Deep tech innovation in
smart connected technologies
A comparative analysis of SMEs in Europe and the United States
April 2022
2
Foreword
The Fourth Industrial Revolution (4IR) has triggered sweeping transformations in value
creation and consumer behaviour. A constellation of disruptive technologies – such as the
internet of things, cloud computing, big data, 5G communication and, of course, artificial
intelligence – is paving the way for a new, data-driven economy. The world is already filled
with billions of smart devices that can all collect and share data in real time and make
autonomous decisions. In terms of value creation, the boom in 4IR technologies is expected
to contribute over two trillion euros to the EU economy by the end of this decade.
With this report, the European Investment Bank (EIB) and European Patent Oce (EPO) are
teaming up for the first time to oer key insights into the small businesses driving innovation
in 4IR technologies. This partnership stems from a shared awareness of the crucial part such
businesses play in Europe's future prosperity. It also draws on our respective experiences of
the unique challenges facing businesses seeking to bring new technologies to market and
how to address them.
Patent protection is vital for the small and medium-sized enterprises (SMEs) that invest in
innovation. Patents enable enterprises and individuals to reap the rewards of their creativity
and hard work. As the patent oce for Europe, the EPO provides high-quality patents to
protect innovations in up to 44 member states (including all EU member states). It is also
positioned at the cutting edge of technical progress, with millions of patent documents
classified across a wide variety of fields. But patent protection is not just for large
multinational corporations. Applicants at the EPO range from teams of scientists
collaborating in university spin-os to sole inventors with brilliant ideas. European patents
also help small deep tech businesses to raise funding, set up collaborations, and
eventually scale up in Europe and beyond.
Favourable financing conditions are another vital precondition for firms developing
4IR technologies to flourish. The European Investment Bank Group, composed of both the
European Investment Bank (EIB) and the European Investment Fund (EIF), is the largest
multilateral financial institution in the world. In 2021, the EIB Group made available almost
EUR 95 billion worldwide. Almost half the Group’s financing, EUR 45 billion, went to SMEs.
At the same time, the EIB Group has intensified financing for innovation. Last year, EUR
20.7 billion of the EIB Group’s financing went to support innovation, including investment in
digitalisation and cutting-edge technologies. From start-ups, to scale-ups, to well established
firms, the EIB Group supports innovation and growth via funding for lending and guarantees
for banks to target SMEs, direct finance and guarantees to innovative companies, seed capital,
business angels and venture capital support, as well as venture debt.
Our study draws attention to SMEs that are developing new 4IR technology in Europe. It
provides data-driven analysis of the specific challenges they are facing compared to other
SMEs in Europe and in the US. 4IR SMEs have strong potential to unlock growth and deliver
added value. In the global race to digital transformation, it is paramount that both investors
and decision-makers recognise their potential.
Debora Revoltella Yann Ménière
Chief Economist EIB Chief Economist EPO
3
About the report
The purpose of this study is to provide a comprehensive inventory and analysis of small
and medium-sized enterprises that invest in the development of new technologies linked to
the Fourth Industrial Revolution (4IR) in the EU27. The study quantifies and analyses the
contribution made by these small businesses to the European Union's performance in
4IR innovation over the past decade. By benchmarking these companies against similar
4IR businesses in the US and other European countries, it aims to inform policymakers,
private decision-makers and investors of the specific challenges of growing 4IR deep tech
businesses in Europe.
About the European Investment Bank Economics Department
The mission of the EIB Economics Department is to provide economic analyses and studies
to support the Bank in its operations and in defining its positioning, strategy and policy. The
department, a team of 40 economists, is headed by Director Debora Revoltella.
www.eib.org/economics
About the European Patent Oce
The European Patent Oce was created in 1977. As the executive arm of the European Patent
Organisation, it is responsible for examining European patent applications and granting
European patents, which can be validated in up to 44 countries in Europe and beyond. As the
patent oce for Europe, the EPO is committed to supporting innovation, competitiveness
and economic growth across Europe by delivering high-quality products and services and
playing a leading role in international co-operation on patent matters. The EPO is also one
of the world's main providers of patent information. As such, it is uniquely placed to observe
the early emergence of technologies and follow their development over time. The analyses
presented in this study are a result of this monitoring.
4
Table of contents
Foreword 2
List of tables and figures 6
List of abbreviations 8
List of countries 8
Executive summary 9
Key findings 10
1. Introduction 15
2. 4IR patenting and the contribution of SMEs 22
3. Innovation and business profiles of 4IR SMEs 33
Case study: From the garage to the securities exchange 40
4. Market and IP positions 42
Case study: Broad patent protection paves the way to commercialisation 51
5. Investment activities 53
Case study: Strong patent position attracts major investment for growing SME 61
6. Financial profile and structural barriers 63
6.1 Funding 4IR SMEs 64
6.2 Structural barriers 67
Case study: From the lab to the market with a solid licensing strategy 69
6
List of tables and figures
Tables
Table 1.1 Overview of core technology fields 20
Table 1.2 Overview of enabling technology fields 20
Table 1.3 Overview of technology fields in application domains 21
Table 2.1 Top 4IR clusters in the EU27, 2010-2018 30
Table 3.1 Business models and deployment areas 39
Table A 2.1 Breakdown of the fieldwork outcome 83
Table A 2.2 Weights: global (adjustment between Europe and the US) 84
Table A 2.3 EIBIS at a glance 84
Table A 3.1 4IR-based indicators: country comparison 85
Figures
Figure E.1 Share of 4IR IPFs contributed by SMEs (average of years 2010-2018) 10
Figure E.2 Size and age of 4IR SMEs 11
Figure E.3 Share of investment related to 4IR technologies (in %) 12
Figure E.4 Geographical markets of 4IR SMEs in EU27 13
Figure E.5 Major obstacles of 4IR SMEs 14
Figure 1.1 Global growth of IPFs in 4IR technologies versus all technologies and
the proportion they make up of all technologies (in %), 2010-2018 16
Figure 1.2 Top ten applicants in 4IR technologies (as a proportion of 4IR IPFs) 17
Figure 2.1 Number of 4IR IPFs by year and country/region, and their revealed
technology advantage (RTA) in 4IR technologies, 2010-2018 23
Figure 2.2 Contribution of SMEs to national 4IR IPFs, 2010-2018 25
Figure 2.3 Geographic origins of the 4IR SMEs 26
Figure 2.4 Number of 4IR IPFs originating from SMEs per million inhabitants and
specialisation (RTA) in 4IR technologies in selected countries 27
Figure 2.5 Proportion of 4IR IPFs originating from SMEs and specialisation (RTA) in
4IR technologies in selected countries 28
Figure 2.6 Location of 4IR SMEs in Europe 29
Figure 2.7 4IR activities and proportion of the population with strong digital skills 31
Figure 2.8 4IR activities and quality of digital infrastructure 32
Figure 3.1 Size and age of the 4IR SMEs 34
Figure 3.2 4IR innovation profile of European SMEs 35
Figure 3.3 Presence of core and enabling 4IR technologies in SMEs' patent portfolios 36
Figure 3.4 Implementation of 4IR technologies (proportion of firms in %) 37
Figure 3.5 Business models 38
Figure 4.1 Geographical markets for 4IR technologies 43
Figure 4.2 Scope of international patent protection 44
Figure 4.3 Market position of 4IR SMEs 45
Figure 4.4 Eect of 4IR technologies (net balance), by market position 46
Figure 4.5 Protection of intellectual assets 47
Figure 4.6 Average number of 4IR IPFs 48
Figure 4.7 Relevance of IP strategy for investors 49
Figure 4.8 Use of IP as collateral 50
Figure 5.1 Median investment intensity, in EUR 54
Figure 5.2 Proportion of investment related to 4IR technologies (in %) 55
Figure 5.3 Perceived investment gaps related to 4IR technologies 56
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Figure 5.4 Investment outlook 57
Figure 5.5 Investment outlook, by past investment 58
Figure 5.6 Impact of the COVID-19 crisis on firms' turnover 59
Figure 5.7 Impact of the COVID-19 crisis on firms' innovation activities 60
Figure 5.8 Impact of the COVID-19 crisis on firms' innovation plans 60
Figure 6.1.1 Number of firms with and without funding, and proportion of firms
with formal funding 64
Figure 6.1.2 Funding received by funding stage, funding amount in thousand USD
(median) 65
Figure 6.1.3 4IR SMEs receiving funding, by investor type 66
Figure 6.2.1 Obstacles 67
Figure 6.2.2 Obstacles by size and age 68
Figure 6.2.3 Dierence between firms that feel they underinvested and others 68
Figure 7.1.1 Acquired start-ups, comparison to benchmark 72
Figure 7.1.2 Origin of the acquiring companies 73
Figure 7.2.1 Companies with IPO, comparison to benchmark 74
Figure 7.2.2 Location of the stock exchange for the IPO 74
Figure 8.1 Policy support 4IR SMEs considered most useful (in %) 77
8
List of countries
AT Austria
BE Belgium
CH Switzerland
CN People's Republic of China
DE Germany
DK Denmark
ES Spain
EU European Union
FI Finland
FR France
IE Ireland
IT Italy
JP Japan
KR Republic of Korea
NL Netherlands
NO Norway
PL Poland
SE Sweden
UK United Kingdom
US United States of America
List of abbreviations
4IR Fourth Industrial Revolution
AI Artificial intelligence
CAGR Compound annual growth rate
CATI Computer-assisted telephone interviews
CAWI Computer-assisted web interviews
EISMEA EU's Executive Agency for Small and Medium-sized Enterprises
EIB European Investment Bank
EIBIS EIB Investment Survey
EPC European Contracting States
(member states of the European Patent Organisation)
EPO European Patent Oce
EU27 The 27 European Union countries
GDP Gross domestic product
ICT Information and communication technologies
IoT Internet of Things
IP Intellectual property
IPFs International patent families
IPO Initial public oering
PROs Public research organisations
R&D Research and development
RTA Revealed technology advantage
SMEs Small and medium-sized enterprises
VC Venture capital
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Executive summary
In recent years, the Fourth Industrial Revolution (4IR) has
massively accelerated the process of digital transformation.
Technologies such as the Internet of Things (IoT), cloud
computing, 5G and artificial intelligence (AI) are already
altering the way we live, work and interact. By paving the
way for a data-driven economy, they are disrupting many
European industries. As one of the six headline priorities
of the EU Commission's 2020 Work Programme, its digital
strategy is designed to keep Europe on a par with the
rapid pace of 4IR innovation observed in the US and Asia.
By enabling “a vibrant community of innovative and
fast-growing start-ups and small businesses to access finance
and to expand”, it specifically aims to foster the emergence
of new European players in the global race to digital
transformation.
Aim of the study
This study seeks to guide policymakers, industry and
the public in this endeavour by providing a comprehensive
inventory and analysis of SMEs that have been developing
4IR technology over the past decade. It focuses on deep
tech SMEs that have actively patented 4IR technologies,
as opposed to the larger population of small businesses
that are simply implementing and making use of such
technologies. By benchmarking these companies against
their counterparts in the US and other European countries,
the study provides insight into the specific challenges
of growing deep tech businesses in Europe for
decision-makers in the public and private sectors, as
well as investors.
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– Relative to their size, smaller EU countries like Finland,
Sweden, Ireland and Denmark are outperforming
other EU member states and even the US. The
particularly high concentration of 4IR SMEs in Finland
and Sweden denotes the existence of strong local
ecosystems, including world-class 4IR companies.
Outside the EU, Switzerland and Norway have a
relatively high concentration of 4IR SMEs.
– In the EU27, over 2 600 European SMEs generated
3 181 international patent families (IPFs
1
) related to
4IR technologies between 2010 and 2018, contributing
10% of the EU's 4IR patenting in that period. Despite
the overall lower proportion of SMEs in the US economy,
there are about twice as many SMEs with 4IR IPFs in the
US. They contributed 16% of US 4IR patenting in the same
period and have significantly larger 4IR patent portfolios
on average.
– Within the EU, Germany (570), France (400) and Italy (273)
have the largest number of 4IR SMEs – most of which
are, in fact, concentrated in a limited number of regions
(such as the greater Munich and Paris areas). Outside the
EU, the UK has the largest number of 4IR SMEs (950).
1 Each international patent family (IPF) covers a single invention and includes
patent applications filed and published at several patent oces. It is a reliable
proxy for inventive activity because it provides a degree of control for patent
quality by only representing inventions for which the inventor considers the value
sucient to seek protection internationally. The patent data presented in this
report refer to IPFs.
EU US
Figure E1
Share of 4IR IPFs contributed by SMEs (average of years 2010-2018)
% %
Source: Crunchbase and Orbis, authors' calculation.
Key findings
There are twice as many SMEs with an international
portfolio of 4IR patents in the US than in the EU27,
adding to the overall leadership of the US in advanced
digital technologies.
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%
%
%
%
Although 80% of EU 4IR SMEs have 50 employees or less,
only 41% have been operating for ten years or less, in line
with the long development cycles typically observed in
deep tech. US 4IR SMEs have a similar age/size distribution
but tend to focus more on core hardware, software and
connectivity technologies.
– Almost 60% of EU 4IR SMEs plan to invest more in
4IR-related innovation in the future, while almost
25% regard their current investment as insucient.
However, the current COVID-19 pandemic has had a
negative impact on the turnover of more than half of
EU 4IR SMEs.
– Over 90% of the EU's 4IR SMEs have already
implemented their 4IR technologies in products and
services or in their own business, with applications
spanning the healthcare, transport and cleantech
sectors, as well as data analytics. In addition, 4IR SMEs
are more likely (44%) to be involved in manufacturing
hardware products (developing, building and selling
physical devices) than other SMEs.
– More than a third of the EU27 and US SMEs have filed
patent applications related to data mining and
exploration. The patents filed by US 4IR SMEs are also
frequently related to core hardware, software and
communication technologies. 4IR SMEs in Finland and
Sweden likewise stand out with an even stronger focus
on core hardware and communication technologies.
Small (1-50 employees) Large (51-250 employees) Young (10 years or less) Old (older than 10 years)
Source: Orbis and Crunchbase, authors' calculation.
Figure E2
Size and age of 4IR SMEs
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EU 4IR SMEs show a higher investment intensity than other
EU SMEs, with up to 70% of total investment targeted at
4IR innovations among young 4IR SMEs.
– However, the proportion of these 4IR start-ups
reporting formal funding sources is higher in the US (68%)
than in the EU (59%). In addition, more EU27-based 4IR
start-ups rely on public funding.
– Almost half of all 4IR SMEs (49%) consider patents as
very important to secure financing and a large majority
(80%) report that IP strategy was of relevance to their
investors.
– About 70% of total investment by young 4IR SMEs in the
US and EU was specifically targeted at 4IR innovation.
For 4IR firms operating for more than 10 years, this
proportion drops to less than 50% in the EU27 and less
than 60% in the US.
– On average, the subgroup of 4IR SMEs from the US and
Europe listed on Crunchbase, one of the largest start-up
repositories, received significantly higher funding than
a benchmark group of SMEs, especially during the build
and growth stages.
Figure E3
Share of investment related to 4IR technologies (in %)
Share of Ivestment (in %)
%
%
%
%
%
%
%
%
EU US EU US
Young Old
%
%
%
%
Source: 4IR survey.
Base: Firms that invested in innovation (excluding don't know / refused responses).
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More than every second 4IR SME in the EU sees its future
primary market in Europe.
– European 4IR SMEs listed on Crunchbase are almost
twice as likely to be acquired than a benchmark group
of European SMEs (15% vs 8%), and more than every
third EU 4IR SME is acquired by a US company.
– Currently, 32% of EU SMEs are still focused primarily
on operations in their home country. However, their
growth plans tend to be targeted towards the European
market (57%), as also reflected in the geographical scope
of their patent portfolios. By contrast, US 4IR SMEs cite
the entire US domestic market as a priority for both
current and future growth, as well as for patent filings.
– While only about one in ten US SMEs sees their future
primary market in Europe, more European firms regard
the US as their future primary market (24% of EU27). In
particular, the EU27 SMEs considered to be dominant
players in their market report more frequently that they
expect the US to be a future primary market (38%).
Current primary market Future primary market
Home country Europe US Other
Source: 4IR survey.
Base: 4IR innovators in 4IR survey (excluding don't know / refused / no obstacle responses).
Note: Europe is defined as all EPC member states, including the EU27, the UK, Switzerland, Norway and other countries.
Figure E4
Geographical markets of 4IR SMEs in EU27
%
%
%
%
%
%
%
%
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A large proportion of 4IR SMEs in both the EU and US cite
the availability of finance (73% and 77% respectively) and
the availability of sta with the required technical skills
(73% and 76% respectively) as business barriers.
– The most cited policy support that would encourage
SMEs to further introduce or develop 4IR technologies
is the availability of finance (54% of the youngest and
smallest firms indicate that this is the most helpful
support).
– Compared with other categories of SMEs, 4IR SMEs also
report the availability of finance more frequently as a
major issue. By contrast, the lack of technical skills and
other obstacles are less likely to be deemed a severe
issue by 4IR SMEs than by other SMEs.
– More than half of US and EU 4IR SMEs complain about
the availability of government support, although EU
4IR SMEs are liable to consider this to be a major
obstacle to their activities.
Policy perspective
– Fostering the 4IR innovations of small businesses,
together with digital skills and infrastructure, should
be a policy priority to ensure Europe's competitiveness
in advanced digital technologies.
– The creation of the Unitary Patent will support the
growth of 4IR SMEs in Europe by helping them secure
patent protection in a larger number of national
markets.
– Direct policies (such as targeted grants or early-stage
deployment policies) provide a tool to foster innovation
in technologies that have not yet become cost-eective.
– Access to adequate growth funding remains insucient
to enable scale-up and thereby develop more global
4IR leaders. Further development of the European
start-up ecosystem is needed to enable larger funding
rounds (in particular for the later stages) and make
listing start-ups on European stock markets an
attractive option.
Figure E5
Major obstacles of 4IR SMEs
Share of firms (in %)
%
%
%
%
%
%
EU US EU US
Availability of finance Availability of staff with the required technical skills
Major EU Major US Major EIBIS EU Major EIBIS US
Source: 4IR survey, EIBIS (2021).
Base: 4IR innovators in 4IR survey, SMEs in EIBIS (excluding don't know / refused / no obstacle responses).
%
%
%
%
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1. Introduction
In recent years, the Fourth Industrial Revolution (4IR) has
been driving the digital transformation. Characterised by a
combination of technologies that blurs the lines between
the physical and digital spheres, it is altering the way we live,
work and interact, and has already disrupted many industries.
According to a 2020 study by the European Commission,
over 29 billion devices will be connected to Internet
Protocol networks across the globe by 2023, most of which
will be creating data in real time. Once combined with other
technologies, such as artificial intelligence (AI), big data,
advanced robotics, the Internet of Things (IoT), cloud
computing or 3D printing, they enable the automation of
entire business processes, including repetitive intellectual
tasks previously performed by humans. It is estimated that
the cumulative additional GDP contribution of these new
digital technologies could amount to EUR 2.2 trillion in the
EU alone by 2030, a 14.1% increase from 2017.
This revolution is primarily driven by innovation in
technology, as illustrated by the impressive growth of
worldwide patent applications in this field (EPO, 2020). The
pace of international patenting related to smart connected
objects accelerated strongly during the last decade, with an
average annual growth rate in patenting close to 20% from
2010 to 2018, compared with 12.8% between 2000 and 2009.
The annual increase in international patent families (IPFs)
2
for 4IR technologies has been nearly five times greater than
the growth of IPFs in all fields since 2010 (4.2%). As a
result, smart connected objects accounted for more than
11.5% of all patenting activity worldwide in 2018 (with
nearly 40 000 new IPFs in 2018 alone), pervading most
sectors of the economy (Figure 1.1).
2 Each international patent family (IPF) covers a single invention and includes
patent applications filed and published at several patent oces. It is a reliable
proxy for inventive activity because it provides a degree of control for patent
quality by only representing inventions for which the inventor considers the value
sucient to seek protection internationally. The patent data presented in this
report refer to IPFs.
Figure 1.1
Global growth of IPFs in 4IR technologies versus all technologies and the proportion they make up of all technologies (in %),
2010-2018
%
%
%
%
%
%
%
%
%
Earliest publication year
%
%
%
%
%
%
.%
.%
IPFs in 4IR technologies IPFs in all technologies
Source: EPO, authors' calculation
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Leading innovators in these technologies are already shaping
the data-driven economy for the years to come. Meanwhile,
others may struggle or even disappear in the wake of 4IR
disruptions. Despite being a significant contributor to 4IR
innovation (with about 15% of 4IR IPFs between 2010 and
2018), the EU27 lacks specialisation in the field. It also has
few of the major digital companies that have been driving
4IR transformations thus far (Figure 1.2). The top ten 4IR
applicants in the period 2010-2018 (together accounting for
nearly a quarter of all IPFs) include only two European
companies (Ericsson and Nokia), compared with four firms
in the US (Qualcomm, Intel, Microsoft and Apple). Besides
ensuring that its established industries successfully seize the
opportunities oered by 4IR technologies, one of the EU's
key challenges is therefore to foster the rapid emergence
of new, innovative players that can strengthen Europe's
position in the global race to digital transformation.
Against this backdrop, the European digital strategy aims
to "enable a vibrant community of innovative and
fast-growing start-ups and small businesses to access
finance and to expand".
3
This objective is particularly
relevant for the deep tech SMEs that are developing
patentable 4IR technology. While deep tech innovators
typically have strong disruptive potential, they face specific
issues such as higher development costs and market and
technological risks. Most recently, these challenges have
been compounded by the COVID-19 pandemic, underlining
the need for appropriate measures to support the funding
and growth of 4IR SMEs in Europe.
3 See "Factsheet: Shaping Europe's Digital Future", European Union 2020.
Figure 1.2
Top ten applicants in 4IR technologies (as a proportion of 4IR IPFs)
Samsung [KR] Qualcomm [US] Huawei [CN] Nokia [FI] Apple [US]Ericsson [SE]
LG [KR]
Sony [JP]
Intel [US] Microsoft [US]
Source: EPO, authors' calculation.
.%
.% .% .% .%
.% .% .% .% .%
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About this study
The purpose of this study is to provide a comprehensive
inventory and analysis of SMEs that invest in the
development of new 4IR technologies in the EU27. The
study quantifies and analyses the contribution made by
these small businesses to the EU's performance in 4IR
innovation over the past decade. By benchmarking these
companies against similar 4IR businesses in the US and other
European countries, it aims to inform policymakers, private
decision-makers and investors about the specific challenges
of growing deep tech businesses within Europe.
Strict emphasis is placed on SMEs that have been actively
patenting 4IR technologies, as opposed to the larger
population of small businesses that are simply implementing
and applying the technologies. These deep tech SMEs
typically rely on recombining existing technologies or
leveraging emerging technologies rooted in science and
advanced engineering that oer significant advances over
those currently in use. As a result, they also often face higher
upfront R&D investment and a longer transition period from
research to actual industry applications. Patent protection
is instrumental in securing the legal exclusivity needed to
develop and bring new technology to market.
The study documents the distribution and profiles of
European 4IR SMEs across EU27 countries and benchmarks
them against their counterparts in the US – historically,
the leading country in the field – as well as other European
countries that are not part of the EU27. To this end, it
exploits a holistic set of indicators spanning the business
and IP strategies, development trajectories, funding and
financial performance of the SMEs. Throughout the analysis,
particular attention is paid to the SMEs' plans to grow and
commercialise 4IR technologies, and to the factors impacting
their ability to fulfil those plans. Furthermore, 4IR SMEs are
compared with the SMEs interviewed in the EIB Investment
Survey (EIBIS), highlighting the obstacles they face compared
with their peers.
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Methodology
The analysis is based on the systematic identification of
small businesses in Europe and the US that have been filing
international patent applications for inventions related to
4IR technologies. The identification of 4IR inventions in
patent data is based on expert searches by EPO examiners
focusing on all types of inventions relevant to smart
connected objects. The focus on international patent
families (IPFs, i.e. inventions for which patent protection
has been sought in at least two distinct jurisdictions)
ensures that the selection of SMEs is based on inventions
with a confirmed potential for commercialisation on an
international scale. It also enables sound comparisons
between populations of SMEs with 4IR patenting activities
in dierent countries.
BOX 1
For the purpose of the analysis, data on 4IR patents were
matched to company data from the ORBIS and Crunchbase
databases (see Box 3 and Annex 1 for more information)
in order to retrieve employment and financial data. The
matched dataset of 10 126 companies was also used as
a source sample to carry out a survey of 4IR SMEs in
Europe (including member states of the European Patent
Convention that are not part of the EU) and the US
(see Box 3 and Annex 1). Some 625 firms provided complete
interviews. All selected firms have fewer than 250 employees.
The aim of the interview was to ask firms about their
business activities and markets, as well as what hampers
their growth. Results from this survey form the basis of
the report and are complemented where relevant by those
directly derived by analysing the source dataset of matched
patent-company data.
Outline
The report contains nine sections. It first looks at where
SMEs stand in terms of deep tech innovation and reviews
their business profiles. Then it elaborates on the 4IR SMEs'
market and IP position, and investment activities. Next, the
report shows the investment activities and funding profiles
of 4IR SMEs, concluding with policy recommendations.
About patents and patent information
Patents are exclusive rights for inventions that are new
and innovative. High-quality patents are assets for
inventors because they can help attract investment,
secure licensing deals and provide market exclusivity.
Patents are not secret. In exchange for these exclusive
rights, all patent applications are published, revealing
the technical details of the inventions in them.
Patent databases therefore contain the latest technical
information, much of which cannot be found in any other
source and is freely available for independent research
purposes. The EPO's free Espacenet database contains
more than 120 million patent documents from around
the world and comes with a machine translation tool
in 32 languages. This patent information provides early
indications of technological developments that are bound
to transform the economy, revealing how innovation is
driving the Fourth Industrial Revolution.
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BOX 2
Technologies for the Fourth Industrial Revolution (4IR)
The second sector encompasses enabling technologies
that build upon and complement the core technologies.
These enabling technologies can be used for multiple
applications. They have been subdivided into eight
technology fields (Table 1.2).
The third sector, application domains, encompasses the
final applications of 4IR technologies in various parts of
the economy. It has been broken down into eight dierent
technology application fields (Table 1.3).
4IR inventions can be relevant to one or more technology
fields within one or more technology sectors, combining
features of several 4IR technologies and forming a bridge
technology between dierent 4IR building blocks.
4IR technologies comprise inventions that are related
to smart connected devices and combine computing,
connectivity and data exchange. These 4IR inventions
are further divided into three main sectors, namely "core
technologies", "enabling technologies" and "application
domains", each of which is subdivided into several
technology fields.
The first sector, core technologies, corresponds to the
basic building blocks upon which the technologies of
4IR are built. It consists of inventions that directly
contribute to the three established fields of information
and communication technologies (ICT) inherited from the
previous industrial revolution: IT hardware, software and
connectivity. The table gives a short definition of these
core technology fields.
Table 1.1
Overview of core technology fields
Field Definition Examples
IT hardware Basic hardware technologies Sensors, advanced memories, processors, adaptive displays, smart instruments
Software Basic software technologies Intelligent cloud storage and computing structures, adaptive databases, mobile
operating systems, virtualisation and blockchain technologies
Connectivity Basic connectivity systems Network protocols for massively connected devices, adaptive wireless data
systems for short-range and long-range ommunication
Table 1.2
Overview of enabling technology fields
Field Definition Examples
Data management Technological means to
create value from data
Diagnostic and analytical systems for massive data, prediction and forecasting
techniques, monitoring functions, planning and control systems
User interfaces Enabling the display and
input of information
Virtual reality, augmented reality, speech recognition and synthesis
Core AI Enabling machine
understanding
Machine learning, neural networks, statistical and rule-based systems,
AI platforms
Geo-positioning Enabling the determination
of the position of objects
Enhanced geo-location and satellite navigation, device to device relative and
absolute positioning
Power supply Enabling intelligent power
handling
Automated generation, situation-aware charging systems, shared power
transmission and storage objectives, smart power-saving management
Data security Enabling the security of data Adaptive security systems for devices, services and data transmission
Safety Enabling safety or physical
objects
Intelligent safety systems for theft and failure prevention
Three-dimensional
support systems
Enabling the realisation of
physical or simulated
D systems
D printers and scanners for parts manufacture, automated D design and
simulation, D user interfaces
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Table 1.3
Overview of technology fields in application domains
Field Definition Examples
Consumer goods Applications pertaining
to the individual
Personal health monitoring devices, smart wearables, smart entertainment and
sport devices, smart toys and textiles
Home Applications for the home
environment
Smart homes, alarm systems, intelligent lighting and heating, consumer
robotics, climate control systems
Vehicles Applications for moving
vehicles
Autonomous driving, vehicle fleet navigation devices
Services Applications for business
enterprise
Intelligent retail, payment and loyalty systems, smart offices
Industrial Applications for industrial
manufacture
Smart factories, intelligent robotics, energy saving
Infrastructure Applications for
infrastructure
Intelligent energy distribution networks, intelligent transport networks,
intelligent lighting and heating systems
Healthcare Applications for healthcare Intelligent healthcare systems, robotic surgery, smart diagnosis
Agriculture Applications for agriculture Climate monitoring systems, greenhouse automation, smart crop and cattle
management, smart farming
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2. 4IR patenting and the contribution of
SMEs
Between 2010 and 2018, almost 200 000 4IR inventions
were submitted for international patent protection globally.
In 2018, they represented more than one tenth of IPFs in all
technologies (see Figure 1.1 above). The US was the strongest
contributor with 31% of all 4IR IPFs, followed by Japan (18%)
and Europe (15% for the EU27 and 19% for the 38 EPC countries).
R. Korea (12%) and P.R. China (11%) have been catching up
quickly over the last decade.
Of the top five innovation centres, Europe has the lowest
specialisation in 4IR technologies over the period 2010-2018
(Figure 2.1). The US shows the highest specialisation with a
revealed technology advantage (RTA)
4
value of 1.5, meaning
that its proportion of 4IR technologies is 50% higher than its
contribution to IPFs in technologies overall.
4 The revealed technology advantage (RTA) index indicates a country's specialisation
in terms of 4IR technology innovation relative to its overall innovation capacity. It
is defined as the proportion of IPFs a country has in a particular field of technology
divided by the proportion of IPFs a country has in all fields of technology. An RTA
above one reflects a country's specialisation in a given technology.
Figure 2.1
Number of 4IR IPFs by year and country/region, and their revealed technology advantage (RTA) in 4IR technologies, 2010-2018
US Europe (EPC) JP CN KR EU27
Source: EPO, authors' calculation.
Note: The right panel shows the average RTA for the period 2010-2018.
,%
,%
US
Europe (EPC)
EU
JP
KR
CN
.
.
.
.
.
.
Earliest publication year
24
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BOX 3
Methodology and data sources
5
Orbis is Bureau van Dijk's flagship company database,
providing information on close to 400 million listed and
unlisted companies and entities worldwide, of which
68 million are in North America and 122 million in Europe.
It contains detailed financial information and extensive
corporate ownership structures. Data are collected from
more than 170 providers around the world, treated,
appended and standardised to make them more
comprehensive and comparable. The version used for
this study was downloaded in January 2021. Where
information was available, the European definition was
applied to identify SMEs
6
, otherwise the 250-employee
threshold was used. Manual checks were performed as
necessary. Companies that have been operating for over
50 years were not considered.
Crunchbase is a commercial database of innovative
start-ups and scale-ups maintained by US company
Crunchbase Inc. The data are sourced through two main
channels: a large network of global investment firms
and direct contributions from executives, entrepreneurs
and investors who update and revise the company
profile pages. The database version used for this study
(downloaded in March 2021) lists more than 13 800
dierent firms operating in the 37 countries covered in
this study. For every company, the database reports both
the foundation year and the date on which the firm first
registered on Crunchbase. Crunchbase is increasingly
being used by the venture capital industry as a data
source. Where information was available, the European
definition was applied to identify SMEs, otherwise the
250-employee threshold was used. Manual checks were
performed as necessary. Companies that have been
operating for over 50 years were not considered.
5 More detailed information can be found in Annexes 1-3.
6 See https://ec.europa.eu/growth/smes/sme-definition_en.
The 4IR survey
The main goal of the survey was to collect information on
small and medium-sized enterprises (SMEs) in Europe and
the US that are developing and/or applying technology
in the 4IR category. To achieve this, the population was
regarded as comprising all SMEs identified as applicants of
an international patent family in the 4IR category in recent
years. Finally, N=625 complete interviews were held with
the target population between June and October 2021.
The interviews, N=455 companies from Europe and N=170
companies from the US, were conducted using mixed
methods, namely computer-assisted telephone and web
interviews. For the analysis, 27 interviews (14 in Europe
and 13 in the US) were discarded as the firms had not
carried out any development work in 4IR technologies
over the past three years.
EIBIS
The EIB carries out an annual survey of firms in the EU27,
UK and US with the aim of monitoring investment and
investment finance activities, while at the same time
capturing potential obstacles to investment. The survey
covers approximately 12 500 companies across the EU and
the UK every year, with just over 800 firms in the US for
the last three waves. It is administered by telephone (in
the local language) and takes an average of 20 minutes.
The first wave of the survey took place in 2016 and the
survey completed its sixth wave in 2021, with interviews
being held between April and July 2021. The results of
the latest wave are used as comparison benchmarks.
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During the same period 2010-2018, over 2 600 SMEs located
in member states of the EU contributed 3 117 IPFs related
to 4IR technologies, representing 10% of the EU total
(Figure 2.2). Their patenting activities increased rapidly, at
a compound average growth rate (CAGR) of 17% during
this period.
7
7 The CAGR is the rate of return that would be required for an investment to grow from
its beginning balance to its final one. See above note for the EU definition of SMEs.
In comparison, the US is home to twice as many 4IR SMEs as
the EU27, with a total of 6 157 4IR SMEs. This is remarkable
since, overall, fewer SMEs are based in the US than in the EU
(see EIB, 2021). US 4IR SMEs contributed 16% to their country's
total innovation output in 4IR technologies between 2010
and 2018; this figure is also significantly higher than their
EU27 counterparts and adds to the overall US leadership in
4IR technologies. However, the number of 4IR IPFs from SMEs
rose less dynamically than in Europe, with a CAGR of 15%. As
a result, the contribution of SMEs to national 4IR patenting
decreased in the US from 17% in 2010 to 13% in 2018, while
increasing from 9% in 2010 to 11% in 2018 in the EU.
Figure 2.2
Contribution of SMEs to national 4IR IPFs, 2010-2018
Proportion of 4IR IPFs contributed by SMEs (average of years 2010-2018)
EU US
% %
Number of 4IR IPFs contributed by SMEs
EU27 Other Europe US
Source: Crunchbase and Orbis, authors' calculation.
Base: 10 126 4IR SMEs and 14 350 4IR IPFs with earliest publication year between 2010 and 2018.
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Most EU-based 4IR SMEs are located in the three largest
member states, Germany (570), France (400) and Italy (273)
(Figure 2.3). Scandinavian countries also have a significant
number of 4IR SMEs, especially Finland (271) and Sweden
(240). Poland is the only Eastern European country in the top
15, with 31 4IR SMEs. In non-EU European countries, SMEs
contributed 1 458 IPFs, largely due to the performance of
companies in the UK, Switzerland and Norway. The UK in
particular has by far the largest number of 4IR SMEs, almost
950. With 254 and 117 4IR SMEs respectively, Switzerland and
Norway have comparable numbers to Sweden and Denmark.
Figure 2.3
Geographic origins of the 4IR SMEs
UK
DE
FR
IT
FI
CH
SE
NL
ES
NO
DK
BE
AT
IE
EU27 Other Europe US
Source: Crunchbase and Orbis, authors’ calculation
Note: Only countries with at least 100 SMEs are shown in the right panel.
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Figure 2.4 provides further insight into the links between
the 4IR specialisation of selected countries in 4IR patenting
(RTA) and the number of 4IR SME patents per capita in those
countries. It suggests a positive correlation between both
indicators, with countries that show overall excellence
in 4IR technologies also demonstrating stronger SME
performance in 4IR innovation. A few EU countries, namely
Finland, Sweden and Ireland, clearly stand out in this respect,
with Sweden and Finland even outperforming the US. By
contrast, larger countries such as Germany or France exhibit
both a lack of 4IR specialisation and relatively low SME
impact in 4IR patenting.
Figure 2.4
Number of 4IR IPFs originating from SMEs per million inhabitants and specialisation (RTA) in 4IR technologies in
selected countries
Number of IR SME patents per million inhabitants
. . .
RTA in IR technologies (-)
Source: Orbis and Crunchbase, authors` calculation.
Population data for 2020 were retrieved from the World Bank.
CH
NO
DK
AT
BE
DE
ES
IT
PL
UK
NL
IE
US
SE
FI
Europe (EPC)
EU
FR
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Figure 2.5 in turn compares the countries' specialisation in
4IR patenting with the proportion of their 4IR IPFs contributed
by SMEs. It shows that SME contribution to overall 4IR
patenting is actually lower in countries that are highly
specialised in 4IR technologies – such as Finland and Sweden
– although the correlation is lower than in Figure 2.4 above.
This is due to the significant contribution to 4IR patenting in
these countries of other parties in the innovation ecosystem,
such as large companies or universities. For instance, Finland
and Sweden are the only two EU countries to host some of
the top ten 4IR applicants globally,
8
like the US. These large
companies contribute to the strength of local innovation
ecosystems reducing the proportion of 4IR patents
contributed by SMEs. The same pattern applies to the US,
where large companies and SMEs both contribute to the
country's specialisation in 4IR technology. In contrast, small
countries like Switzerland, Norway and Denmark reveal a
relative lack of specialisation in 4IR technologies, despite the
strong performance of local SMEs (Figure 2.4). This is likely
due to the low contribution of large companies to 4IR
patenting, as evidenced by the very high proportion of
4IR SME patenting in those countries (Figure 2.5).
8 Namely Nokia in Finland and Ericsson in Sweden, see Figure 1.2.
Proportion of IR patents originating from SMEs (-)
%
%
%
%
%
%
%
%
%
. . .
RTA in IR technologies (-)
Source: Orbis and Crunchbase, authors' calculation.
Population data for 2020 were retrieved from the World Bank.
NO
CH
AT
IT
ES
BE
UK
IE
DK
FR
Europe (EPC)
EU
DE
NL
US
SE
FI
Figure 2.5
Proportion of 4IR IPFs originating from SMEs and specialisation (RTA) in 4IR technologies in selected countries
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As illustrated in Figure 2.6, along with larger companies
and research institutions, 4IR SMEs tend to congregate in
regional clusters that provide a large pool of technical and
entrepreneurial specialists, investors and business partners.
The most important clusters are shown in Table 2.1, together
with further information on their respective leading
4IR companies, research institutions and technology
specialisation. Besides Sweden (Stockholm and Malmö
regions) and Finland (Helsinki region), two main EU clusters
are located in Germany (around Munich and Stuttgart), one
in France (Paris), and one in the Netherlands (Eindhoven).
The greater London area also appears as a major 4IR cluster
outside the EU.
Figure 2.6
Location of 4IR SMEs in Europe
Source: Crunchbase and Orbis, authors' calculation.
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Table 2.1
Top 4IR clusters in the EU27, 2010-2018
Cluster
(country)
Global proportion
of 4IR IPFs (CAGR)
RTA* > 1.5 Top 4IR applicants**
(% of 4IR IPFs)
Proportion of IPFs from
research institutions
Top research
institution
London (UK) .%
(.%)
Core AI Sony (%) .% University of
London
Eindhoven (NL) .%
(.%)
Core AI,
D systems,
healthcare,
agriculture
Philips (%),
Signify (%)
.% Eindhoven
University of
Technology
Munich (DE) .%
(.%)
Position
determination,
data security,
D systems,
vehicles
Siemens (%),
Volkswagen group (%),
BMW (%)
.% Fraunhofer
Stockholm (SE) .%
(.%)
Connectivity,
power supply,
agriculture
Ericsson (%),
Volkswagen group (%)
.%*** Fraunhofer***
Paris (FR) .%
(.%)
Data security,
safety,
vehicles,
infrastructure
Nokia (%),
Valeo (%)
.% CEA
Stuttgart (DE) .%
(.%)
Data management,
geo-positioning,
vehicles,
industrial
Robert Bosch (%),
Nokia (%),
SAP (%)
.% Karlsruhe
Institute of
Technology
Helsinki (FI) .%
(.%)
Connectivity,
power supply,
data security
Nokia (%),
Ericsson (%)
.% Valtion
Teknillinen
Tutkimuskeskus
Malmö (DK/SE) .%
(.%)
Power supply Sony (%),
Ericsson (%))
.%*** Danmarks Tekniske
Universitet
Source: EPO (2020)
*
The RTAs in each 4IR sector and field are calculated as the proportion of an innovation centre's IPFs in that sector or field, divided by the proportion of the same innovation
centre's IPFs in all 4IR technologies.
**
The top three corporate applicants in each cluster are shown in this column, provided they contributed more than 5% of the cluster's 4IR IPFs. Their respective proportions of IPFs
in the cluster are also reported.
***
Due to the system of professors' privilege in Sweden, most IPFs originating from academic inventors are attributed to the individual inventors and not to the research institutions
that employ them. Such IPFs are not included in the proportion of IPFs originating from universities and PROs. This explains why a non-Swedish organisation (Fraunhofer) appears
as the top research institution in Stockholm according to our data.
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The availability of people with digital skills may foster
innovation in 4IR. Firms operating in countries where a
greater proportion of the population have above-average
digital skills tend to have a higher RTA in 4IR (Figure 2.7)
and more 4IR SMEs per capita. Reaping the benefits of
digitalisation will require improvements in education
and vocational training.
Figure 2.7
4IR activities and proportion of the population with strong digital skills
RTA in IR technologies (-)
.
.
% % % % % %
Proportion of the population with above-average digital skills (in %)
Number of IR SMEs per million inhabitants
Number of IR SMEs per million inhabitants RTA in IR technologies (-)
Source: Orbis and Crunchbase, authors' calculation. Digital skills data were retrieved from Eurostat.
FI
FI
SE
IE
CH
SE
PL
FR
ES
IT
FR
BE
ES
NL
NO
DK
UK
NL
NO
UK
CH
DK
DE
AT
DE
AT
PL
IE
BE
IT
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Digital infrastructure plays a critical role in supporting 4IR
SMEs. Firms operating in countries with low average latency
(a proxy for good internet connection) tend to have more
4IR SMEs per capita (Figure 2.8). This indicates that many
EU regions have the potential to unlock investment in the
supporting 4IR SMEs by ensuring wider access to faster
broadband. However, broadband connection and RTA do
not appear to be linked, possibly due to regional variations
in the speed of internet connections in larger countries.
Figure 2.8
4IR activities and quality of digital infrastructure
RTA in IR technologies (-)
.
.
Average latency (in ms)
Number of IR SMEs per million inhabitants
FI
FI
SE
SE
CH
NL
NO
DK
CH NO
NL
BE
BE
AT
AT
PL
DE
DE
PL
UK
ES
UK
ES
IT
FR
FR IT
IE
IE
DK
Number of IR SMEs per million inhabitants RTA in IR technologies (-)
Source: Orbis and Crunchbase, authors' calculation. Average latency data was retrieved from European Data Journalism Network (2021).
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3. Innovation and business profiles of
4IR SMEs
4IR SMEs in the EU27 are mostly small businesses: combining
information from Orbis and Crunchbase reveals that four
out of five have fewer than 50 employees and over 40% have
fewer than ten. However, they are not necessarily young
companies, which is consistent with the long development
cycles typically observed in deep tech. Only 41% of 4IR SMEs
in the EU27 have been operating for under ten years, while
a significant proportion (23%) have been in business for over
twenty years. A similar pattern of size and age distribution
can be observed for 4IR SMEs in the US, with a slightly higher
proportion of companies over 50 employees (21%) and
operating for over ten years (60%)
9
.
9 Cross-tabulation of 4IR SMEs by age and size shows that there is merely a weak
correlation between the two dimensions. Although only 3.2% of EU firms are
relatively young and large, with more than 50 employees, the majority of
EU 4IR SMEs have been operating for at least ten years and are relatively small.
The distribution of US 4IR start-ups is similar, where 42.7% have been operating
for over ten years but have a relatively small workforce. Compared with the EU27
and the US, other European countries have a larger proportion of companies
that are young and small, namely 42.3%.
Figure 3.1
Size and age of the 4IR SMEs
Number of employees
%
%
%
%
%
- - - -
Age
%
%
%
%
%
- - - - +
EU27 Other Europe US
Source: Orbis and Crunchbase, authors' calculation.
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Results from interviews with firms (hereafter referred to as
the 4IR survey) provide further insight into their market and
technology profiles (Figure 3.2). The industry areas in which
4IR SMEs are planning to deploy (or are already deploying)
4IR technologies are highly diverse (Figure 3.1, right panel).
The main target area for EU27 4IR SMEs is the biotech and
healthcare industry, cited by nearly one in three SMEs.
However, other important target areas include data
analytics and software development (19%), transport (19%)
and cleantech (11%). In comparison, only a modest proportion
of 4IR SMEs are targeting less tech-intensive sectors such as
e-commerce (3%), security (2%) and fintech (2%). Although
the deployment profiles of European and US 4IR SMEs are
very similar, EU27 respondents are more likely to target the
transport sector than US respondents.
4IR SMEs tend to develop and deploy the same types
of technologies in all sectors, however. Comparable
proportions of the 4IR SMEs in the EU27, with 69% and 64%
respectively, indicate that they have made technological
developments in the areas of the Internet of Things and data
management (including data analytics and AI). Automation
of devices was also mentioned by 44% and 3D-systems
technologies by 24%. These development profiles are
remarkably similar among US and European 4IR SMEs.
Figure 3.2
4IR innovation profile of European SMEs
Focus of deployment efforts
Biotech and healthcare
Transport
Data and analytics and
software development
Cleantech
Automation
Other
E-commerce and
marketing
Security
Fintech
% % % % %
Proportion of firms (in %)
Focus of development efforts
Internet of Things
Data management,
big data analytics,
AI
Automation of
devices
D printing or
other D systems
% % % % %
Proportion of firms (in %)
EU27 Other Europe US
Source: 4IR survey.
Base: 4IR innovators in the 4IR survey (excluding don't know / refused / no obstacle responses).
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A detailed analysis of the 4IR SMEs' patent portfolios from
the 4IR survey provides further information on the type of
technology that they are developing (Figure 3.3). More than a
third of the EU27 and US SMEs have filed patent applications
related to data mining and exploration, which encompasses
all technologies, including AI, that aim to exploit data from
the creation, processing and analysis thereof to feedback
execution
10
. These technologies, which are also one of the
main drivers of 4IR patenting overall
11
, oer particularly
interesting opportunities for SMEs due to their lower capital
requirements and wide spectrum of applications in a variety
of sectors (see Figure 3.1 above).
10 The field of data management is pivotal in deriving value from the massive amount
of data collected by connected objects. It encompasses all technologies aiming to
exploit data, from the creation, processing and analysis thereof to feedback
execution. It can be subdivided into four distinct categories, namely monitoring
functions (generating data typically by means of sensors), analytics and diagnosis
(based on the generated data), planning and control (e.g. automated control
systems for enterprises, vehicles or factories), and prediction and forecasting
(e.g. wind speed forecasting for electric energy production or business forecasting
and optimisation).
11 With about 28% of all 4IR IPFs at the global level in 2018.
About a quarter of the EU27 SMEs have also patented in
the core fields of connectivity (26%) and IT hardware (20%),
including sensors. Together with enabling technologies such
as user interfaces (12%) and position determination (11%),
these two technology fields form the basis of the Internet of
Things. However, an even larger proportion of US SMEs have
been filing patents relating to core 4IR technologies, even
more so in the case of software, which is represented in the
patent portfolios of 18% of the US companies, compared
with 10% of the EU27 companies. Likewise, 4IR SMEs in
Finland and Sweden display a stronger focus on core
hardware (24% and 25% respectively) and connectivity
(34% and 30% respectively). This reflects the pattern more
generally observed in patenting at the country level, where
the US, as well as Sweden and Finland, show a specialisation
in core 4IR technologies (EPO, 2020).
Figure 3.3
Presence of core and enabling 4IR technologies in SMEs' patent portfolios
Core
Connectivity
IT hardware
Software
Enabling
Data mining and exploitation
User interface
Position determination
Safety
Data security
D systems
Core AI
Power supply
% % % % %
EU27 US
Source: Orbis and Crunchbase, authors' calculation.
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Over 90% of SMEs based in the EU27 (86% for US-based
SMEs) claim in the interviews to have already implemented
the respective 4IR technology
12
(Figure 3.4). Almost
three-quarters (72%) of the 4IR SMEs in the EU27 reported
implementation in products or services as well as in their
own business. Another 13% implemented the technology
exclusively in products and services sold, while the technology
was used only internally at an additional 6%. Interestingly,
younger companies (operating for under ten years) were
more likely to implement their 4IR technologies in products,
services and their own business than mature companies
(78% vs 68%).
13
12 This proportion is remarkably high compared with available evidence on the
commercialisation of patented inventions by SMEs in other sectors. In fact, a prior
EPO survey (EPO, 2019) found that European SMEs that had filed patent applications
with the EPO had managed to commercialise about two-thirds of the corresponding
inventions.
13 Although EU27 and US 4IR SMEs are comparable when it comes to implementing
deep tech technologies, there are dierences when focusing more broadly on
the non-financial corporate sector. For instance, 47% of US respondents have
already implemented the Internet of Things (IoT) in their business, compared
with 29% of EU respondents (EIBIS 2021).
Figure 3.4
Implementation of 4IR technologies (proportion of firms in %)
EU
US
% % % % % % % % % % %
Implemented in both Implemented in products and services only Implemented in own business only Not implemented
Source: 4IR survey.
Base: All firms (excluding don't know / refused / no obstacle responses).
38
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4IR technologies can support companies' business models
in dierent ways (Figure 3.5). In the EU27, 43% of 4IR SMEs
are involved in hardware manufacturing
14
(i.e. developing,
building and selling physical products). Another 25% create
and sell intellectual property (IP), such as software, analysis,
pharmaceuticals or biotechnology, while 23% provide other
paid services. Only a very small proportion of the SMEs
surveyed operate network platforms used for online trading
or other types of interaction.
Medium-sized companies with more than 50 employees
report a larger proportion of activities related to
manufacturing, while smaller companies are apt to
concentrate on providing services and creating and selling
IP (61% of larger SMEs and 39% of smaller SMEs focus on
manufacturing). In general, 4IR SMEs tend to favour
manufacturing business models compared with other
SMEs, as shown in a recent EIB start-up survey (EIB, 2019).
14 In comparison, the proportion of EU27 start-ups focusing on manufacturing is
only 23%.
Figure 3.5
Business models
Develop, build and sell physical things
Develop and sell intellectual property,
for example software, analysis,
pharmaceuticals or biotechnology
Provide services to customers for
which you charge
Operate a network platform on which
participants can, for example, buy, sell
or share things or build relationships
Other
% % % % % %
Proportion of firms (in %)
EU27 US
Source: 4IR survey.
Base: 4IR innovators in the 4IR survey (excluding don't know / refused / no obstacle responses).
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The design of the survey makes it possible to analyse the
business models used by 4IR SMEs in their main deployment
sectors, as shown in Table 3.1. In biotech and healthcare,
and transport, over 40% of the companies develop and
make physical products. By contrast, the business models
of companies active in data analytics and software
development show a stronger focus on development
and the sale or licensing of intellectual property.
Biotech and
healthcare
Data analytics
and software
development
Cleantech Transport
Develop, build and sell physical things % % % %
Develop and sell intellectual property, for example software, analysis,
pharmaceuticals or biotechnology
% % % %
Provide services to customers for which you charge % % % %
Operate a network platform on which participants can, for example,
buy, sell or share things or build relationships
% % % %
Other % % % %
Source: 4IR survey.
Base: 4IR innovators in the 4IR survey (excluding don't know / refused / no obstacle responses).
Table 3.1
Business models and deployment areas
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Tobii continually expanded its patent portfolio, enabling
it to attract investors, diversify its products, and refine its
technology. As a result, the start-up from Sweden became
a listed company that dominates its niche.
Neurodegenerative conditions often mean a cruel fate.
People who are otherwise healthy with active minds
may be unable to express themselves through speech or
movement, leaving them trapped in their bodies. Thankfully,
rapid technological advancements give those living with
conditions such as cerebral palsy or severe paralysis greater
independence. Tobii continually expanded its patent portfolio,
enabling it to attract investors, diversify its products, and
refine its technology. As a result, the start-up from Sweden
became a listed company that dominates its niche.
John Elvesjö and Mårten Skogö (European Inventor Award
2015, SMEs, finalists) invented a revolutionary eye-tracking
system that recognises the position and gaze point of the
pupils and interprets this information in real time. Together
with their team at Tobii, they explored uses for their system,
ranging from interaction with speech-generating
programmes to clinical diagnosis and gaming.
Improving lives in the blink of an eye
At just 24 years old, Elvesjö made a ground-breaking
discovery during a lab experiment. He was working with
optical sensors designed to track the movements of fruit
pulp particles in solution and, peering closely at the vessel,
noticed that the sensors detected his own eye movements.
He realised the potential of his observation and began
working on an eye-tracking device.
The device employs several near-infrared light
micro-projectors – optical scanners placed on a screen
display. Sensors register and track the reflections of the
infrared light from the user's eyes to follow their gaze,
where it lands and how it moves. Proprietary software
incorporating special algorithms then interprets these
eye movements in real time.
An ever-growing number of fields now use eye-tracking.
Gamers control the on-screen action with unprecedented
realism and researchers see the world through the eyes of
their subjects. Marketeers observe how consumers behave
online and in-store, while clinicians use new tools to identify
tell-tale signs of ocular disease and mental or neural disorders.
Crucially, the invention facilitates touchless human-machine
interaction and enables people to control computers with
eye movements. For those living with a neurological
condition or recovering from a debilitating injury, this
enables mobility and improves communication. It empowers
people to gain independence and live fuller personal and
professional lives. Current assistive technologies can
generate speech, connect to devices or to the web, and
allow users to write, draw or create music.
Visionary
Tobii was founded by John Elvesjö, Mårten Skogö and Henrik
Eskilsson in 2001. The company's iterative development
approach required a robust patent portfolio and regular
investment. Between 2007 and 2012, venture capitalist firms
invested EUR 41 million over several rounds. These funds
supported R&D and allowed Tobii to explore new avenues
for its eye-tracking devices. It received an additional
EUR 13 million in 2014 to finance expansion plans and
strategic acquisitions.
Thanks to its market success, the start-up grew quickly and
surpassed its status as an SME. Today, the company has split
and both Tobii and its subsidiary (Tobii Dynavox) are listed
on Stockholm's NASDAQ. The company now employs some
600 people in 14 oces worldwide and reported revenue of
almost EUR 60 million (SEK 616 million) in 2021.
The company cites innovation as a vital part of its business
model and commands an extensive intellectual property
portfolio. This includes rights to protect the design, control
and readout of image sensor data; physical integration
techniques, calibration methods and system layouts; as well
as algorithms and methods to implement eye-tracking. Their
patent portfolio extends to industry-specific use cases in
areas such as automotive, biometrics, gaming, consumer
engagement measurement and wearables. To date, Tobii
holds 26 granted European patents, highlighting their
consistent focus on intellectual property over two decades.
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4. Market and IP positions
While the previous chapter focused on the technological
profiles and innovation strategies of 4IR SMEs, this chapter
provides insight into their sales markets and structure.
Information from the 4IR survey is complemented by an
analysis of patent protection strategies of 4IR SMEs and
their role in supporting their business developments.
Figure 4.1 documents the reference geographical markets
of 4IR SMEs. At present, almost every second 4IR SME in
the EU27 primarily targets the European market in their
commercialisation eorts. Nevertheless, 32% regard their
home country as their core market and 9% primarily target
the US. Looking ahead to the next five years, only 6% of
SMEs in the EU27 would still consider their national market
as their main market. Instead, 4IR SMEs in the EU27 are
focusing their growth plans on the European market
(from 52% to 57%) or the US (from 9% to 24%).
In comparison, virtually no US 4IR SMEs focus their sales
activities exclusively on their home state and 87% of all US
4IR SMEs regard the whole US as their primary market. Only
a very small proportion of US companies have their main
operations in Europe (7%) or in any market outside the US.
Over the next five years, the US will remain the primary
market for 79% of US 4IR SMEs. However, the proportion
of companies intending to primarily target the European
market may increase to 13%. Other markets are likely to
remain peripheral for US 4IR SMEs.
It is worth stressing that more European firms see their
future primary market in the US (24% of EU27 and 35% of
Other Europe SMEs) than vice versa. Only 13% of US SMEs
regard Europe as their future primary market. Moreover,
SMEs in the EU27 claiming to be dominant players in their
markets are more likely to see the US as a future primary
market (38%).
4IR SMEs from the UK, Switzerland and Norway have a
similar market distribution to their EU counterparts.
Although their primary focus is, and will remain, on the
European market, a large proportion of these 4IR SMEs
(35%) – especially UK-based firms – will target the US market.
Overall, only less than 6% of European 4IR SMEs would
consider China as their main sales market in the future.
Figure 4.1
Geographical markets for 4IR technologies
Future primary market Current primary market
Source: 4IR survey.
Base: 4IR innovators in the 4IR survey (excluding don't know / refused / no obstacle responses).
Note: Europe is defined as all EPC member states, including the EU27, the UK, Switzerland, Norway and other countries.
EU
Home
country/state
Europe
US
China
Other
countries
Worldwide
% % %
Proportion of firms (in %)
Other Europe (UK, CH, NO)
Home
country/state
Europe
US
China
Other
countries
Worldwide
% % %
Proportion of firms (in %)
US
Home
country/state
Europe
US
China
Other
countries
Worldwide
% % %
Proportion of firms (in %)
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The countries in which companies seek patent protection
for their inventions also provide information on the
importance of the dierent markets for commercialisation.
Almost 95% of European 4IR SMEs seek protection in
Europe, followed by the US (73%), with China (36%), Japan
(25%) and R. Korea (13%) quite some distance behind. In
turn, US 4IR SMEs try to protect 91% of their 4IR inventions
in their home market, 64% in Europe, 34% in China,
31% in Japan and 18% in R. Korea. These patent protection
strategies reveal the strong integration of the European and
US markets, as well as their importance for 4IR technology
commercialisation. However, European SMEs seek to protect
a larger proportion of their 4IR inventions in the US (73%)
than vice versa (63% of US SMEs protect their invention in
the EU). This is in line with the survey results, which showed
the greater significance of the US market for European 4IR
SMEs than vice versa (see Figure 4.1 above). Interestingly, the
results apply both to young and mature, as well as smaller
and larger SMEs.
Figure 4.2
Scope of international patent protection
Europe
EU
US
P.R. China
Japan
R. Korea
% % % % % % % % % % %
EU27 Other Europe US
Source: Orbis and Crunchbase, authors' calculation.
Note: The following criteria have been applied to make the results comparable: (a) filtering for patent families with the earliest filing date before 2019 to avoid the issue
of the entry into regional/national phase coming from PCT applications; (b) removing all patent families featuring a unique PCT application, since they had not entered a
regional/national phase at the time of data retrieval.
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Although a large proportion of the EU's 4IR SMEs are small
companies with fewer than 50 employees (see Figure 2.4),
the majority have established a strong, competitive position
in their respective markets. 31% of 4IR SMEs in the EU27
are among a few established players, another 11% are one
of the dominant players and 13% are the sole player in
their market. As Figure 4.3 shows, larger and more mature
SMEs are more likely to occupy a dominant position in their
market, or be one of a few established players, than smaller
and younger SMEs. However, smaller SMEs more frequently
indicate that they are the only player in the market, in other
words they create new markets or occupy niche markets.
Compared with EU companies, a larger proportion of US
4IR SMEs consider themselves as small players (56% vs 45%),
while a minority claim to be one of a few established players
(18% vs 31%).
Figure 4.3
Market position of 4IR SMEs
Proportion of firms (in %)
%
%
%
%
%
EU US EU US
Young Old
Small player Among few established Dominant Only player
Source: 4IR survey.
Base: 4IR innovators in the 4IR survey (excluding don't know / refused / no obstacle responses).
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
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Survey results also suggest a positive eect of 4IR innovation
on competition, as measured by the reported pressure on
costs and firm entry. Overall, US and European SMEs that
expect the importance of 4IR technologies to increase in
their market also anticipate stronger competition. The most
common perception is that the greater dominance of 4IR
technologies will lead to more cost pressure, more market
entry as well as a higher demand for skilled sta. The main
dierence is that dominant SME players in their markets
expect less cost pressure to follow from the further
importance of 4IR technologies.
Figure 4.4
Eect of 4IR technologies (net balance), by market position
Share of firms (in %)
%
%
%
%
%
Number of competing firms Cost pressure Innovation pressure Demand for skills
A small player One among a few A dominant player The only player
Source: 4IR survey.
Base: 4IR innovators anticipating that 4IR technologies will gain in importance (excluding don't know / refused / no obstacle responses).
Note: Net balances show the dierences between firms expecting an increase and firms expecting a decrease.
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Given their focus on deep tech innovation, securing IP rights
in their key geographic markets is of strategic importance
for 4IR SMEs. The survey shows that EU27 companies
use patents for a variety of business-related purposes
(Figure 4.5). The reputational benefit from owning patents
is considered indispensable by most SMEs (63%), closely
followed by obtaining the freedom to deploy the invention
(57%), facilitating business partnerships and co-operations
(56%), preventing imitation and copying (52%), and securing
financing (49%). Interestingly, only 41% regard patent
protection as a high priority in increasing the company's
revenues.
The importance of the dierent benefits of patent
protection does not dier significantly between locations.
Preventing imitation is the only notable exception,
considered essential by a much larger proportion of US
SMEs (73% for the US vs 52% for Europe). However, there
are some key dierences, depending on company size and
age. For example, the role of patents in securing financing
is a higher priority for younger and smaller 4IR SMEs,
while securing the freedom to deploy seems to be more
important for larger SMEs than for smaller.
In addition to patents, most 4IR SMEs in the EU27 use other
IP protection mechanisms, especially trade marks (65%)
and secrecy (60%), to protect 4IR technologies. Copyright
protection and lead time are vital protection mechanisms
for 43%, in each case, of the EU27's 4IR SMEs. Interestingly,
both are more important for US 4IR SMEs than for SMEs in
the EU27. In addition, all types of protection mechanisms
are generally adopted by larger SMEs, perhaps explained
by their having better IP management processes in place,
rather than by smaller firms. A recent joint study by the EPO
and EUIPO (EPO and EUIPO, 2021) found that European SMEs
that own combinations of IP rights tend to outperform other
companies in terms of revenue-per-employee. The use of
dierent IP rights is probably a sign of good IP management
practices.
Figure 4.5
Protection of intellectual assets
EU27 Other Europe (UK, CH, NO) US
Source: 4IR survey
Base: 4IR innovators in the 4IR survey (excluding don't know / refused / no obstacle responses).
Other protection strategies
Trade mark
Secrecy
Copyright
Lead time
% % % % %
Share of firms (in %)
Importance of patents
Supports the
company's reputation
Obtains freedom to
operate the invention
Facilitates business
partnerships and
co-operations
Prevents
imitation/copying
Secures financing
Increases company
revenue
% % % % %
Share of firms (in %)
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An analysis of the patent protection strategies of 4IR SMEs
for the full Orbis and Crunchbase sample is presented in
Figure 4.6. While a European SME owns 1.8 4IR IPFs on
average, their US counterparts own 2.5 IPFs. The higher
number of 4IR SMEs in the US is therefore compounded
by their, as a rule, significantly larger 4IR patent portfolios.
The regional dierence persists for younger and mature
4IR SMEs, as well as for smaller and larger companies
15
.
15 One similarity between US and European 4IR SMEs is that they tend to increase
their patent portfolios in line with company size and less so with the age of the
company. While a 4IR SME in the EU with fewer than ten employees owns an
average of 1.6 patent families, companies with more than 50 employees own 2.6,
and small 4IR SMEs in the US own 2.1 IPFs and larger 4IR SMEs 4.2 IPFs, respectively.
Figure 4.6
Average number of 4IR IPFs
EU Other Europe US
. .
.
EU
Number of years in operation
Size
0-10 11-20 20+
-
1.4 1.9 1.9 1.6
-
1.8 2.2 1.8 1.9
-
3.4 2.3 2.1 2.6
1.7 2.1 1.9
US
Number of years in operation
Size
0-10 11-20 20+
-
2.0 2.1 3.0 2.1
-
2.1 2.6 2.5 2.4
-
3.7 4.1 4.4 4.2
2.2 2.7 3.3
Source: Orbis and Crunchbase, authors' calculation.
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BOX 4
Patents and finance
Patents and IP are important assets, enabling technology
SMEs to raise capital and finance innovation. They
allow enterprises to obtain funding at more favourable
conditions. Since they are publicly disclosed, patents help
investors assess the quality of the firm's technological
capabilities, reducing asymmetric information between
them and the company. As legally protected and
enforceable property rights, they are also likely to give
the company a competitive advantage and increase its
expected profitability. In addition, patent rights can be
separated from the business and sold in case of financial
distress, thus increasing the salvage value of the
company, should it fail.
A recent survey by the EUIPO (EUIPO SME scoreboard,
2019) found that, in general, few European SMEs leverage
their IP to get access to finance. According to the EUIPO
SME scoreboard, only 13% of SMEs owning IP rights tried
to use intangible assets to obtain finance: 9% successfully
and 4% unsuccessfully. However, the picture changes if
only companies using patents to protect their innovations
are considered. According to the EPO's Patent
commercialisation scoreboard (EPO, 2019), using
European patent applications to secure financing is
regarded by over one third (35%) of European SMEs as
an important motive for maintaining their patent. This
proportion is even higher among European 4IR SMEs.
According to the 4IR survey, almost 50% of 4IR SMEs in
the EU27 consider that helping to secure financing is one
of the chief benefits of patent protection, especially if the
firms are very small (see Figure 4.5 above). An even larger
proportion of interviewees agreed that the company's
IP strategy was of relevance to their investors. 80% of
EU27 4IR SMEs reported that investors pay attention to
the company's IP strategy; this figure largely reflects the
experience of US 4IR SMEs. Interestingly, the percentages
do not vary significantly by size, age or industry sector
of EU 4IR SMEs.
Figure 4.7
Relevance of IP strategy for investors
EU
Other Europe
US
% % % % % %
Proportion of firms (in %)
Source: 4IR survey.
Base: 4IR innovators in the 4IR survey (excluding don't know / refused / no obstacle responses).
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IP may also be used as collateral for loans or to back
equity investments. Over half of 4IR SMEs in the EU27
and 63% of 4IR SMEs from the three other European
countries (UK, CH and NO) reported that IP was
considered collateral by investors, while just 17%
disagreed with this statement. However, 10% and 9% of
respondents respectively revealed that a relatively large
proportion of companies did not know the answer. The
proportion of SMEs in agreement with the statement
was high in biotech and healthcare (67%) and significantly
lower in data analytics and software development, with
only 43% of the 4IR companies concurring and 14% unable
to say. Interestingly, variation by age and company size
was relatively low. The proportion of SMEs declaring
that IP was considered collateral by investors was lower
among US 4IR SMEs, with 43% agreeing and 15% declining
to respond.
Figure 4.8
Use of IP as collateral
EU
Other Europe (UK, CH, NO)
US
% % % % % % % % % % %
Proportion of firms
Agree Neither agree nor disagree Disagree Don't know No statement
Source: 4IR survey.
Base: 4IR innovators in the 4IR survey.
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Spinning out from a university proved the best option
to commercialise this flexible, scalable medical imaging
technology. Broad patent cover protected the invention
and secured continuous investment throughout the
development and approval phases.
Healthcare providers have used systems combining
computers and cameras for approximately three decades.
For example, endoscopy systems comprise thin, flexible
tubes fitted with a camera. The camera transmits images
onto a screen in real time, enabling the physician to examine
a patient's internal organs. Some scopes are equipped with
tools that allow doctors to perform keyhole surgery. While
these systems can improve patient outcomes, they are
often expensive, bulky and closed, and therefore useful
in a limited number of procedures.
University of Coimbra Professor João Pedro Barreto and
Rui Melo, one of his PhD students, were researching camera
calibration and real-time image processing for endoscopy
systems. They soon developed early prototype software and
knew that their work had potential. However, they were also
aware that larger companies are often unwilling to invest
directly in technology emerging from universities. With their
own capital and an exclusive licensing agreement with the
university, Barreto and Melo founded P3D to commercialise
their image-processing software. Today, the company
develops video-based technology to assist surgeons in
navigating around the human body. Their systems are
accurate and solve several ergonomic and economic
problems.
Towards new surgical concepts
During its first development stage, P3D focused on new
camera calibration methods, applying pixel value and pixel
position techniques to improve visualisation and correct
camera lens distortion, or "fish-eye" eect. The company
then developed image-based surgical navigation, combining
a pre-operative 3D surgical planning tool with real-time,
intra-operative guidance based on augmented reality
technology. This enables a surgeon to see the "real" image
of a joint, bone or organ, overlaid with additional digital
information or projections, all in one view. The device
included the first navigation system for Computer-Assisted
Orthopaedic Surgery (CAOS) in arthroscopy (keyhole joint
surgery). The system adds overlays in the intra-operative
video with exceptional accuracy and control.
The solutions currently provided by P3D are simple and
cost-eective, reducing the amount of sterilised material
needed for each surgery and enabling quicker, more
cost-eective procedures. Their software is universal and
can be used with o-the-shelf devices such as smartphones,
tablets or mixed reality headsets, as well as with existing
surgical cameras. This "open surgery" concept bypasses
the need for more capital-intensive equipment that is not
portable and takes up valuable operating room space.
Navigating the field
In 2013, Portugal Ventures became the first venture capital
(VC) fund to invest in P3D via a seed round. The investment
covered early patenting costs and secured a minority share
for Portuguese Ventures, leaving the founders as the major
shareholders. While IP-related expenses consumed a large
percentage of early funding, it would have been more
dicult to fund such an early-stage R&D project without
IP. Then, in 2017, the EU's Executive Agency for Small and
Medium-sized Enterprises (EISMEA) granted VC funds to
help P3D upscale.
Initially, P3D showcased its technology to practitioners at
fairs and other events. However, the company planned these
demonstrations (where technical details would be revealed)
to follow their patent filings to safeguard them from
novelty-destroying prior disclosure. More recently, P3D
licensed its navigation system for hip surgery to a global
implant manufacturer. The development phase was
successful and the system is expected to enter the market
in early 2022, almost ten years after P3D's incorporation. In
parallel, the company is also preparing to launch its own
branded product – a navigation system for total knee
arthroplasty that runs on a small device like a smartphone
or tablet.
P3D's technology is scalable to many procedures and
anatomies in orthopaedics (hip, spine, shoulder). The total
market potential is estimated at EUR 4.2 billion, considering
both open and minimally invasive surgeries. The company's
navigation technology could also reduce surgical revisions.
Each year, some 312 000 patients undergo procedures to
correct failed knee implants. Improved navigation could
reduce this figure by 20% and save healthcare operators
EUR 2 billion. For patients, however, the saving is invaluable.
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5. Investment activities
4IR SMEs are drivers of investment: they consistently have a
higher investment intensity (defined as investment spending
per employee) than the SMEs that were interviewed in the
EIB Investment Survey (Figure 5.1). When comparing young
4IR SMEs and those that have been operating for over ten
years, we find a higher investment intensity among younger
firms, both in the EU27 and the US. The investment intensity
is also higher in small firms than medium-sized firms. Firms
use strategic business monitoring – a proxy for managerial
skills – invest more than their peers without monitoring
in place.
To a large extent, the higher investment intensity of 4IR
SMEs is driven by greater investments in intangibles and,
more specifically, R&D. This confirms the high technological
nature of these companies. When asked directly, 4IR SMEs
also confirmed that a large part of their investment is linked
to innovation. Young 4IR firms estimate that about 80%
of their investment is related to innovation. For 4IR firms
operating for over ten years, this proportion drops to just
over 60% in the EU27 and the US.
Figure 5.1
Median investment intensity, in EUR
Proportion of firms
EU US EU US
Young Old
4IR SMEs EIBIS SMEs
Source: 4IR survey, EIBIS (2021).
Base: Firms with fewer than 250 employees (excluding don't know / refused responses).
Note: Investment intensity defined as investment spending per employee.
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Not surprisingly, a large proportion of the innovation-related
investment of 4IR companies was in 4IR technologies. Up to
70% of the total investment of young 4IR SMEs was targeted
at 4IR innovations. For 4IR firms operating for over ten years,
this figure drops to less than 50% in the EU27 and less than
60% in the US.
Figure 5.2
Proportion of investment related to 4IR technologies (in %)
Proportion of investment (in %)
%
%
%
%
%
%
%
%
EU US EU US
Young Old
%
%
%
%
Source: 4IR survey.
Base: Firms investing in innovation (excluding don't know / refused responses).
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Despite a high investment intensity, over 25% of firms
consider their past investment activities related to
4IR activities insucient. Looking back at their investment
activities over the past three years, 27% of young EU27 and
28% of US 4IR SMEs stated that their investments were too
low to ensure business success. Among firms operating for
over ten years, 21% of EU27 firms and 33% of US firms rate
their investment activities as inadequate. Given their market
position, reported investment gaps were highest for firms
claiming to be the sole player in their market and lowest for
firms professing to be dominant players.
Figure 5.3
Perceived investment gaps related to 4IR technologies
Proportion of firms (in %)
%
%
%
%
%
EU US EU US
Young Old
%
%
%
%
%
%
%
%
%
%
%
%
Too low About right Too high
Source: 4IR survey.
Base: Firms investing in 4IR innovation (excluding don't know / refused responses).
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The vast majority of firms predict that 4IR technologies
will progressively dominate their market in the future. On
balance, about 56% of EU27 and 74% of US firms anticipate
an increase in investments related to 4IR innovations in
the next five years. When asked whether they expect
their investment in 4IR innovation to increase, decrease or
stay the same over the next three years, the answer was
overwhelmingly: increase. Regional dierences reflect
variations in firms' expectations of changes in the
importance of 4IR innovation, with firms in the US
standing out as the most buoyant.
Figure 5.4
Investment outlook
Proportion of firms (in %)
%
%
%
%
%
EU US EU US
Young Old
More About the same Less Do not expect to invest
Source: 4IR survey.
Base: Firms investing in 4IR innovation (excluding don't know / refused responses).
%
%
%
%
%
%
%
%
%
%
% %
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Firms' predictions of increasing investment prospects
are related to their past investments. On balance, firms
considering their investment to have been inadequate are
more likely to announce greater investments in 4IR innovation
over the next five years than firms investing in line with their
needs. This suggests that underinvestment has implications
insofar as it pushes firms to catch up with peers whose
investments met their needs (see Figure 5.5). Furthermore,
firms that are well managed tend to report an intention to
increase investment in the future.
Figure 5.5
Investment outlook, by past investment
More About the same Less Do not expect to invest
Source: 4IR survey.
Base: Firms investing in 4IR innovation (excluding don't know / refused responses).
Note: Firms with inadequate investments in 4IR innovation in the last three years are labelled gap.
Proportion of firms (in %)
%
%
%
%
%
EU US EU US
Gap No gap
%
.%
%
%
%
%
%
%
%
%
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BOX 5
The impact of the COVID-19 pandemic on 4IR SMEs
COVID-19 has undeniably had a large impact on many
firms. Nevertheless, when asked about the impact of the
pandemic on their turnover, 4IR SMEs were more likely
than SMEs in general to report a negative impact. In
addition, US 4IR SMEs in particular were more likely to
experience a negative impact on their sales than their
peers in a wide variety of sectors. Given that COVID-19
led to a slowdown in the adoption of advanced digital
technologies (see EIB (2022)), it is not surprising that firms
active in deep tech saw a larger drop in sales than SMEs
in general.
Apart from aecting companies' turnover, COVID-19 had
an enormous impact on their various activities. Although
most 4IR SMEs did not perceive any impact of the
pandemic on their innovation activities in general, more
4IR firms state that the COVID-19 crisis allowed them to
innovate more rather than less. Compared with EIBIS EU
SMEs in manufacturing and services overall (based on
the AOM module of the EIB Investment Survey), 4IR SMEs
seemed slightly less likely to perceive this positive impact
on innovation. This dierence also applies when focusing
exclusively on EU 4IR SMEs.
Figure 5.6
Impact of the COVID-19 crisis on firms' turnover
Proportion of firms (in %)
%
%
%
%
%
EU US EU US
IR SMEs SMEs EIBIS
%
%
%
%
%
%
%
%
%
%
%
%
Positive No Decrease
Source: 4IR survey, EIBIS (2021).
Base: 4IR innovators in the 4IR survey, SMEs in EIBIS (excluding don't know / refused / no obstacle responses).
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When asked about the impact of COVID-19 on their
4IR-related innovation investment plans, especially young
and small 4IR SMEs indicate that the pandemic led them
to revise their investment plans upwards. At the same
time, just under 20% of all 4IR SMEs anticipate a downward
Figure 5.7
Impact of the COVID-19 crisis on firms' innovation activities
Proportion of firms (in %)
%
%
%
%
%
Young small Old small Medium SMEs EIBIS
%
%
%
%
%
%
%
%
%
%
%
%
Less About the same More
balance
Source: 4IR survey, EIBIS 2021 add-on module (AOM) – sample of EU SMEs in manufacturing and services (2021).
Base: 4IR innovators in the 4IR survey, SMEs in EIBIS (excluding don't know / refused / no obstacle responses).
Figure 5.8
Impact of the COVID-19 crisis on firms' innovation plans
Revised 4IR innovation investment plans upwards Revised 4IR innovation investment plans downwards
Source: 4IR survey.
Base: 4IR innovators in the 4IR survey (excluding don't know / refused / no obstacle).
Proportion of firms (in %)
%
%
%
%
%
%
%
Young small Old small Medium
%
%
%
%
%
%
revision of their 4IR-related investment plans. Among
young firms, US-based 4IR SMEs in particular expect an
upward revision of their future investments, while their
EU counterparts were more likely not to change their
4IR investment plans.
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A strong patent position scooped investments of EUR 2.5
million for this Norwegian marine engineering company.
The capital injection helped grow a business now supplying
technology to over 100 salmon farms.
Norway is the world's largest Atlantic salmon producer and
the country's salmon industry is worth over EUR 6.4 billion
annually. However, the industry faces a massive threat from
a miniscule enemy: sea lice. Each year, salmon farmers spend
over EUR 800 million on measures to control outbreaks.
Current delousing techniques may involve chemicals that
pollute the environment. Over time, parasites can become
resistant to these treatments, rendering them ineective.
Fish also need to be starved and handled physically, which
may kill them or stunt their growth – resulting in financial
losses for farmers who sell by weight.
Esben Beck (European Inventor Award 2019, SMEs, finalist)
decided to use technology to tackle the problem. He
developed a robot that can spot sea lice on salmon or trout
and zap them with lasers. The Norwegian entrepreneur
founded Stingray Marine Solutions to take his invention
from the basement to the market.
A smart combination
The invention, called Stingray, combines artificial intelligence
(AI), 3D computer vision and simulation algorithms that can
identify the dark sea lice (typically no larger than 12 mm) on
the silvery skin of salmon up to several metres away. The
device is also equipped with stereo cameras and uses AI to
examine video footage.
An onboard computer scans the fish and can pinpoint the
shade and shape of sea lice in just seven milliseconds. The
software then models the path of the salmon in the water
to predict the future location of the targeted sea louse.
The Stingray then directs its movable mirrors to focus the
laser beam onto individual sea lice and fires a short pulse of
intense light (100-150 milliseconds). The green wavelength
of the laser transmits eectively underwater while providing
enough energy in each burst to kill the parasites.
The system can kill tens of thousands of sea lice a day and
operates 24/7 with no need for human intervention. It keeps
fish healthier and heavier, reduces deadly physical contact
and ensures that no toxic chemicals enter the marine
environment.
When one door closes, another opens
In the early 2000s, the Tromsø-born inventor founded
Beck Engineering AS to provide engineering expertise and
equipment such as pipeline robots. In 2009, however, the
financial crisis threatened his livelihood. Beck read about sea
lice infestations and immediately thought about burning the
parasites with lasers – much like burning ants with sunlight
and a magnifying glass. Thanks to his marine welding
knowledge, he knew green laser light would work best.
A patent database search showed that his laser solution
was unique and he applied for patents to protect his robot.
From 2011 onwards, Beck relied on his then pending
applications to raise over EUR 2.5 million in government
funding and venture capital. He established a subsidiary,
Stingray Marine Solutions, and with his own capital and
additional support from employees, launched the robot
commercially in October 2014.
Today, the Stingray is used in more than 100 salmon farms
in Norway, collectively monitoring around 40 million fish.
Mortality has more than halved in pens fitted with the
device and farmers yield an extra half a kilogram of meat
per fish. With no similar solutions available and the original
patents still in force, Stingray Marine Solutions is set to
expand its market share locally and abroad.
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6. Financial profile and structural barriers
6.1. Funding 4IR SMEs
The proportion of funded 4IR SMEs is higher than reported
in other studies (EIB, 2019). However, the EU27 has a relatively
low number of 4IR start-ups and scale-ups listed on
Crunchbase. This is true in absolute numbers (Figure 6.1.1)
and as a proportion of the total population. The gap is
relatively big, with the EU27 having only about one third the
number of young, high-growth firms of the US. Moreover,
according to Crunchbase data, 4IR start-ups and scale-ups
in the EU27 are less likely to list that they received formal
funding (59%) than their US peers (68%).
Figure 6.1.1
Number of firms with and without funding, and proportion of firms with formal funding
Source: Crunchbase, authors' calculation.
Base: See Annex 1 for a definition of 4IR SMEs.
Note: Crunchbase lists firms that have already received some type of formal funding (with funding) as well as firms that have not yet received formal funding
(without funding).
Number of firms
EU- Other Europe US
With funding
Without funding
Proportion of firms (in %)
%
%
%
%
%
%
%
%
EU Other Europe US
%
%
%
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The benchmark for Europe and the US is based on all
Crunchbase companies with 250 or fewer employees, which
were founded between 1971 and 2018, and based in the
respective countries.
While SMEs in Europe and the US receive relatively similar
absolute amounts of early-stage funding, 4IR start-ups and
scale-ups benefit more from higher growth funding than
their benchmark peers. This might be linked to the fact that
start-ups in this domain invest enormously in R&D, while their
projects entail greater risks. Low cash flows, few tangible
assets that can serve as collateral and the uncertainty
associated with innovating mean that more traditional
lenders/investors are hesitant to get involved, so
4IR start-ups depend more on equity-type financing.
We find that EU27 firms raise less funding as they mature.
Figure 6.1.2 shows the amount of funding attracted at
each funding stage by firms with growth ambitions. While,
initially, the dierences between the EU27 and the US are
modest in absolute terms, as firms move to later funding
stages the gap between the EU27 and the US increases.
Figure 6.1.2
Funding received by funding stage, funding amount in thousand USD (median)
Early Build Growth Early Build Growth Early Build Growth
EU Other Europe US
4IR SMEs
Benchmark
Source: Crunchbase, authors' calculation.
Base: See Annex 1 for a definition of 4IR SMEs.
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EU policymakers are already making great eorts to close
the funding gap. At 12%, the proportion of 4IR start-ups in
the EU27 receiving funding from public investors is much
higher than in the US, with 3%. In connection with the
funding results above, this suggests that public support has
been quite eective in closing the early-stage funding gap,
but less to help firms to scale.
Figure 6.1.3
4IR SMEs receiving funding, by investor type
Proportion of firms (in %)
%
%
%
%
%
EU Other Europe US
%
%
%
%
%
%
%
%
%
Private Private/public Public
Source: Crunchbase, authors' calculation.
Base: See Annex 1 for a definition of 4IR SMEs.
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6.2. Structural barriers
To get a better grip on the development and implementation
of 4IR technologies, and how policymakers can further
enhance this, it is also important to understand the main
obstacles faced by 4IR innovators.
The availability of both finance and sta with the required
technical skills are the main obstacles cited by both EU27
and US firms in the survey. More than half of US and EU
companies are dissatisfied with the availability of government
support, although EU firms are more likely to consider this a
major obstacle to their activities.
Overall, firms in both the EU27 and the US seem to face
the same barriers, with some noteworthy exceptions. For
example, US firms are slightly less likely than EU firms to
perceive the availability of government support, business
regulations and taxation, and a small market size as major
obstacles.
Comparing some of the obstacles investigated by EIBIS, we
find that 4IR SMEs seem to regard fewer obstacles as major
than their peers (Figure 6.2.1). In particular, 4IR SMEs appear
to be less exposed than other SMEs to the shortage of
skilled sta. This might be linked to the fact that many
4IR SMEs started with high IT skills, in other words, skills that
firms generally lack. However, the availability of finance is
an important exception, perceived more often as a critical
issue by 4IR SMEs than by other SMEs. In the EU27, 30% of
4IR SMEs cite the availability of finance as a major obstacle,
compared with 20% of SMEs in EIBIS. In the US, the
dierence is even greater with 33% of 4IR SMEs reporting it
as a major obstacle, compared with 8% of SMEs in EIBIS.
Figure 6.2.1
Obstacles
Proportion of firms (in %)
%
%
%
%
%
EU US EU US EU US EU US EU US EU US EU US
Availability of
finance
Availability of staff
wih the required
technical skills
Availability of
government
support
Business
regulations and
taxation
Fragmentation of
the EU market
Uncertainty
about the
future
Small market
size
Major EU Minor EU Major US Minor US Major EIBIS EU Major EIBIS US
Source: 4IR survey, EIBIS (2021).
Base: 4IR innovators in the 4IR survey, SMEs in EIBIS (excluding don't know / refused / no obstacle responses).
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In particular, firms operating for under ten years face major
challenges in raising funds across all regions (Figure 6.2.2).
In addition, of these young firms, those with fewer than
50 employees tend to be particularly dissatisfied with
their access to finance. This suggests that "newcomers",
presumably digital natives, face higher constraints than
other companies. These funding disadvantages might be
linked to their access to growth capital.
The dierence in the availability of growth finance has
consequences, not merely for firms' access to funding, it
also aects the type of investments they make. Companies
aiming to scale up their activities very quickly by means of
(new) digital technologies rely on equity-type finance. The
risky nature of their project – low cash flows, few tangible
assets than can serve as collateral and the uncertainty of
a completely new venture – means that more traditional
lenders/investors are hesitant to get involved. In other
words, funding of similar activities is prone to market failure.
It is common knowledge that market failures hamper the
innovative activities of firms in general, a factor that may
be aggravated in the case of 4IR endeavours, which are
perceived as even riskier by the more traditional lenders.
Moreover, access to equity finance not only aects whether
firms can access funding for high-risk projects, it also has an
impact on what project they pursue. Against this background,
it has often been argued that the financial landscape in
Europe – heavily skewed towards bank funding – is a barrier
for high-growth businesses.
Furthermore, the proportion of firms citing inadequate
access to finance as a barrier to their investment activities is
substantially higher among firms taking the view that they
underinvested over the past three years across all regions in
our sample (Figure 5.2.3). The dierence between firms with
investment gaps and no gaps is particularly pronounced for
young, small firms.
Therefore, firms that feel they were unable to make
sucient investments to drive their business and achieve
their intended success suer to a greater degree from a
lack of financing. This finding is particularly worrisome,
given the importance of 4IR in policy debates.
Figure 6.2.2
Obstacles by size and age
Proportion of firms (in %)
%
%
%
%
Availability of finance
Young small Old small Medium
Source: IR survey
Base: All IR innovators (excluding don't know / refused / no obstacle responses).
Difference (in pp)
Availability of finance
Young small Old small Medium
Source: IR survey
Base: All IR innovators (excluding don't know / refused / no obstacle responses).
%
%
%
Figure 6.2.3
Dierence between firms that feel they underinvested
and others
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Financing and R&D support from a start-up accelerator
enabled a small Italian start-up to become the sole "open
platform" ABS technology provider for the vast global
e-bike and e-cargo bike industry.
The popularity of e-bikes has risen in recent years due to
the growing interest in smarter, greener mobility solutions.
The pandemic further accelerated this demand: to avoid
the risk of infection, many turned to cycling rather than
urban public transport. While bicycles remain the preferred
mode of transport for many, they are not without risk. Many
accidents occur when braking and, until recently, an anti-lock
braking system (ABS) for bicycles was not technically feasible.
Electronic sensors and computer processors are essential
components in ABS. However, these need electricity and
only modern e-bikes can provide this power.
Professor Sergio Matteo Savaresi, Politecnico di Milano
(Polimi), led a research group that was working on braking
control systems for vehicles. In 2015, some members of
the research group together with e-Novia, an organisation
that helps universities or research institutions develop
intellectual property strategies to scale up technologies and
create spin-os, decided to apply their know-how to light
electric vehicles, in particular e-bikes. The collaboration led
to the development of an open-ended ABS control system
for e-bikes and the formation of a company to commercialise
the invention: Blubrake. Under the leadership of co-founder
Fabio Todeschini, the start-up company developed an ABS
product compatible with most of the brakes and batteries
already present on the e-bike market.
Open to collaboration
Blubrake provides the only "open-platform" ABS solutions
currently available in the e-bike and e-cargo bike market.
Their technical solution can be integrated with every
third-party braking system and battery kit, uniquely meeting
the needs of the original equipment manufacturers (OEMs).
The technology comprises both hardware and software:
the speed sensor and the phonic wheel measure the front
wheel speed in real-time with high precision. A proprietary
AI-powered main unit with an ABS actuator continuously
and instantly increases or reduces hydraulic pressure in
the front brake – guaranteeing smoother braking while
preventing the front wheels from locking. Finally, the system
incorporates a human-machine interface (HMI) for driver
control.
Going global: growing demand for e-bikes
Being a safety device, Blubrake decided to sell its ABS
control systems to large OEMs in order to guarantee the
highest quality and safety standards. At the same time, the
start-up company is also a technology platform provider,
supporting OEMs in adapting its technology solutions to
specific needs and bike models.
A majority share was granted to e-Novia, who played an
essential role in Blubrake's development. The group
attracted financing, negotiated with initial investors and
supported researchers in filing patent applications and
covering procedural fees. At first, Blubrake relied on seed
funding, e Novia and a grant from the EU's Executive Agency
for Small and Medium-sized Enterprises (EISMEA) to finance
four years of R&D. At the end of 2020, the company raised
EUR 5.2 million from private investors thanks to its unique
innovation, protected by an expanding patent portfolio.
The global e-bike market is worth an estimated EUR 16 billion
(USD 18.2 billion) and is expected to grow with an average
annual rate of 5% until 2024 (at least). The Asia-Pacific area
is the largest market, valued at EUR 11.8 billion (USD 13.5
billion) and around 33.7 million e-bikes sold. However, the
Asia-Pacific market is characterised by the slowest growth
rate and the lowest average price, with an estimated
premium segment that amounts to just 4% of the total.
Europe, with 2.9 million e-bikes sold, oers the highest
average price and an above-average growth rate, with
premium e-bikes (minimum price EUR 1 500) making up
46% of that figure. While growth in North America is high,
the market is still relatively small.
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7. Exit
7.1. Acquisitions of 4IR SMEs
The most common types of exits for investors – other than
secondary sales to other financial investors – are acquisitions
and initial public oerings (IPOs). Acquisitions account for
a larger proportion of exits; IPOs are less common when
looking at 4IR start-ups. Indeed, the dierence between the
acquisition activities of 4IR start-ups in the EU and the US
is striking. EU27 4IR start-ups are less likely to be acquired
than US companies (15% vs 19%) and the median acquisition
price is considerably lower (USD 81 million compared with
USD 102 million).
Figure 7.1.1
Acquired start-ups, comparison to benchmark
Source: Crunchbase, authors' calculation.
Base: See Annex 1 for a definition of 4IR SMEs.
Number of acquired IR start-ups
EU Other Europe US
Proportion of acquired start-ups (in %)
%
%
%
%
%
IR SMEs Benchmark IR SMEs Benchmark IR SMEs Benchmark
EU Other Europe US
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Successful start-ups often act as acquirers of new start-ups
and scale-ups. Despite broadening their geographical focus
in recent years, these firms have an overwhelming tendency
to acquire start-ups in their immediate vicinity, thereby
generating enormous local demand for new start-ups and
scale-ups. Mind the Bridge (2016) shows a correlation of 95%
between the state of the acquirer and that of the acquiree
in the US. The EIF (2017) indicates that, from 2003 to 2015,
an average of 44% of exited EIF-backed VC investees were
acquired by non-European buyers, particularly from the US.
We find comparable patterns for 4IR start-ups (see Figure
7.1.2). EU27 4IR start-ups are more likely to be acquired by
US firms (34%) than vice versa (9% of US 4IR SMEs are
acquired by firms based in the EU27).
A strong acquisition demand translates directly into a strong
incentive for investors to invest in high-growth firms from
an early stage. It also increases their willingness to invest
large sums in these firms – explaining the earlier finding that
investments tend to be higher in the US than in the EU – and
invest more "patiently". The greater incentives to invest in
start-ups and scale-ups follow the logic that, where there is
higher acquisition demand, investors know that there is a
good chance that their investee firms will ultimately be
acquired by a deep-pocketed corporate, allowing them to
exit their investments successfully (see e.g. EIF, 2019).
Figure 7.1.2
Origin of the acquiring companies
Source: Crunchbase, authors' calculation.
Base: See Annex 1 for a definition of 4IR SMEs.
EU
%
%
%
%
%
EU Other
Europe
Rest of
world
US
US
%
%
%
%
%
EU Other
Europe
Rest of
world
US
Other Europe
%
%
%
%
%
EU Other
Europe
Rest of
world
US
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7.2. IPOs of 4IR SMEs
4IR start-ups are slightly more likely to have an IPO when
compared with the benchmark (3-4% of 4IR SMEs compared
with 1% of benchmark firms). Moreover, IPO activities are
marginally higher in the US. The positive dynamics of past
success stories for current IPOs are probably the main reason
why among the few European firms that seek a public listing,
a significant proportion also does so in the US. US firms are
much less likely to seek a public listing in Europe, however.
Figure 7.2.1
Companies with IPO, comparison to benchmark
Source: Crunchbase, authors' calculation.
Base: See Annex 1 for a definition of 4IR SMEs.
Number of IPOs for IR start-ups
EU Other Europe US
Proportion of IPOs (in %)
%
%
%
%
%
IR SMEs Benchmark IR SMEs Benchmark IR SMEs Benchmark
EU Other Europe US
Figure 7.2.2
Location of the stock exchange for the IPO
EU
US
% % % % % % % % % % %
EU27 Other Europe Rest of world US
Source: Crunchbase, authors' calculation.
Base: See Annex 1 for a definition of 4IR SMEs.
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8. Policy recommendations
Fostering 4IR innovations should be a policy priority and
policy should not hesitate to push companies to invest in
innovation. Even if innovations have the potential to attract
a suciently wide market, private investors may still hold
back, owing to the higher sunk costs, and delay bringing
novel technology to market. The specific risks entailed by
R&D investments, such as the risk of R&D failure or of new
technology spilling over to competitors, also make it more
dicult for firms to find the necessary funding. These
knowledge-market failures are not new in the innovation
literature and can be addressed by a variety of measures.
Nevertheless, the novelty and often experimental nature
of innovations in the domain of 4IR suggest that they may
be more prone to these failures.
The patent system and intellectual property rights (IPRs)
are generally of direct relevance in this context. By ensuring
legal protection of their inventions, patents and other
IPRs oer businesses incentives to invest in research and
commercialisation. They are also a means of organising
technology transfers with other SMEs, research institutions
and large companies, thereby enabling the development of
innovation ecosystems for deep tech SMEs. The publication
of patent applications is particularly important in this
context as an eective signal of innovation for investors
and other business partners.
Ensuring accessibility of the patent system, together with
the high and consistent quality of patents related to digital
technologies is therefore a key factor of the successful
development of 4IR SMEs in Europe (Figure 4.7 above). While
the survey of 4IR SMEs highlights the relevance of IP strategy
for their investors, other studies
16
point out the need to
increase awareness of IP in the broader population of SMEs
and the investor community.
16 See EUIPO (2019), for example.
The study also shows that European 4IR SMEs prioritise
growth within Europe, seeking to align the geographical
scope of their patent portfolios accordingly (Figures 4.1 and
4.2 above). Currently, the EPO oers a single uniform grant
procedure for Europe, enabling owners of European patents
to take up their rights in over forty countries. However, once
granted, these European patents must be validated and
maintained in force in each individual country to take eect.
Similarly, European patents are enforced before the national
courts so there is fragmentation at the litigation stage, too.
The imminent creation of a Unitary Patent and Unified
Patent Court will address these post-grant limitations by
giving inventors access to an alternative, simplified and
cost-eective route to patent protection and dispute
resolution over most of the EU single market. By providing
for a more integrated European market for technologies, it
will facilitate the growth of European deep tech companies
and make them more attractive for international investors.
Direct policies, such as targeted grants or early-stage
deployment policies, are another tool to foster innovation
in technologies that have not yet become cost-eective.
For early-stage technologies, policies are needed to help
cross the bridge from research and development to market
launch (Howell, 2017). In this context, the EU's flagship
research and innovation programme Horizon Europe will
direct EUR 100 billion to research and innovation, making
it one of the biggest initiatives in the world. In addition,
specific innovation programmes and prize-based challenges
could benefit innovation.
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Investments in 4IR technologies are mainly hampered by a
lack of finance. Survey respondents (Figure 6.2.1 above) cite
this as the main obstacle, more so than the overall group
of SMEs. In addition, it is chiefly the younger, smaller firms
indicating that they had underinvested that express
dissatisfaction in this regard. Unsurprisingly, therefore,
across all regions, these same firms believe that financial
backing would give them the most support (Figure 8.1).
The second-most cited support that would encourage firms
to further introduce or develop 4IR technologies is assistance
in identifying new markets or customers for the youngest,
smallest firms and consistent regulation for the other 4IR
SMEs. This suggests that, while smaller and younger firms
are still in a growth phase and looking for opportunities,
more mature and larger companies are considering dierent
business aspects, requiring a greater focus on regulation
and taxation.
The amount of capital going into the European start-up
ecosystem increased substantially over the last decade and
numerous political initiatives taken by governments helped
in founding European start-ups. This is encouraging but
Europe's start-ups are still hampered in terms of later-stage
funding. As 4IR scale-ups are essential for Europe's
competitiveness and in order to develop more global
4IR leaders, the access of adequate growth funding needs
to be improved.
With the lack of late-stage financing slowing the growth
of EU start-ups, it will be essential to create a start-up
ecosystem that both enables larger funding rounds (in
particular for the later stages) and makes listing start-ups
on European stock markets an attractive option. Europe
needs to do even better in transforming scientific ideas into
sound business models. So far the excellence of Europe's
research landscape is not duly reflected in the form of
4IR champions. What is more, the collaboration between
start-ups and industry incumbents could be strengthened
by overcoming cultural barriers on both sides.
Our survey data point towards structural barriers to the
growth of 4IR SMEs. These include market fragmentation as
well as the availability of sta with the right skills. A smaller
eective market size aects adoption of new technologies
as it means less room to scale up technologies. The Digital
Single Market Strategy championed by the European
Commission aims at addressing these broader obstacles
and enablers of digitalisation. Lack of sta with the right
skills flags a need for policymakers to foster a system of
lifelong learning that extends from basic skills in formal
education to social and emotional skills in vocational training
and higher education, and continuous training throughout
working lives.
Figure 8.1
Policy support 4IR SMEs considered most useful (in %)
Proportion of firms (in %)
%
%
%
%
%
%
Advice on funding Available financial
support
Assistance with
identifying new
markets or customers
Technical support Consistent regulation
within Europe
Advice on IP strategy
and/or IP management
Young small Old small Medium
Source: 4IR survey
Base: 4IR innovators (excluding don't know / refused / no obstacle responses).
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9. Conclusion
The purpose of this report is to shed light on SMEs that are
active in 4IR patenting. As they bring novel and disruptive
technology to market, 4IR SMEs are instrumental in
shaping the global race to digital transformation. By
benchmarking the impact, business profile and challenges
of these companies in the EU, the US and other European
countries, the report aims to inform policymakers, private
decision-makers and investors of the specific challenges
of growing deep tech businesses within Europe.
The report highlights that Europe not only lags behind the
US when it comes to large ICT companies but also in terms of
SME activity in deep tech. The US has roughly twice as many
4IR SMEs as the EU, despite the overall lower proportion of
SMEs in the US economy. They contributed 16% of US 4IR
patenting between 2010 and 2018, and have significantly
larger 4IR patent portfolios on average. Within the EU, over
2 600 European SMEs contributed 10% of the bloc's 4IR
patenting. There are significant dierences between EU
countries, however. Finland and Sweden in particular stand
out with a higher concentration of 4IR SMEs than even the
US, adding to the presence of global 4IR leaders such as
Nokia and Ericsson.
Analysis of the main markets and growth trajectories of
4IR SMEs reveals other dierences between the EU and the
US. Currently, 32% of the EU's SMEs still focus primarily on
operations in their home country, with growth plans mainly
targeting the European market (52%), as also reflected in the
geographical scope of their patent portfolios. By contrast, US
4IR SMEs cite the entire US domestic market as a priority for
both current and future growth, as well as for patent filings.
Interestingly, more than every third EU 4IR SME that has
been acquired was acquired by a US company.
European and US 4IR SMEs have very similar profiles. A
relatively large proportion (43%) of these SMEs are involved in
manufacturing (developing, building and selling physical
products), as opposed to service-based or platform-based
business models for the remainder. Overall, almost 90% of 4IR
SMEs have successfully implemented their 4IR technologies
in products and services or in their own business.
Crucially, 4IR SMEs dier significantly from other SMEs with
respect to their investments and capital needs. For instance,
our survey results reveal the higher investment intensity of
EU-based 4IR SMEs, as well as their strong investment focus
in 4IR-related innovation. On average, 4IR SMEs listed on
Crunchbase also received substantially greater funding than
a benchmark group of SMEs, especially during the build and
growth stages.
Survey data point toward various structural barriers that
hamper 4IR SMEs in bringing new technology to market.
Specifically, firms consider the availability of finance and
shortage of sta with the required technical skills to be their
main obstacles in introducing or developing 4IR technologies.
They also dier from other SMEs in these respects.
Compared with other SME categories, 4IR SMEs more
frequently report the availability of finance as a major issue.
4IR SMEs are telling us that financial backing and assistance
in identifying new markets and customers would give them
the most support. In addition to addressing the structural
bottlenecks identified, policymakers should work to ensure
strong demand for new generations of 4IR SMEs as well as a
flourishing ecosystem overall.
The results of this study open various avenues for future
research. The analysis firstly highlights the importance of
local 4IR innovation ecosystems involving large, international
companies as well as universities alongside 4IR SMEs. Further
research is needed to analyse these ecosystems, their
respective strengths and dynamics, as well as the structural
conditions and policy levers that can support their further
development towards a smart specialisation in 4IR
technologies.
Further investigation of the funding conditions available to
European and US SMEs is also necessary to document the
current obstacles to growth that seem to persist in Europe,
and available policy levers to address these obstacles. In
particular, we find that 41% of 4IR SMEs in the EU27 received
funding from public investors, compared with only 12% of US
ones. A deeper comparative analysis of these two patterns
of funding would help to better understand their impact on
the growth and business performance of SMEs.
While the study is based on a comparison between Europe
and the US, other potential benchmark countries could
also be considered. China and R. Korea in particular have
managed to close the gap in 4IR innovation with respect to
the other leading innovation centres over the last decade,
even overtaking the EU27's contribution to 4IR IPFs in 2017
(see Figure 2.1). A comparison with these two countries
could provide additional insights into the role of SMEs in
catching-up and in establishing a competitive 4IR innovation
landscape.
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Annex 1 Identification of SMEs with
international patent families related to
4IR technologies
Identification of 4IR international patent families
Patents are strictly territorial. To protect a single invention
in multiple markets, a number of national or regional
patents is required. A large number of patents, therefore,
does not necessarily mean a large number of inventions.
A more reliable measure is counting international patent
families (IPFs), each of which represents a unique invention
and includes patent applications filed and published in at
least two countries.
17
IPFs are a reliable and neutral proxy for
inventive activity because they provide a degree of control
for patent quality and value by only representing inventions
deemed important enough by the applicant to seek
protection internationally. A relatively small proportion of
applications meet this threshold. This concept enables a
comparison of the innovative activities of countries and
companies internationally since it creates a suciently
homogeneous population of patent families that can be
directly compared, thereby reducing the national biases
that often arise when comparing patent applications across
dierent national patent oces.
17 An IPF is a patent family that includes a published international patent application,
a published patent application at a regional patent oce or published patent
applications at two or more national patent oces. The regional patent oces
are the African Intellectual Property Organization (OAPI), the African Regional
Intellectual Property Organization (ARIPO), the Eurasian Patent Organization
(EAPO), the European Patent Oce (EPO) and the Patent Oce of the Cooperation
Council for the Arab States of the Gulf (GCCPO).
In addition, almost all IPFs are classified according to the
Cooperative Patent Classification (CPC) scheme (this is not
always the case with applications filed solely at one oce).
Only one scheme is therefore needed to identify relevant
inventions and assign them to the dierent technologies in
the cartography, irrespective of where the applications were
filed. Each IPF identified as relevant to 4IR technologies is
assigned to one or more sectors or fields of the cartography.
The date attributed to a given IPF always refers to the year
of the earliest publication within the IPF. The geographic
distribution of IPFs is calculated using information about the
origin of the inventors disclosed in the patent applications.
Where multiple inventors were indicated on the patent
documents in a family, each inventor was assigned a fraction
of the patent family.
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Linking 4IR technology to patent data
The cartography of 4IR technologies was created in three
steps.
Step 1: Mapping the cartography to the patent
classification scheme
The cartography is based on the in-depth knowledge of
EPO patent examiners. Patent classification experts from
all technical areas were asked to indicate which field ranges
of the Cooperative Patent Classification (CPC) scheme they
would assign 4IR inventions to, and to which fields of the
cartography these ranges should be attributed. The resulting
concordance table contains around 368 CPC field ranges in
all technical areas with their respective 4IR technology fields.
The cartography was verified by applying ad hoc queries
against the EPO's full-text patent database and analysing the
results using text mining techniques. Whenever anomalies
were identified they were re-assessed by classification
experts and corrected/amended where necessary.
Example
CPC range Description 4IR fields
G16H10/00 -
G16H80/00
Medical
informatics
Consumer goods,
healthcare
B60K31/00 -
B60K31/185
Vehicle control,
e.g. automatic
speed control
Vehicles
Step 2: Identifying 4IR patent applications
On all patent documents in the identified CPC ranges, a
full-text search query was applied to identify documents
related to the 4IR definition with the highest degree of
certainty placed on true positives. As a general restriction,
all documents had to contain the concept of data exchange,
even if this was not itself the inventive aspect of the patent
application. In addition, further subqueries were defined
to include the concepts of communication (e.g. internet,
mobile, wireless), computing (e.g. big data, cloud, artificial
intelligence) and intelligent devices (e.g. sensor networks,
Internet of Things, smart homes).
Step 3: Classifying patent applications to the
cartography fields
All the patent documents associated with each field in
the cartography were extracted and labelled with said field.
Finally, all the retrieved patent documents were combined
in a final set of unique patent documents with the
corresponding cartography fields. The combination of the
cartography fields defined the characteristic 4IR technology
fields of the patent application.
Examples:
– CPC codes assigned to patent application or cited
documents: A61B5/68, B60D1/075
– Corresponding CPC field ranges in 4IR cartography:
A61B5/68 – A61B5/6802, B60D1/01 – B60D1/075
– Cartography fields mapped to patent application:
Personal, Connectivity, Vehicles
For the purposes of this study, the statistics on 4IR patent
applications are based on a simple count method, reflecting
the number of patent families, or inventions, assigned to a
particular field or sector of the cartography, independently
of whether some of these patent families are also classified
in other fields or sectors. For example, a patent family
assigned to two fields of the same sector is counted as a
single invention at sector level and as one invention in each
of the technology fields. Accordingly, an invention assigned
to two fields in two dierent sectors is counted as one
invention in each of the two technology sectors and as
one invention in each of the technology fields.
Identification of SMEs with 4IR international
patent families using Orbis and Crunchbase
databases
The internal EPO database of patent applications was
matched to the Crunchbase and Orbis company databases
using a "fuzzy" procedure in line with previously proposed
approaches in the literature, such as the one described in
detail by Tarasconi and Menon (2017). The matching
procedure exploits the available overlapping information
across the two databases represented by company name
and location. The procedure is based exclusively on the
patent applicant information and does not consider inventor
information, given the high level of false positives that this
approach would have produced.
A final manual consolidation and cleaning step was
performed on the matched dataset to avoid false positives
and maximise the number of correct matches.
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Annex 2 4IR survey methodology
The main subject of the survey was to collect information
on small and medium-sized companies (SMEs), which are
developing and/or applying technology that can be
categorised under the Fourth Industrial Revolution (4IR).
Companies were identified based on matching patent
applicant data with the two company databases Orbis
and Crunchbase.
The criteria of each company in the target population were
defined as:
– a company filing at least one patent application in
the 4IR technology category that was part of an
international patent family (IPF) with an earliest
publication date after 2009
– a company fitting the definition of a small or
medium-sized company. If information was available,
the European SME definition
18
was applied; if not,
the 250-employee threshold applied.
The target respondents were defined as individuals who are
responsible for operative business and/or technical/financial
decisions in patent matters at a specific company.
To ensure high response rates, the target persons were able
to answer the questionnaire in CATI or CAWI interviews.
Furthermore, the survey was oered in three languages:
English, French and German. The interviews were
conducted between June and October 2021. On average, the
interviews on the "business" part took around 26 minutes in
computer-assisted telephone interviews (CATI) version and
17 minutes in computer-assisted web interviews (CAWI).
18 See https://ec.europa.eu/growth/smes/sme-definition_de.
Sampling
The survey focused on existing and operating companies
that had not been acquired at the time of the fieldwork.
Therefore, companies not meeting these criteria had to be
eliminated from the target population for the weighting of
the net sample. Finally, N=7 104 units were established as
"valid companies" in the final target population, N=3 270 in
Europe and N=3 834 in the United States. Since the aim was
to contact each company in the complete final target
population, quotas were not applied in the fieldwork.
The response rate (calculated by processed sample units,
divided by complete interviews) varied in the European
regions from 13.3% to 20.5%, except for the United Kingdom,
where the response rate was the lowest at 8.4%. For the
United States, the response rate was the lowest overall at
4.5%. The net sample resulted in N=625 complete interviews.
N=455 companies from Europe and N=170 companies from
the United States contributed interviews to the net sample.
N=521 (83%) of the net sample were companies with 50 or
fewer employees. N=48 (8%) of the net sample were
companies operating for under five years.
Table A 2.1
Breakdown of the fieldwork outcome
Region Valid companies Complete interviews Response rate (%)
Western EU without Germany .
Germany .
Scandinavia without Norway .
Southern EU .
Remaining EU .
UK .
Switzerland and Norway .
United States .
Total
Note: Western EU without Germany (Austria, Belgium, France, Ireland, Luxembourg, Netherlands), Scandinavia (Denmark, Finland, Sweden), southern EU (Cyprus, Greece, Italy, Malta,
Portugal, San Marino, Spain), remaining EU (Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia).
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Weighting
The net sample of N=625 cases was adjusted by weighting to
best reflect the population in terms of its proportions. The
valid companies of the final target population (N=7 104) were
used as the basis for the weighting. In general, the weighting
factors were moderate as the proportions of the final target
population were approximately met by net sample. The
exception was the global weight to balance the proportions
between the United States and Europe. As the response rate
for the United States was significantly lower than for Europe,
the US net sample had to be weighted up with relatively
high weights to balance the proportion between the United
States and Europe. Furthermore, to provide enough cases in
each cell of the net sample, western EU and Germany were
joined together, as well as Switzerland, Norway and the
United Kingdom.
covers approximately 12 500 companies across the EU and
the United Kingdom every year, with just over 800 firms in
the United States for the last three waves. It is administered
by telephone (in the local language) and takes an average of
20 minutes. The first wave of the survey took place in 2016
and the survey completed its sixth wave in 2021, with
interviews taking place between April and July 2021.
Using a stratified sampling methodology, the EIBIS General
Module is representative across all 27 EU member states, the
United Kingdom and the United States. It is representative
across four firm size classes (micro, small, medium and large)
and four sector groupings (manufacturing, services,
construction and infrastructure) within the individual
countries.
Firms have to have a minimum of five employees in order
to be interviewed, with full-time and part-time employees
being counted as one and employees working under 12 hours
per week excluded. Eligible respondents are senior employees
with responsibility for investment decisions.
The survey is designed to build a panel of observations over
time and is set up in such a way that survey data can be
linked to firms' reported balance sheet and profit-and-loss data
(see EIBIS-Orbis matched dataset below). Approximately 40%
of the companies interviewed in each wave are companies
that took part in the survey in the previous wave.
The EIBIS General Module complements pre-existing
information on investment activities in the EU. It adds a
firm-level dimension to the macroeconomic data available,
thereby allowing for more fine-grained analysis of investment
patterns. It also adds to existing firm-level national surveys
by providing full comparability of results across countries.
The survey complements the European Commission
investment survey by asking a much wider set of both
qualitative and quantitative questions on firm investment
activities and the European Central Bank / European
Commission SAFE survey by focusing on the link between
firm investment and investment finance decisions.
Table A 2.2
Weights: global (adjustment between Europe and the US)
Region (global) Weights Weighted N
Western EU incl. Germany .
Scandinavia .
Southern EU .
Remaining EU .
Other Europe
(UK, Switzerland, Norway)
.
United States .
Table A 2.3
EIBIS at a glance
EU member states are all consistently represented in the survey – more specifically, non-financial enterprises with at least
five employees and assigned to NACE categories C to J.
industry groupings and size classes determine the representativeness of the data in almost every member country.
firms belonging to the EU participated in the last wave of the survey.
US firms participated in the last wave of the survey.
% of all firms participating in the last wave responded for at least two consecutive waves.
% of firms surveyed in agreed to be contacted again for next year's survey.
Questionnaire
The questionnaire is provided in a separate Annex.
EIBIS
The EIB carries out an annual survey of firms in the EU (EIBIS
General Module) with the aim of monitoring investment
and investment finance activities, and at the same time
capturing potential obstacles to investment. The survey
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The EIBIS is a powerful instrument, built according to the
highest scientific standards. To guarantee this, every step
of the survey process is executed and monitored closely
by experts in the field. All steps – sampling and weighting,
questionnaire development and translation, the fieldwork,
and quality control and data processing – are also subject
to strict controls and validation. Further information on
these technical aspects can be found in the technical report
produced by the market research company conducting the
survey (Ipsos MORI, 2020). Table A.3.1 presents key facts and
figures about EIBIS.
All aggregated data using the EIBIS General Module in this
report are weighted by value added to better reflect the
contribution of dierent firms to economic output. The
aggregate survey data and a detailed account of the survey
methodology are available at www.eib.org/eibis.
Annex 3 4IR-based indicators: country
comparison
Number of
4IR SMEs per
GDP (billion USD)
Number of 4IR SME
patents per million
capita
Proportion of 4IR patents
originating from SMEs
(2010-2018)
Average number of
4IR patents per SMEs
EU27 . . % .
Germany . . % .
France . . % .
Italy . . % .
Finland . . % .
Sweden . . % .
Netherlands . . % .
Spain . . % .
Denmark . . % .
Belgium . . % .
Austria . . % .
Ireland . . % .
Europe (EPC) . . % .
UK . . % .
Switzerland . . % .
Norway . . % .
US . . % .
Table A 3.1
4IR-based indicators: country comparison
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87
Published and edited by
© European Patent Oce (EPO) and Economics Department (EIB), 2022.
All rights reserved.
Authors
Muzio Grilli, Yann Ménière, Ilja Rudyk (EPO)
Julie Delanote, Désirée Rückert (EIB)
Acknowledgements
The authors are grateful for comments on an earlier version of this report from Bowman Heiden of the Chalmers University
of Technology, Bart van Looy and Marcelina Grabowska of the University of Leuven.
Additional comments were provided by Willem Bulthuis, Jürgen Graner and Alexander Wurzer.
Vasiliki Papanikolaou (EPO), Ludovica Massacesi (EIB) and Irene Rizzoli (EIB) provided research assistance.
Fieldwork done by
BERENT Deutschland GmbH
Design
European Patent Oce
Disclaimer
The views expressed in this publication are those of the authors and do not necessarily reflect
the position of the EIB and EPO.
The report can be downloaded from:
epo.org/trends-deeptechSMEs
eib.org/trends-deeptechSMEs
ISBN: 978-3-89605-291-9
