New Zealand Applied Business Journal
Volume 1, Number 1, 2002
CREATION TO LAUNCH –
BARRIERS FACED IN THE INVENTION COMMERCIALISATION PROCESS IN NEW ZEALAND
Richard Hadfield
Massey University
Palmerston North, New Zealand
richard.hadfield@ird.govt.nz
Dr Alan Cameron
Massey University
Palmerston North, New Zealand
a.f.cameron@massey.ac.nz
Abstract: In recent years political and business commentators have emphasised the
importance of invention-commercialisation to New Zealand's future economic
prosperity. However, it seems that inventors often face considerable barriers when
attempting to get those inventions to market. The purpose of this study is to verify the
existence of such barriers, and explore their nature and extent. The research adopted a
multiple case study approach. The participants in the research indicated thirty
specific barriers experienced by inventors when trying to commercialise their ideas.
Some of these barriers were generic in nature, whilst others were specific to the
circumstances of the case. The barriers identified were grouped into six categories:
patents, government, bureaucracy, finance, the inventor, and other. These categories
mirror the general barrier categories found in the literature. These findings suggest
that New Zealand's individual inventors do indeed face a wide range of barriers when
attempting to commercialise their inventions. Further research is required to
investigate the ways in which these barriers can be avoided or overcome.
Key words: Entrepreneurship, invention, business start-up, marketing, small
business.
INTRODUCTION
Inventions and their commercialisation are vital to the future success of New Zealand’s
economy in the emerging global marketplace. Prime Minister Helen Clark (2002) recently
identified innovation as one of the three key elements of the economic policy framework that
would carry New Zealand into the 21st century. The Foundation for Research, Science and
Technology’s (2001b, p.2) statement of intent for 2001-2004 emphasises the importance of
invention commercialisation to New Zealand’s economy by stating “New Zealand must
position itself better to develop a sustainable competitive advantage in the new global
economy. This means not only developing a culture of innovation, but a culture of ensuring
that new knowledge is profitably commercialised or otherwise used to advantage”. Batterham
(2001), Australia’s chief scientist, recently urged New Zealanders to consider the importance
of new ideas and their commercialisation to the national economy. Patterson (2001, p.1)
emphasises that the ideas alone are not enough:
The sense of ‘good old kiwi ingenuity’ has always shown that New Zealanders
are great improvisers. However, this does not mean we are good innovators. In
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the commercial world, where the bottom line is a large part of the picture, an idea
and enthusiasm is not enough to transform it from kiwi ingenuity to a product.
Christie (2001) also indicates the importance of invention commercialisation, but laments that
New Zealand’s approach to this is sub-optimal. Patterson (2001) affirms this assertion,
claiming that New Zealand’s current system of facilitating invention commercialisation is
inadequate.
Small businesses play an important role in invention and innovation (Cameron & Massey,
1999). In terms of Schumpeterian theory, a hallmark of entrepreneurs is their ability to
innovate (Cameron & Massey, 2002). However, individual small business entrepreneurs face
greater barriers than their organisational counterparts when trying to bring their inventions
and innovations to market. Few studies focus precisely on the experiences of inventors when
they attempt to commercialise their creations. According to Amesse, Densraleau, Etmad,
Fortier & Seguin-Dulude (1991, p.20) “this is obviously the most important issue, since only
the actual commercialisation of inventions will allow society to derive concrete gains from
the patent system”. Despite exploration of New Zealand’s individual inventors in the popular
press and literature, there has been little empirical research that focuses on the barriers faced
within the commercialisation phase of the inventions. This study aims at identifying these
barriers and explores the nature and extent of the barriers identified.
THE LITERATURE
The phenomenon of innovation has been well rehearsed in the literature for some time.
Economic and social commentators (such as Crocrombe, et al., 1991 and Batterham, 2001)
have commented on the importance of innovation to New Zealand’s economic growth.
However, the field of innovation consists of a wide array of separate disciplines. One of these
disciplines is the study of invention. Invention is thought by some researchers (such as
Damanpour & Evans, 1984) to be a component of innovation, whilst others (such as
Bradbury, 1989) consider it to be a phenomenon that precedes innovation. Irrespective of
how these two phenomena are conceptually related, invention often acts as a catalyst for
successful innovation. However, it seems that individuals with inventions face considerable
barriers when attempting to get those inventions to market (Bridges & Downs, 2000). Little
empirical research has been conducted to identify these barriers in New Zealand.
Consequently most knowledge of this topic is derived from overseas academic studies on
related topics (such as those conducted by Kassicieh, Radosovich & Banbury, 1997 and
Ammesse, et al., 1991) and books or articles aimed at a general audience (such as Bridges &
Downs, 2000 and McGuinness, 1993a,b). Five main barriers to invention commercialisation
identified in the literature are: the patent process, lack of finance, lack of entrepreneurial skill,
lack of government support, and bureaucracy. Although these paramount barriers have been
identified, little information exists on less common barriers. This paper endeavours to
establish to what extent barriers to commercialisation in New Zealand are those commonly
found elsewhere and the nature of any barriers that may be unique to New Zealand.
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METHODOLOGY
The research was conducted using the case study approach. Multiple cases were researched.
The evidence gained by this method is generally sound, with the consequence that such
studies are generally regarded as being more robust (Herriott & Firestone, 1983; Yin, 1994).
Five New Zealand inventors were interviewed and information gathered in each interview
was analysed and tested in subsequent interviews. This method follows the grounded theory
approach to research, which aims to identify and test common themes, patterns and diversity
in the topic (Gilgun, 1992).
While the sample was not chosen on a random basis, it attempted to be a representative
group. Details of the participants are shown in Table 1.
Gender
Age
Nature of invention
Inventor A
M
40s
undisclosed
Inventor B
M
50s
adventure facility
Inventor C
M
40s
Safety testing
technology
Inventor D
M
70s
medical equipment
Inventor C
F
20s
undisclosed
Stage reached in commercialisation of
invention
Prototyped, currently seeking finance and
assessing manufacturing requirements.
Prototyped, patented, financed, business
established and expanding.
Prototyped, patented, financed, in negotiation
with potential clients.
Prototyped, patented, financed and extremely
successful worldwide.
Currently seeking finance for comprehensive
technical assessment. Product not yet patented
or financed.
Table 1
The interviews were loosely structured in order to maintain flexibility, understanding and
cooperation (King, 1994; Easterby-Smith et al., 1991; Sekeran, 1984). The topic guide
approach, advocated by Easterby-Smith, et al. (1991) and King (1994) was adopted within
the interviews. The topic guide was a list of barriers, which had been identified in the
literature as well as interviews with other participants. Coding and analysis of each interview
took place before subsequent interviews were conducted, in line with the grounded theory
underpinnings of the research design. New barriers identified by participants were added to
the guide list for subsequent interviews. Once the data had been analysed and classified into
categories, a case report was written up for each participant. The report outlined the thoughts
on the barriers faced by individual inventors in the commercialisation process. Quotes from
participants were used to support and illustrate assertions, following the example of Marriott
& Marriott (2000). Once the case reports had been written up, content analysis was used to
identify barriers encountered when trying to commercialise their inventions.
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INVENTOR A
Inventor A has invented a number of technical products. His present invention is at a
sensitive stage of commercialisation, having not yet been patented, so the specifics are not
disclosed.
Inventor A believes that the greatest barrier to individual invention commercialisation is the
inventor. The naivety of lone inventors, the belief that all they need is a good idea, is their
greatest liability. Lone inventors become too protective of their ideas:
They want the money, they want the limelight, but they’re not prepared to let
their baby go. You have to let your ideas go for them to see the light of day.
However, most inventors do not do that, with the result that many inventions
never get out of the owner’s mind.
According to Inventor A, “A little bit of a lot is more than all of nothing”. Inventors generally
have to trust someone with their invention somewhere along the line. Inventor A contends
that many inventors do realise this, but their ego overshadows logic:
Inventors in the end usually cut off their nose to spite their face; they simply say:
“I’m not going to let anybody see this invention because they’d steal it” and that
makes them feel good because it empowers them to know they have an invention
others can’t see. It’s about power, greed and self-gratification.
Most inventors who have had some success seem to have done so largely because they have
been willing to share more and more of the proceeds from the product’s success. Many
individual inventors resent the compensation required by those involved in the
commercialisation process. Many inventions never reach the market because the creator
cannot or will not invest money, but cannot accept that somebody else will make money out
of the invention.
Inventor A proposes that a narrowness of focus, a lack of communication, and the failure to
use internal and external networks are significant psychological barriers for the individual
inventor, but he also contends that these are self-imposed barriers that inventors themselves
create by not sharing their ideas. “Lone inventors don’t communicate or share, because that
would compromise their creative genius – ‘I created this all by myself, I did everything’”. He
believes that it is the inventor’s self-imposed isolation from the business environment that
often prompts these barriers: “The commercialisation process involves a myriad of people,
but individual inventors do not hook up with these people, and do not even know about them.
They are not even fully aware of the process and what it entails”. But even if lone inventors
are able to overcome the barrier of reluctance or inability to communicate and network, they
are likely to face problems of integration:
There is ignorance on the side of the inventors, but there’s also ignorance on the
side of the financiers, bankers, manufacturers and marketers – how can you put
all of that together without effective communication? We need to work together.
None of us is as smart as all of us.
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Another common barrier within the invention commercialisation process is derived from
what Inventor A refers to as ‘backwards marketing’. Instead of identifying a market need and
then developing a product to satisfy that need, they develop a product and embark on a great
search for someone who wants it. Such products inevitably fail:
Inventions often come out of necessity, but where there isn’t a well defined,
acknowledged need, a solution to a non-existent need is not going to be a
marketplace success. It’s like Victor Borg’s joke about his uncle who invented a
cure for which there was no disease. An inventor coming up with a product for
which there was no market need is the same.
Inventor A believes that research must be conducted not only to identify the nature of the
invention’s market, but also to survey the products that already exist. Often inventors try to
market an invention designed to fill a niche for which a product already exists. A barrier
inherent in the psyche of lone inventors is the belief that they have got to invent something
new from scratch. Inventor A contends that modifications of existing products can be far
more effective:
Making modifications is often the clever thing. That is what adds value. The
person who invented the hairpin did not do very well. But the person who put
little wiggles in it so it didn’t fall out of one’s hair was the person who made a
fortune.
Lack of business experience is often a considerable barrier to success for individual
inventors. Despite their creativity, lone inventors often lack many pieces of the puzzle such as
financial wisdom and entrepreneurial talent. However, Inventor A also emphasises that they
are inventors, and should not necessarily be expected to know a great deal about business:
You don’t expect world-class violinists to also play the clarinet and tuba equally
well. They are violinists, that’s what they do – and inventors invent, marketers
market, and manufacturers manufacture.
Inventor A considers that the lack of finance available for speculative ventures is a significant
barrier to individual inventors. However, he does understand the financial community’s
reluctance to finance inventors, because more money is lost than is ever made on inventions.
Most financiers will require the inventor to match their investment dollar-for-dollar. But this
rate of leverage is not a realistic option for many individual inventors. But the leverage rate
that inventors can afford is not a realistic option for venture capitalists, given the risk
involved: “If you need $50,000 and you’ve only got $5,000, you’re seldom going to find
somebody willing to put up $45,000”.
According to Inventor A, the patent process is often an overwhelming barrier for individual
inventors due to the costs involved. It can cost the applicant from $15,000 to $115,000 to
obtain a patent on a process or product. Inventor A feels that the greatest problem inherent in
the patent system is that it places the legal onus on holders to protect their patents. Large
companies are able to exercise their rights through the legal system, but the same cannot be
said for those without the vast financial resources required to sustain a legal battle.
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INVENTOR B
Inventor B is the inventor of a facility aimed mainly at the adventure tourism industry. After
designing and implementing the facility in New Zealand, expansion is now focussed on
overseas markets and an operation is now under way in a major overseas country. Inventor B
now feels he is on the edge of a break-through in the project’s progress.
Before the invention and implementation of the adventure concept, Inventor B owned a
successful property speculation business. This business made him a lot of money, particularly
in the 1980s. Inventor B has not suffered from any lack of business skills in developing the
adventure project. In fact, he has found the business side of things easy so far in
commercialising his invention. “I was over fifty when I thought of this concept, so I had
some resources as well as my share of knock-backs”.
Inventor B feels very strongly about the impact that his personal wealth has had on the
success of the adventure project:
If I hadn’t had any of my own money, then this would never have happened. I
might have put the whole idea together and got so far, but then it would have
stopped, and that would have been it. There’s that period in-between concept and
market when you potentially make or break the product, a period when you’re
earning nothing and if you don’t have the resources, you’ll fail.
Despite his personal resources, Inventor B believes that it would have been better to bring in
more finance at an earlier stage. If he had involved his current partner on the project two
years earlier, success would have come much sooner. Inventor B concedes that the project
only began to gain momentum after he accepted that he would need the assistance of others.
According to Inventor B, giving others a slice of the project is also a question of spreading
the risk, of getting capital from people who have the resources, and giving them a share in the
responsibility for its success.
Inventor B feels that inventors’ perceptions of their product can taint reality for them.
Because inventors are often independent by nature, they are unprepared to give away a share
of the product, so their prospects wither away. “If I’d brought in other investors earlier in the
piece, I would have been more successful”.
The personality traits that make a person devote time and effort in inventing
something, tinkering and playing with it, and spending much time, money and
effort on it, these are often not the sort of qualities to be held by someone who is
going to say “I’ve got this great idea, you want to buy half?”
But at the same time, Inventor B warns, the willingness to acknowledge what others suggest
must be balanced by a belief in one’s self. A lack of personal conviction can be as much of a
barrier as an excess of it.
The major cost-related barriers for Inventor B were development, marketing, and patenting.
Development costs were particularly high for the adventure project, as the activity’s
implementation relied heavily on design and engineering.
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Patent costs were a considerable barrier to the commercialisation of the adventure project
concept. These included patent attorney fees, fees to patent authorities, both in New Zealand
and overseas, renewal fees, and fees to international patent conventions. Inventor B considers
that there is little sense in commercialising a concept unless it is protected. However, he also
believes that there is little that a small company can do to protect an invention from
intellectual property theft from those with the resources to get away with patent infringement.
Inventor B considers the current tax rates to be a barrier not only to individual inventors, but
also to all New Zealanders: “It’s absolutely outrageous. It’s a big brake on the economy, on
enterprise, on industry and on my enterprise”. Inventor B considers the government’s heavy
influence on business in New Zealand to be “oppressive”, “pervasive” and “arrogant” and he
has no desire for assistance or grants from the government:
I just want the government to stay away from me so I can do what I’m trying to
do, but instead it interferes, gets into your business, and gets into your pocket.
The government here is just so ubiquitous - you can’t get away from it.
Inventor B claims that if someone from overseas asked him for advice on business in New
Zealand, he would advise him or her to go to another country, such as Australia or the United
States.
INVENTOR C
Inventor C has invented a technological system designed to save costs in the transport sector.
He found that crude forms of the technology had been investigated in Britain and USA.
Inventor C’s ingenuity was in the adaptation of this technology to a different context - mainly
by allowing safety tests to be done cheaply in situ, rather than expensively in the lab.
Inventor C believes that the costs inherent in the system pose a significant barrier to
inventors. The provisional patent on Inventor C’s system cost approximately $1 400. This
gave Inventor C a year’s protection without the obligation of disclosure. At the end of this
time he was required to decide whether he would file for a full patent. After the provisional
patent expired, Inventor C made a PCT (Patent Co-operation Treaty) claim, which cost $8
000. This claim theoretically gave Inventor C two years of protection within the PCT’s
member countries. To take out patents abroad is costly. Inventor C was required to separately
patent a number of items and processes incorporated into his system. Inventor C has relied
heavily on patents in protecting his invention, as he believes that patents are vital to the
commercial survival of a product originating from the individual context:
You have to patent. Some people think you don’t need to do it, but if you don’t
you’re going to fail quickly. When you see my system, you only need to take a
glance at it and you can make it yourself if you know what you’re doing.
When Inventor C deals with larger companies, he relies on both patents and confidentiality
agreements for protection. Inventor C strongly advocates confidentiality agreements as a
means of protection against intellectual property (IP) theft, claiming that “confidentiality
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agreements are a lot tighter than patents, and they give you more control”. Inventor C argues
that confidentiality agreements eliminate the need for large amounts of money if legal action
is required.
To counter the threat of IP theft, Inventor C has also allied himself with a larger company. He
has an arrangement with an Australian transport company for exclusive distribution rights to
his product. By giving this company an equity interest in the product, it is also in their
interest to protect the product from patent infringement. But they also require full patents to
be issued and regularly maintained. As a result, patenting costs have escalated to become the
most significant cost-related barrier faced by Inventor C.
Inventor C considers that networking and communication are vital to the success of invention
commercialisation. He claims that networking played a major role in the initial stages of his
invention’s commercialisation: “The moment I get on to something, I think ‘who can help me
here?” However, equally important is management: “You need somebody who can direct the
ideas”. Many of Inventor C’s contacts were gained through a local engineer who was skilled
in project management and had technical knowledge, whilst also possessing a network of
polytechnic and business contacts. These contacts were extremely helpful and contributed
significantly to the project.
In Inventor C’s opinion, networking and business know-how are essential to success. “Some
inventors do not have that ability or willingness to get in touch with those who could help
them. In addition, most inventors don’t have the foggiest idea about going into business,
marketing, financing, and so forth. I think that is a major barrier.”
Inventor C states that some academics can be a barrier to the commercialisation of technical
inventions due to the conflict between theoreticians and practitioners. While the metallurgy
academics that Inventor C dealt with had sound theoretical knowledge, he believed that they
lacked the ability to develop practical solutions to technical problems. Inventor C conjectures
that academics felt threatened by his ability to apply the theory in an innovative way and
strongly questioned the validity of his claims. Although Inventor C was prepared to work
with academics, he felt that they resented him for discovering the concept first.
The vested interest of others is such that they don’t take kindly to outsiders
coming in and pointing out that there could be another way. This is a huge
barrier. It’s a system that assumes you must protect your patch somehow. It’s an
arrogant assumption that an outsider can’t come up with a better idea.
In the opinion of Inventor C, government assistance in New Zealand could do more to
expedite commercialisation of inventions. He attempted to gain funding from the Technology
for Business Growth (TBG) programme, but found this to be problematic. He had difficulty
gaining access to the funding because he was an individual inventor rather than a company.
The TBG programme is focussed on helping technology-based companies to employ more
people. Inventor C believes that he was not eligible because he was an individual - a “one
man band”.
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Inventor C considers financial difficulties to be a huge barrier for individual inventors. He
estimates that he has spent in excess of $200,000 on developing and marketing his invention.
Most of the funding for Inventor C’s project has come from a personal inheritance, without
which it would never have reached its present stage. Inventor C believes that obtaining
venture capital can be problematic for inventors. When inventors make agreements with
venture capitalists, they become bound by that agreement. This can put the inventor in an
undesirable situation:
Venture capitalists will inevitably want a return. It’s not always the best thing to
be involved with people who want a pound of flesh out of you at the end of the
day. It might work for some people but for inventors it’s no good. They don’t
want the pressure of it. They need to be free to work through their ideas and not
have to be worried about paying back money.
INVENTOR D
Inventor D is a long established serial inventor. In the 1960s Inventor D identified a gap in
the health sector and began inventing specialised equipment to fill this gap. Since then,
Inventor D Ltd has grown to become a substantial manufacturer of medical equipment,
exporting to a wide range of countries. Much of the company’s success has come from
Inventor D’s ability to constantly invent new products to satisfy the market.
Inventor D believes that although many people will invariably be involved in an invention’s
commercialisation, in the end, the product’s success will rest in the hands of one individual –
the inventor:
I have only ever found one answer - you have to do it yourself. You have to make
the product, you have to market it, you have to finance it, and you have to coordinate the whole process. There just isn’t any other way.
If the inventor does not have the skills required to co-ordinate the product’s
commercialisation, then it will inevitably fail. Lack of business and project management
skills often presents an ongoing barrier to individual inventors when attempting to manage an
invention’s commercialisation. Inventor D also believes that the right attitude to business is
just as important as business skills. From the outset, Inventor D followed some very definite
rules of business. All suppliers got paid on the 20th of each month. On the 30th of every month
all other accounts payable went out, regardless of all other operations. Inventor D kept these
principles and priorities in mind throughout the establishment and growth of the company,
ensuring that the business remained, in his words: “tight and clean”.
Fiscal prudence has helped ensure success. Inventor D began his business with the help of a
₤200 loan from his father and a small amount of his own savings. ₤150 was put towards
engineering equipment used to manufacture the product, and the remaining ₤50 was used to
open a bank account. Inventor D has not gone below this ₤50 bank balance, but has instead
“inched it upwards and upwards”. The company operated for forty years without an
overdraft. Eventually Inventor D grew the company to a point where he did not feel
comfortable unless it had a bank balance of $100 000. This maintenance of a contingency
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fund has been an underlying principle of Inventor D’s business philosophy. Inventor D
believes that many self-employed inventors are not careful enough financially. However, he
also concedes that it may be more difficult now to commercialise an invention with limited
resources now than it was in the past.
Inventor D conducted market research for his products before he began designing them.
Because Inventor D designed his inventions to fit the needs of the market, he was able to
ensure a greater likelihood for market acceptance of his products.
In the late 1970s Inventor D realised that in order to grow, the company needed to expand
into overseas markets. The process was not cheap. Inventor D initially spent $120,000 on
entering his products in a healthcare exhibit in Germany. He has subsequently entered his
product range in exhibitions all over the world, in order to establish them on the global
market. Inventor D had the funds required to do this because he had built up a sound
domestic market run on a sound financial basis.
Patents have cost Inventor D a great deal over the last forty years. Patent renewals have
become increasingly expensive and the time between each one has become shorter. Patent
costs imposed a huge burden on him, as he increasingly relied on offshore markets. Patents
were registered in many countries including Germany, France, Sweden, UK, and the United
States. Inventor D is sceptical about how effective patents really are at protecting lone
inventors from intellectual property theft. “In the final analysis, my experience indicates that
a patent’s worth is negligible”. He considers that, in effect, there is no real protection for
individuals, and this is a major barrier for them. Large companies can ignore small businesses
on the other side of the world, and continue to infringe on their patents in the knowledge that
there is little that the patent holder can do to stop them. Inventor D claims that numerous
companies have copied his patented designs, including some based in New Zealand.
However, such patent infringements have generally been unsuccessful because Inventor D
has continually stayed a few steps ahead of the competition:
My answer has always been not to fight it, but to redesign and go a step over the
top of the competition. If they’re copying your current product range, you
redesign and come back with something that leaves them way behind.
Inventor D suggests that individuals should go no further than provisional patent registration.
The provisional patent provides twelve months’ protection without the obligation to disclose
the product to the public. Inventor D asserts that a worthwhile invention is going to be copied
regardless of patents. “So common sense says leave it at that. Forget carrying on, because it
gets too costly.”
Inventor D has now retired. Nevertheless, he remains an inventor at heart, having recently
designed and created a wheel-harness for a friend’s dog, which has no back legs. Inventor D
still feels the achievement and joy of inventing something of use. “The dog loved it; he was
running around here on his new wheels, and that made me glad.”
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INVENTOR E
Inventor E is a 29-year-old solo mother with two children and has been on social welfare for
many years. In recent years, Inventor E has been involved in development and market
planning for a product she invented. However, at the present stage, the product is sensitive to
competition and subsequently has not been disclosed within the case.
Inventor E believes that the project she is now working on has far greater potential than any
of her previous inventions. “My present project is very exciting and extremely achievable.”
Inventor E seems to have a firm understanding of what is required to get a product to market.
She thinks of the invention as a business project rather than a stand-alone product that will
sell itself. According to Inventor E, the project is progressing steadily. She is at the end of the
prototype development phase and is currently working on patenting.
Inventor E has previous employment experience as a waitress, and has also worked for a
marketing company. However, she states that she has never kept a job for any length of time
due to her “stubbornness and unwillingness to take orders”.
She has no tertiary qualifications but does not consider this lack of education to limit her
ability: “I believe that a person’s ability to run a business is not dependent on their level of
education”. Having said this, Inventor E concedes that in her experience, other people have
not held the same opinion, and this has impacted negatively on her project. Inventor E also
feels that her status as a welfare recipient has meant that those she has approached for
assistance have not taken her seriously. “When people found out that I was on a benefit they
instantly assumed I was stupid.” Inventor E resents this assumption. The treatment that
Inventor E received from her Business in the Community mentor appears to typify this
stereotyping. Inventor E states that her mentor was extremely dismissive of her abilities and
the worth of her invention:
My ‘mentor’ laughed at me then walked out the door, because I was not as adept
in business as she had expected me to be. I found this to be quite ironic,
considering her role was to develop these skills in me.
As a welfare beneficiary, Inventor E’s main dealings with the government have been through
Work and Income New Zealand (WINZ). Inventor E considers that WINZ’s reluctance to
provide assistance and funding has been a major barrier to the commercialisation of the
invention. WINZ claims that Inventor E’s project does not fit the policy criteria for
assistance. However, Inventor E speculates that very few lone inventors’ projects do fit the
criteria for assistance.
However, Inventor E has obtained help from an independent consultant who was extremely
helpful at a minimum cost to the project. She admits that she initially found it difficult to trust
the consultant with the product’s specifications, but eventually did so. Inventor E considers
that she was lucky to find someone who was willing to assist her without demanding a great
deal in return. The inherent difficulty in developing networks and connections is a significant
barrier for inventors who are on welfare. However, Inventor E believes that many inventors
do not even try to develop these vital networks, thus compounding the problem. Lone
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inventors “often do not know where to start in making connections in the business world”.
Nonetheless, developing and using these connections is of vital importance to success:
“Accessing the right people is difficult, but also important”.
Inventor E has found academics to be extremely helpful and forthcoming with their time and
advice. Inventor E contends that if she hadn’t had the help of certain university engineers and
their contacts, she would not have made so much progress. “I probably would have given up
trying by now. I owe more to them than to any other group because they encouraged me and
took the time to help me.”
Inventor E has found the costs of invention commercialisation to be very high, with the result
that she continually has had to compromise on the project. The only way Inventor E could
cover the costs was to carry out the project over a long period of time. This way she could
build up savings from her welfare benefit to fund the project.
Inventor E’s invention is currently at the end of the research and development phase. It has
not yet been patented, manufactured, or marketed. Consequently the project’s costs may soon
grow beyond Inventor E’s means, irrespective of the lengthened time frame. Recognising
this, Inventor E has made concerted efforts to obtain financial assistance from a wide range of
sources. Inventor E quotes Ernest Rutherford to indicate her attitude to financing the project:
“I have no money, so I’m going to have to think harder”. Inventor E has approached WINZ,
BizInfo and a number of banks and venture capitalists, all to no avail. Inventor E felt that she
was being pushed around from one to the other.
Venture capitalists approached were willing to offer finance, but at an exorbitant interest rate
as well as requiring an 80% to 90% equity share of the project. Inventor E was not prepared
to accept either of these conditions. Through networking, Inventor E found that government
assistance schemes provide access to either ‘matching finance’ or ‘20/80 finance’. Inventor E
also identified that some programmes offer research, development and patent cost coverage.
However, as these still fall under the matching or bridging finance schemes, they still
represent a barrier to a welfare beneficiary:
A person like myself is not able to access the funding provided by these schemes,
as I do not have the money to qualify for acceptance. 20% of $50,000 is still quite
a bit for someone on the Domestic Purposes Benefit.
Inventor E has found a source of finance in a government assistance scheme that is prepared
to help with patenting costs. However, this deal may fall through because the agency is
reluctant to sign a confidentiality contract, which Inventor E considers to be vital, as the
invention is as yet unpatented.
Inventor E feels that with the invention unpatented, she is stuck in a ‘Catch 22’ situation. The
only thing she has to protect her product from theft is confidentiality agreements:
I have come across a couple of people and thought to myself “Oh no, they do not
feel right”. But what can you do? Keep your mouth shut and never get anywhere,
or say something with a confidentiality agreement and pray the person doesn’t go
off and steal it, knowing that you don’t have the resources to take him to court.
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Volume 1, Number 1, 2002
Inventor E views confidentiality agreements with the same scepticism as she does patents: “I
don’t have the resources to take a company to court, for breach of contract, for patent
infringement, for anything”. Inventor E suggests that a confidentiality agreement is unlikely
to deter a large company from stealing an invention. She comments that some large Asian
companies hire people to search patents in New Zealand and Australia, then adapt the
technology to their own design and flood the market.
Furthermore, Inventor E feels that deficiencies in the New Zealand legal system are at the
core of the problem, claiming that, “New Zealand patent laws are very outdated and need to
be revised to provide more comprehensive protection to inventors and their inventions”.
RESULTS
The participants in the research identified thirty specific barriers to individual invention
commercialisation in New Zealand, illustrated in Figure 1. This indicates that there is a wide
array of barriers faced by New Zealand’s inventors in the commercialisation of their
inventions. Some of these barriers were generic in nature, whilst others were specific to the
circumstances of the inventor. The barriers identified were grouped into six categories:
patents, government, bureaucracy, finance, the inventor, and other. These categories mirror
the generic barrier categories identified in the literature.
5.2 Barriers identified: Frequency across cases
5
1
gulati
ons
Safety
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ealth
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y
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ymen
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posed
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anced
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of per
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acity
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ills
Local
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te
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and In
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nd
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t Inte
rferen
ce
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of go
v
of go
v
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Lack
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Paten
ented
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paten
of pro
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te
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io
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ents
ed in
some
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etwork
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munic
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ess co
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ifically
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iciaries
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s
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etwork
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ck of
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evelo
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arch
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ket
Acad
emics
3
Cost
of co
mmer
cialisat
Difficu
ion
lty in
raisin
g cap
ital
Frequency
4
Figure 1
DISCUSSION
Patents
One of the most significant barriers was that of the patent process, specifically its high cost
and lack of protection. The inventors took the issue of intellectual property protection very
seriously, as this is the basis on which their success is based. On the whole, the participants
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confirmed the assertion in the literature (Bridges & Downs, 2000; Hopkins, 1999) that
patents are extremely expensive and time consuming. Ongoing renewal fees identified in the
literature (Intellectual Property Office of New Zealand, 2001) were found to be an ongoing
cost barrier to individual inventors when trying to commercialise their ideas.
However, on the topic of the worth of patents, there was a certain amount of disparity
between the cases. Whilst some participants initially proclaimed the importance of patenting,
all were hasty in pointing out the myriad of flaws in the system. The major patent-related
barrier identified by the participants aligns with that identified by Husch & Foust (1987) and
Schulman (2001), that in the event of a patent violation, the legal onus is on the inventor to
protect their patent in court. Inventor A agreed with Husch & Foust (1987) and Schulman
(2001), claiming that in this circumstance there is no guarantee that the claimant will win the
court case. The participants pointed out that irrespective of the outcome of legal action, the
cost of taking a large company to court is beyond the means of most individual inventors, and
this represents a substantial barrier to these individuals. Three of the five participants
extrapolated upon this in affirming the assertion of Roberts (2000) that geographic barriers
compound the problem. Inventor B pointed out, however, that if the claimant did win a court
battle against a large company, they could be awarded a great deal of money by the court.
On the whole, the participants were extremely sceptical about the ability of patents to protect
their inventions. They all concluded that patents, on their own, do little to protect them from
intellectual property theft, and this is a significant barrier to the commercialisation of their
inventions. In considering the implications of this, a range of suggestions were put forward,
including confidentiality agreements, secrecy agreements, and strategic alliances. However,
these mechanisms seem as problematic as patents when viewed in their individual contexts,
which leaves the barrier of protection costs and difficulties standing.
The inventor
Inventor C considers the term ‘inventor’ to carry an unwarranted sense of arrogance, claiming
that invention is not creation, but the discovery of something that already existed. Inventor A
expressed similar sentiments, suggesting that many lone inventors relish the stereotype of
‘eclectic genius’. Inventor A strongly believes that inventors themselves are answerable for
many of the problems that arise in the commercialisation process. He argued that some
individual inventors become so obsessed with their invention that it clouds reality for them.
To bring these opinions into the context of this study, however, the implications of such
personality traits must be addressed. According to the participants, the implications of
inventors’ attitudes to the commercialisation of their inventions are far-reaching. Inventor A
believes that the major problem resulting from inventors’ attitudes is the reluctance to share
the inventions with those who may be able to help in their commercialisation. Inventors B
and E both conceded that they had problems trusting others with their inventions. Inventor B
indicated that this made the commercialisation of his adventure facility more difficult than it
would otherwise have been.
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Networking and communication
Not surprisingly, the participants supported the assertion in the literature (Kay, 1993;
Madique & Zirger, 1988) that the commercialisation process is both complex and difficult to
manage. Furthermore, they all felt that inventors in general often underestimate the
complexity of the commercialisation process. In light of this, the participants suggested that
the lack of networking and communication conducted by inventors throughout the
commercialisation process represents a significant barrier to success. The presence of
networks is perhaps the most noticeable difference between the corporate context and the
individual context. In the company environment, individuals from separate disciplines work
together on projects under the organisational umbrella. The individual inventor, on the other
hand, is faced with the formidable task of developing and maintaining a network of
individuals not only from different disciplines, but also in different organisations. Often the
individual inventor is unaware of the need for this network of individuals.
Finance
All participants identified high costs, linked with the difficulty in obtaining financial
assistance, as significant barriers to invention commercialisation. The participants’ opinions
aligned with claims within the literature (Technology New Zealand, 2001) that there is no
lack of venture capital in New Zealand. The problem, it seems, is the common requirement
among venture capitalists for either a high equity share, a substantial deposit on a loan, or
both. However, the participants were by no means critical of venture capitalists for their
reluctance to fund lone inventors’ projects. The participants agreed with the assertions of
Madique & Zirger (1988) and McGuinness (1993a) that the high risk, and corresponding high
failure rate of invention commercialisation projects, explains financiers’ reluctance to fund
these projects. Inventor A and Inventor B both conceded that if they were venture capitalists
they would be just as reluctant to invest in the projects of lone inventors.
Three of the five participants indicated that inventors’ reluctance to share hinders external
financing of invention commercialisation projects. Venture capitalists usually require an
equity share in the projects they finance, but many lone inventors are reluctant to provide
this. Subsequently, as Inventor A stated, the lone inventor maintains their 100% share of
nothing, having foregone the chance to retain a lesser share of much more. But even if the
inventor is willing to forego an equity share in the product, problems arise because investors
often require bridging finance for monetary loans. Inventor E indicated that this bridging
capital requirement is a significant barrier for her, as she cannot afford the down payment on
a loan.
Backwards marketing
Inventor A commented that instead of identifying a market need and then developing a
product to satisfy that need, inventors often develop a product and then embark on a great
search for someone who was willing to buy it. Inventor D and Inventor B also claim that this
lack of pre-development market research results in a significant barrier to individual
invention commercialisation. Often, in instances where pre-development market research was
not conducted, the market for the invention never existed. In these instances, huge resources
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are required to get the market to accept the product. Individual inventors usually do not
possess huge amounts of resources, so the requirement for push-focussed marketing becomes
a barrier to them. Inventor A agreed, claiming that where inventors try to change the market,
they often fail.
However, it could be argued that assessing the market potential for individual inventions is
more difficult that it seems. By its legal definition, a patentable invention possesses complete
novelty status. Many of the products developed by lone inventors are revolutionary in their
design. Products of this nature are difficult to assess from a marketing perspective, as they
cannot be placed within the context of existing product lines on the market. This may present
a significant barrier in itself – even if an inventor does attempt post-design market research,
they will not reach definite conclusions on the market potential for the product.
Bureaucracy
Three of the five participants identified bureaucracy as a barrier to individual invention
commercialisation. Whilst some of the participants did not directly refer to the existence of
this barrier, none of them disputed it. The contexts in which the participants encountered
bureaucracy were wide-ranging. Some bureaucracy-related barriers were somewhat generic.
For example, Inventors A and C both faced the barrier of being required to spend time and
money producing product performance specifications which simply stated the obvious.
However, most of the bureaucracy encountered was specific to the context of the invention
and its market. For example, the issue of the Resource Management Act (RMA) only arose in
Inventor B’s case, as his invention was a facility, whereas the other participants’ inventions
were products.
Government
The stark contrast in participants’ opinions on the responsibilities of government is a notable
phenomenon within the study. Inventor E felt that government had a responsibility to fund
the commercialisation of individual inventions. Furthermore, she felt that the absence of
government financial support presented a significant barrier to individual invention
commercialisation. Inventor E has approached various government departments and schemes
seeking financial support, and considers their reluctance to provide monetary grants to be her
greatest barrier.
In contrast, Inventor B believes that the New Zealand government’s attempts to provide
support for inventors creates more barriers than it solves. Inventor B believes that speculative
ventures such as invention commercialisation should be funded by venture capitalists in
return for equity. He believes that government interference and the tax rate pose a significant
barrier to inventors-come-entrepreneurs such as himself. This indicates the way in which
opinions are inevitably shaped by circumstance. Whilst Inventor E lacked resources, Inventor
B did not, and it would seem that this runs parallel to their contrasting opinions on
government support.
Inventor C and Inventor A considered that whilst government should not be expected to fund
invention commercialisation, they do have a responsibility to assist lone inventors in the
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commercialisation of their inventions. They contended that the type of assistance provided by
the New Zealand government is of little help to individual inventors, and this represents a
barrier for them. Inventor C’s suggestion of ‘inventions factories’ was surprisingly similar to
Inventor A’s idea of ‘technology parks’. Both concepts were centred on government
providing access to the network of individuals required to bring a product to market.
CONCLUSIONS
The responsibility for countering the barriers identified in this research rests on both the
government and lone inventors. It seems that many of the barriers are derived from overprotectiveness on the part of individual inventors. The unwillingness to interact with others in
the process of commercialisation often limits the product’s potential to the business abilities
of its inventor. This is a problem, as lone inventors are often severely lacking in
entrepreneurial ability. The only avenue out of this conundrum is the willingness to forego
partial control and ownership of the invention, in return for the assistance of others. A huge
network of individuals will inevitably be required to bring a product to market. Government
can make this network more accessible to inventors, but it cannot make them use it. This
decision will continue to rest upon the shoulders of lone inventors.
There is no doubt that New Zealand’s individual inventors face barriers when attempting to
commercialise their inventions. However, a lack of research on exactly what these barriers
are, make it difficult for those in the business realm to help lone inventors in their plight. The
type of help required, is also difficult to determine, as the true nature of the barriers faced is
not clearly understood. This research never aimed to provide generalisable explanations for
the failure of lone inventors. Likewise, it is not the aim of this report to make practical
suggestions on how commercialisation barriers can be overcome or avoided by individual
inventors. It is hoped, however, that the study’s results will set a basis for further research
that will provide practical suggestions for lone inventors and the government on how the
barriers can be overcome or avoided.
LIMITATIONS
The most significant limitation of this research lies in the small sample size, which means
that findings are not representative of the population. The aim is to give an indicative
impression of the relevant barriers.
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