESIS)Royal Institute of TechnologyStockholmSweden
  2. 2.Jönköping International Business School (JIBS)JönköpingSweden
  3. 3.Blekinge Institute of Technology (BTH)KarlskronaSweden
  4. 4.Division of Economics and CESISRoyal Institute of TechnologyStockholmSweden

Personalised recommendations