Patent-based investment funds as innovation intermediaries for SMEs: In-depth analysis of reciprocal interactions, motives and fallacies

SMEs and academic spin-offs play an important role in generating innovations but face resource and competency constraints that have implications for commercializing their technologies. In two in-depth case studies we analyze how patent-based investment funds (PBIFs), operating as innovation intermediaries, help overcome these constraints. In contrast to other patent intermediaries, PBIFs acquire patents and patentable inventions at an early stage of technology development when access to capital is particularly critical. They invest in the technological and legal advancement of their portfolio, which is mostly conducted in close interaction with the technology-providing SMEs and their original inventors. These PBIFs not only provide high added-value in the course of technology commercialization but also operate international networks to facilitate the commercialization of SMEs' technologies at an international scale. Although PBIFs are a promising new agent in the heterogeneous field of innovation intermediaries, their commercialization results and the actual rate of returns are not yet well established.

► We examine how patent-based investment funds function as innovation intermediaries.
► SMEs receive financing based on selling embryonic technologies and patents.
► Acquired patents are advanced technically and legally with original inventors.
► PBIFs facilitate an international commercialization of SMEs' technologies.
► PBIFs focus on creating business cases rather than patent litigation threats.