Organizational practices facilitating patent commercialization.

ABSTRACT

This study identifies the organizational practices that are essential for enabling patent commercialization in organizations. An empirical study across 56 organizations is conducted for empirically validating the conceptual model. The organizations are clustered into high and low patent commercializing groups. Thereafter these clusters are compared to understand wherein they differ from each other with respect to their patent commercialization activities and implementation of organizational practices supporting patent commercialization. The most significant organizational practices prevalent in the high commercializing organizations are highlighted in order to prescribe them as benchmarking practices for managers striving to implement patent commercialization culture in their organizations.

Keywords: Organizational Practices, Patent Commercialization.

1. INTRODUCTION

With the increasing realization that intangible assets like patents can deliver sustainable competitive advantage, organizations have become more focused upon integrating patenting as a part of their strategic business goals. Their objective now is to design more number of commercially viable patents, which in turn would enhance their organizational performance (Rivette and Kline, 2000). However, as a part of the change management strategies for facilitating a pro-patenting shift, managers need to implement organizational practices for streamlining their organizational patent commercialization activities. This paper makes an appraisal of the practices needed for facilitating patent commercialization.

In this study we identify organizational practices that help in facilitating patent commercialization. We empirically validate the role of these practices in the context of both high and low patent commercializing organizations through a survey across 56 organizations located in India. Finally, on the basis of our findings, we recommend the ideal practices that managers need to institutionalize in order to establish patent commercialization culture in their organizations.

2. LITERATURE REVIEW

Our literature review focused upon identifying organizational practices that have the potential for enhancing organizational patent commercialization. Unfortunately, there exists a noticeable dearth of literature in this area. Existing studies highlight organizational practices that facilitate in stepping up organizational patent filings. The presence of an in-house patent cell, presence of multidisciplinary teams, involvement of top management, alignment of patenting strategies with organizational vision, budgeting patenting expenses, patent awareness programs and institutionalizing rewarding and recognition programs have been highlighted as practices favoring patent productivity (Shapiro, 1990; Berkowitz, 1993; Kahn, 1996; Ransley and Gaffney, 1997; Chattopadhyay, 2004). We assumed that the organizational practices that help in enhancing patent productivity would also have a potential for facilitating organizational patent commercialization.

3. METHODOLOGY

We first developed the conceptual model by integrating findings from the literature review with preliminary exploratory case studies. Based upon its corresponding measurement model, we thereafter developed a questionnaire for conducting a survey across organizations. The reliability and validity of our questionnaire was ascertained through pilot study. Statistical analysis of the data reveals interesting results, which we discuss here. Finally, based upon our results, we have outlined the managerial implications that our study bears.

3.1. Conceptual Model

The conceptual model of our study is shown in Figure 1.

[FIGURE 1 OMITTED]

The case studies had shown that many organizations reward revenue-yielding patents, but would not reward knowledge-yielding patents. We anticipated that this differentiation would have an impact upon the patent commercialization culture in an organization, and consider them as separate organizational practices in our study.

The eight organizational practices are treated as independent variables and organizational patent commercialization is the dependent variable in our study.

3.2. Measurement

Corresponding to the conceptual model described in Figure 1, we developed a corresponding measurement model. The dependent variable, organizational patent commercialization, was measured using the presence of the seven practices--patent licensing, patent cross licensing, maintaining patents for core competence, using patents for blocking, using patents for mergers and acquisitions (M&A), selling off patents and donating patents. The independent variables measured the extent to which the organizational practices are presently implemented in the organizations. Both dependent and independent variables were measured using a 5- point Liked-type scale, the anchors being: 1 definitely non-existent and 5: definitely existent level of practice. The Cronbach alpha obtained for the independent and dependent variables were 0.86 and 0.79, indicating reliable measurement of the constructs.

The mean of the seven dependent variables was used to measure organizational patent commercialization index (PCOM).This index is critical in differentiating the high patent commercializing organizations from the low patent commercializing organizations as discussed subsequently.

3.3. Sample

There is no database available about organizations having commercialized patents. We assumed that organizations, which are maintaining patents and also filing patents are also potential commercializers. Therefore, we combined information from 'Ekaswa A' database (listing organizations filing patents in India) and the NIC database (listing maintained patents) provided by TIFAC, India. The period considered was from 1.1.1995 till 30.6.2002. The organizations selected primarily categorized as information technology (IT) based organizations, pharmaceutical, manufacturing and academic organizations. However, not all the organizations responded to our request for participating in this study citing proprietary reasons. Questionnaires were sent to 80 organizations, out of which 56 organizations returned them duly filled. The respondents essentially were either managers of patent cell or senior managers actively involved in organizational patent commercialization activities. The sample for our study is described in Table 1.

3.4. Analysis

Our primary objective in this study is to understand the effect of facilitating organizational practices upon the organizational patent commercialization. However, not all organizations considered in our study have the same level of patent commercialization. The scatter plot of the organizational patent commercialization index shown in Figure 2 shows the clear existence of 2 clusters.

[FIGURE 2 OMITTED]

The 2 clusters obtained are compared with respect to their implementation of the patent commercialization practices (Table 2) and the organizational practices facilitating patent commercialization (Table 3). The mean, standard deviation for each cluster are noted and we performed t-tests to check whether there exists any significant difference between the 2 clusters' means. Further, we conducted multiple stepwise discriminant analysis across the 2 clusters to identify those organizational practices that differentiate between them. Finally, stepwise multiple regression analysis is conducted with respect to the organizational cluster high on patent commercialization in order to identify the most significant organizational practice presently implemented by the 2 organizational clusters (Table 4).

3.5. Results

Table 2 reports that the Cluster 1 organizations are high in practicing all the patent commercialization practices as compared to Cluster 2, the only exception being selling off patents. In fact, selling off patents is reported as the most favored practice by Cluster 2, their next preference being maintaining patents for core competency. Both clusters are low on donating of patents as in India there are no tax benefits associated with it. From their commercialization preferences it is evident that organizations in Cluster 1 are active commercializers, while in Cluster 2 are low commercializers. Their levels of implementation of the organizational practices in this regard are studied in Table 3. The results confirm our initial hypothesis that organizations differing in their levels of patent commercialization would differ in their levels of implementation of facilitating organizational practices. As seen in the t-test results, the Cluster 1 organizations significantly outperform the Cluster 2 organizations with respect to all the practices considered in our study.

The results of the discriminant analysis identify the practices of presence of in-house patent cell and rewarding and recognition of only knowledge-yielding patents as the most significant differentiating practices between Clusters 1 and 2. These practices are significant enough to correctly classify 96.4% of the original cluster membership.

Our final objective was to identify the significant organizational practices as perceived by the high commercializers--Cluster 1 organizations. The result is described in Table 4.

The regression result highlights three organizational practices as having significant impact upon organizational patent commercialization index. According to their standardized [beta] coefficients, the most significant practice is rewarding and recognition of knowledge-yielding patents ([beta]=0.62), followed by the practices of budgeting of patent commercialization practices ([beta]=0.32) and presence of in-house patent cell ([beta]=0.29). The model has high goodness-of-fit as it explains 78% of the variation in patent commercialization index scores. The high F-value of 34.82 also confirms that the regression model is significantly explained in terms of the independent variables highlighted here.

4. CONCLUSION

The above results have manifold implications. First of all, from the case of the Cluster 2 organizations, it is evident that despite patent creation, they are not too high on patent commercialization. They tend to behave in bipolar manner--either sell off patents or prefer retaining them. Other patent commercialization practices are not practiced by them. They are also low in institutionalizing the required organizational practices for backing their patent commercialization efforts. The managers of these organizations need to implement all the required organizational practices supporting patent commercialization. The practices of institutionalizing in-house patent cell, rewarding and recognition of knowledge-yielding patents and budgeting of patent commercialization expenses need to be looked upon as benchmarking practices, based upon the experiences of the high commercializing Cluster 1 organizations. Additionally, the managers of Cluster 2 organizations need to create the organizational focus towards patent commercialization--not as a tool for gaining short-term returns through selling off and otherwise stacking on the patents for own use, but to use the patents as leveraging tools for increasing their market presence and R&D branding, thereby gaining competitive advantage.

The other implication lies at politico-socio-economic levels. The Indian Government needs to permit tax benefits with patent donations. Otherwise, the low instances of patent donations locks up the knowledge for further research and technological advancement benefiting the public domain. Patents are embodiments of knowledge, which need to be commercialized by organizations, not only for their own profits, but also for societal benefit.

REFERENCE

Berkowitz, L.., "Getting the Most from Your Patents", Research Technology Management, Vol. 32, 1993, 26-34.

Chattopadyay, U., "Understanding Organization Designs for Patent Productivity through Disparity Profiling of ICT Professionals with varying Patent Experience", Ph.D. Thesis IISc 2004.

Kahn, E., "TQM for IPM: Applying the TQM Model to Intellectual Property Management", In Technology Licensing: Corporate Strategies For Maximizing Value John Wile & Sons New York, 1996.

Ransley, D. L. and Gaffney, R., "Upgrade Your Patenting Process", Research Technology Management, Vol. 40(3), 1997, 41-46.

Rivette , K. and Kline, D., "Discovering New Value in Intellectual Property", Harvard Business Review, Vol. 78(1), 2000, 54-66.

Shapiro, Amran R. "Responding to the Changing Patent System", Research. Technology Management Vol. 33(5), 1990, 38-43.

Nilanjana Bhaduri nee Chakraborty, Indian Institute of Science, Bangalore, INDIA

Mary Mathew, Indian Institute of Science, Bangalore, INDIA

Nilanjana Bhaduri nee Chakraborty is a doctoral student at the Department of Management Studies, Indian Institute of Science, Bangalore, India.

Mary Mathew is an Assistant Professor at the Department of Management Studies, Indian Institute of Science, Bangalore, India.

TABLE 1: SAMPLE DISTRIBUTION

                      IT:                      Pharmaceutical:
             22 or g, 91 respondents      10 or g, 45 respondents

Respondent          C1  C2                        C1  C2
type
Respondents         43  48                        29  16

                 Manufacturing:               Academics:
             12 org, 37 respondents       12 org, respondents

Respondent          C1  C2                        C1  C2
type

Respondents          6  31                         3  32

where C1: Member of patent cell or similar body, if patent cell does
not exist

C2: Senior managers with knowledge about organizational patent
commercialization activities

TABLE 2: COMPARISON BETWEEN CLUSTERS 1 ([n.sub.1] = 20) AND 2
([n.sub.2] = 36) REGARDING PRESENT PATENT COMMERCIALIZATION PRACTICES

Present implementation of   Cluster 1    Cluster 2
patent commercialization   Mean (S.D.)  Mean (S.D.)
practices

Licensing of patents       4.53 (0.47)  1.41 (0.32)
Cross licensing of
  patents                  4.53 (0.27)  2.69 (1.44)
Using patents for M&A      4.29 (0.42)  1.52 (0.25)
Maintaining patents for    4.45 (0.40)  3.09 (0.50)
  core competency
Donating patents           2.30 (0.59)  1.43 (0.33)
Selling off patents        3.58 (0.80)  4.53 (0.29)
Using patents for
  blocking                 4.45 (0.46)  1.50 (0.34)

Present implementation of  t-value    Sig.
patent commercialization
practices

Licensing of patents        26.43    0.01 **
Cross licensing of
  patents                   7.41     0.01 **
Using patents for M&A       26.73    0.01 **
Maintaining patents for     11.10    0.01 **
  core competency
Donating patents            6.07     0.01 **
Selling off patents         -5.08    0.01 **
Using patents for
  blocking                  25.06    0.01 **

** p < = 0.01

TABLE 3: COMPARISON BETWEEN CLUSTERS 1 ([n.sub.1] = 20) AND 2
([n.sub.2] = 36) REGARDING PRESENT IMPLEMENTATION OF FAVORING
ORGANIZATIONAL PRACTICES

Present                     Cluster 1    Cluster 2   t-value   Sig.
implementation of          Mean (S.D.)  Mean (S.D.)
organizational practices
facilitating patent
commercialization

Presence of in-house
  patent cell              4.34 (0.43)  1.49 (0.18)   28.65   0.01 **
Presence of
  multidisciplinary
  teams addressing patent
  commercialization
  issues                   4.36 (0.31)  2.54 (0.17)   24.26   0.01 **
Involvement of to
  management               4.21 (0.34)  2.41 (0.24)   20.85   0.01 **
Alignment of patent
  commercialization with
  organizational vision    4.43 (0.31)  2.63 (0.31)   20.85   0.01 **
Presence of patent
  commercialization
  awareness programs       4.33 (0.34)  2.36 (0.24)   23.01   0.01 **
Budgeting of patent
  commercialization
  expenses                 4.32 (0.37)  2.58 (0.36)   17.15   0.01 **
Rewarding and recognition
  practice for only
  revenue-yielding
  patents                  4.29 (0.47)  2.47 (0.24)   16.13   0.01 **
Rewarding and recognition
  practice for only
  knowledge-yielding       4.33 (0.37)  2.01 (0.22)   25.78   0.01 **

** p < = 0.01

TABLE 4: REGRESSION RESULT FOR CLUSTER 1 ORGANIZATIONS ([n.sub.1] = 20)

Dependent variable: Patent commercialization index

                                     Standardized   t-value   Sig.
                                     coefficients

                                         Beta
Constant                                            -5.58     0.01 **
Presence of in-house patent cell         0.38        2.77     0.01 **
Rewarding and recognition practice
  of knowledge-yielding patents          0.71        5.95     0.01 **
Budgeting of patent
  commercialization expenses             0.37        3.06     0.01 **

[R.sup.2] = 0-81; Adj. [R.sup.2] = 0.78; F=34.82, Sig.=0.01 **
** -p <= 0.01, * -p <= 0.05