EFFECTS OF INTELLECTUAL PROPERTY MANAGEMENT ON PERFORMANCE OF SELECTED MANUFACTURING FIRMS IN SOUTH EAST NIGERIA

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ABSTRACT

The work is centered on the effect of IP management on Performance of selected Manufacturing Firms in South East Nigeria. The objectives of the study are; To determine the extent to which protection of intellectual property through trade mark affects the market share in manufacturing firms in the south east Nigeria; To ascertain the degree to which patents induce creativity in manufacturing firms in the same zone; To establish the level to which intellectual property protection fulfills its mission in manufacturing firms; To analyze the various risks involved in intellectual property registration to see if they are higher than expected benefits; To find out the extent to which corporate managers are involved in the management of intellectual property portfolio in their firms and the implications of their involvement especially in the south east Nigeria. The location of the study is the South East Nigeria comprising of Abia, Anambra, Ebonyi, Enugu and Imo states. Seven selected firms were used for the study and they consist of a population of 2258 employees. Exuastive sampling technique was applied to the managerial cadre of the population. Out of the total population, the managerial staff is made up of 644 employees out of whom 604 were qualified to be used for the empirical study. The companies are; Pittasson Industries Ltd., Alo Aluminium Manufacturing Industry Nig ltd, Hardis and Dromedas Ltd, General Cotton Mill Ltd, Ofali Rural Industries Ltd, and Jacobs Wine Nigeria Ltd. Primary data were collected through questionnaire structured in 5 point Likert scale and were complemented with oral interview. Again, secondary data were collected through findings from available literature from works of other authors. Analysis of the data was done using statistical tools of Chi Sq, Pearson Product Correlation Coefficient and Z test used to compare the sample and population mean. Other tools like frequency tables, percentages and statistical package for social science research (SPSS) were also adopted. Hypotheses 1 and 5 are to be tested with Friedman Chi square. This tool is commonly used to compare observed data and expected data.    Hypothesis 2 and 3 are to be tested with Pearson Product Correlation Coefficient Hypothesis 4 will be tested with the z-test. The z-test tool compares sample and population means to determine if there is a significant difference between the variables.This is seen in the statistical significance of (X2c =19.016, p,< .05). Secondly, patents rights induce creativity in manufacturing firms, (r =. 955, P<.05).Intellectual property fulfills its mission in manufacturing firms r = .728 > r= .195 Thus (r =.728, P<.05) It was also discovered that management of intellectual property is usually done by legal practitioners, (xc2 = 213.932>xt2 =26.30).  Also discovered is the fact that, when intellectual property rights are used together with other forms of protection, it yields maximum benefit. Lastly, the benefits that are accruable by the use of intellectual property are higher than the risks involved in IP registration, (Zc =11.517>Zt = 1.96). The study then concludes that contrary to the seemingly believe that protection of IP through the use of IPR does not contribute to an organizations success, it does actually positively impact on the organizations performance to a significant level. The recommendation therefore is that firms should in addition to other strategies, recognize their intellectual properties, and adopt the use of IP rights to protect them. Another recommendation is that IP should be managed strategically by the right personnel which from the findings of the author are the corporate managers.    

TABLE OF CONTENTS

Declaration                                                                                                                  i

Approval                                                                                                                     ii

Dedication                                                                                                                  iii

Acknowledgements                                                                                                    iv

Abstract                                                                                                                      v

List of tables                                                                                                               vi

List of figures                                                                                                             vii

CHAPTER ONE: INTRODUCTION

1.1       Background of the Study                                                                               1

1.2       Statement of the Problem                                                                   7

1.3       Objectives of the Study                                                                      11

1.4       Research Questions                                                                             12

1.5       Research Hypotheses                                                                         12

1.6       Significance of the Study                                                                   13

1.7       Scope of the Study                                                                                         13

1.8       Profile of Selected Organizations                                                    14

1.9       Operational Definition of Terms                                                  18

            References                                                                                                      20

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.0       Introduction                                                                                      22

2.1       Conceptual Framework                                                                         22

2.1.1    Concepts of Intellectual Property                                                          22

2.1.2    Concepts of Intellectual Property and Performance                 23

2.1.3    Concepts of Intellectual Property as an Intangible Asset 28

2.1.4    Concepts of Intellectual Property Rights and the importance of its             Protection                                                                                                     29

2.1.5    Intellectual Property Rights and Policies                           31

2.1.6    The Role of Intellectual Property in the Innovation Process                          35

2.1.7    The Role of Intellectual Property in the Innovation Process                          38

2.1.8    The Concept of Knowledge: Knowledge Flows, Creativity and Innovation            40

2.1.9    The Concept of Management                                                      44

2.1.10  Concept of Manufacturing Companies                                                48

2.1.11  Management of Intellectual Property as an Intangible Asset 50

2.1.12  The Decision to Innovate                                                                52

2.1.13  Intellectual Property Valuation                                                    54

2.1.14  How can Intellectual Property Enhance the Market Value of your

            Manufacturing Firms?                                                                  55

2.1.15  Types and Functions of Intellectual Property Rights                                                56

2.1.16  Industrial Design                                                                             57

2.1.17  Patent                                                                                                             58

2.1.18  Trade Mark                                                                                                    59

2.1.19  Trade Secret                                                                                  60

2.1.20  Copy Right                                                                                                    60

2.1.21  Traditional Knowledge                                                                 62

2.1.22  Geographical Indications (GI)                                                            62

2.1.23  Economic Value of Intellectual Property                                          63

2.1.24  Assessment and Control of Intellectual Property in Nigeria 65

2.1.25  Intellectual Property Theft in Organizations; who they are and when they steal                                                                                                     66

2.1.26  The World Intellectual Property Organization (WIPO)            72       

2.1.27  World Trade Organization (WTO)                                                72

2.2       Theoretical Review                                                                         72

2.2.1    Theoretical Perspective                                                                     72

2.2.2    Theories of Intellectual Property                                                      73

2.2.3    Theories of Performance                                                                    76

2.3       Empirical Review                                                                            81

2.4       Conceptual/Theoretical Framework                                    108

2.5       Gap in Literature                                                                       111

2.6       Contribution to Knowledge                                                          112

            References                                                                                   114

CHAPTER THREE: METHODOLOGY

3.1       Introduction                                                                                  125

3.2       Research Design                                                                               125

3.3       Sources of Data                                                                                  126

3.4       Population of the Study                                                                  127

3.5       Sample Size Determination                                                                     127

3.6       Research Instrument                                                                        128

3.7       Sampling Technique:                                                                           129

3.8       Data Analysis Technique                                                                  129

3.9       Validity of the Research Instrument                                                      129

3.10     Reliability of the Research Instrument                                                 130

            References                                                                                        131

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1       Introduction                                                                                    132

4.2       Data Presentation and Analysis                                                         132

4.3       Oral Interview Analysis                                                                      149

4.4       Test of Hypotheses                                                                            152

4.5       Discussion of Findings                                                                      158

4.6       Discussion of Findings Relating to the Objectives                 160

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

  • Summary of Findings                                                                        167
  • Conclusion                                                                                                      168
  • Recommendations                                                                              169
  • Limitations of the study                                                                 170
  • Suggestion for further studies                                                             171

Bibliography                                                                                                   172

Appendixes                                                                                                     185

LIST OF TABLES

Table: 2.1        Estimated Proportions of Firms that always usually or frequently need to make Unofficial Payments; by Firm Size                                       50

Table 2.2         Showing Number of patents Registration and Percentages of Countries                                                                                        68

Table 2.3         Number of patents Applications for Africa, Canada, Japan, United Kingdom and United States for year 2000 to 2011                          69

Table 2.4:        Representing the Relative percentages of Patent Registration of each Country with Africa being less than 1%                                             71

Table 3.1         Organisations and Number of Employees.             127

Table 3.2:        Managerial Cadre of the Firms under Study.            128

Table 4.1         Distribution on the Response and Non Response Rate of the Instrument   Administered                                                          132

Table 4.2         Distribution of the Respondent’s Gender (Male/ Female)     133

Table 4.3         Marital Status of Respondents                                        133

Table 4.4         Age Distribution Table                                                            134

Table 4.5         Educational Background of Respondent            135

Table 4.6         Duration of Service of Respondents in the Firms     135

Table 4.7         Management Cadre Distribution Table          136

Table 4.8         Trade mark, Copyright, Patent and Market Change      137

Table 4.9         Brand Signature and Market Strength                                  137

Table 4.10       Performance Track and Intellectual Property              138

Table 4.11       Trademark, Copyright, Trade Secret and Imitation                            138

Table 4.12       IPR and Market Index                                                          139

Table 4.13       Industrial Designs, Non-Disclosure and Market Share           139

Table 4.14       Patent Law and Technology Innovation              140

Table 4.15       Patent Rights, Innovation and Technology                     141

Table 4.16       Research and Development Departments and Creation     141

Table 4.17       IPR Acquisition, Invention versus Improved Performances              142

Table 4.18       IPR and Firms Mission                                                    142

Table 4.19       Intangible Assets versus Exclusive Right                   143

Table 4.20       Profit, Market Share and Sustainability                 143

Table 4.21       Trademark, Brand Signature and Firms Success                                144

Table 4.22       Profit and Copy Right                                                          145

Table 4.23       IP Risks and Benefits                                                      145

Table 4.24       Creation, Invention Innovation and Intangibles                146

Table 4.25       Creation, Invention, Innovation and Performance               146

Table 4.26       Cost of Registration versus Benefit                                147

Table 4.27       Corporate Managers versus IP Management                 148

Table 4.28      IP Portfolio Management and Legal Practitioners          148

Table 4.29       IP Portfolio Management and Strategic Management     149

Table 4.30       Creation and Recreation versus Management                        149

Table 4.31       Mission, Vision, Goal and Performance                          150

Table 4.32       R&D versus Growth                                                   150

Table 4.33       Oral Interview Distribution                                               151

Table 4.34       Analysis of Oral Interview                                                   154

Table 4.35       Chi-square Test                                                                155

Table 4.36       Descriptive statistics                                                              156

Table 4.37       Correlation                                                                          156

Table 4.38       Descriptive statistics                                                         157

Table 4.39       Correlation                                                                      157

Table 4.40       Descriptive Statistics for Hypothesis 4                       158

Table 4.41       One Sample Kolmogrove Smirnove Test                            160

Table 4.42       Chi Square Test for Hypothesis 5                        160                                                     

LIST OF FIGURES

Fig: 2.1            Performance Management Cycles                                        47

Fig: 2.2            IP Management Framework                                                 51

Fig: 2.3            Types of IP Rights                                                              57

Fig: 2.4            Line Graph Representing the Patent Registration of IP in the

                        Countries Mentioned.                                                 69

Fig: 2.5            Bar Chart Representing the Patent Registration of IP in the Countries Mentioned                                                                                          70

Fig 2.6             Model Plan to Facilitate Intellectual Property Management for                                Improved Performance                                               113

Fig: 4.1            Bar Chart of Distribution Response                                     131

Fig 4.2             Bar Chart for Gender Distribution                                     132

Fig 4.3             Marital Statuses of Respondents                                            133

Fig 4.4             Bar Chart Representing the Educational Background of                          Respondents                                                                    134

Fig 4.5             Bar Chart for Management Cadre Distribution         136

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

Since the beginning of 20th century, the world has witnessed astronomical advancement in scientific and technological innovation which has changed the face of modern society. Innovation has become the key driver of economic growth and development in both medium term and long term. Kubis(2011) defines innovation as the process of introducing new products, and services, and production process into the marketplace and creating new profitable enterprises and higher paying jobs on this basis. The popular documentary on “Cable Network News” of Make, Create and Innovate” is one of the indications of the importance of innovation in today’s world. Even the most read book in the world; the holy Bible establishes it in King James Translation of Revelation, 21: 5; “Behold, I make all things new”. Innovation is thus about having new ways of doing things which usually will emanate from ideas generated by individuals and groups of individuals in their various works of life and even in their everyday life. When these ideas are put into use or into tangible items for use in creation of wealth and other economic value, they become Properties of Intellect.They are thus called Intellectual Property (IP).

The term Intellectual Propertycame to lime light in the 19th century. By late 20th century, it became a common place in US literature. Nevertheless, Grant(2010)notes that, the usage of the term goes back as far as 1893, at the founding of Swiss federal office for intellectual property. The Paris convention for protection of industrial property (1883) and Berne convention for protecting of library and artistic work (1886) both were separate administrative offices that merged in 1893 and adopted the term intellectual property in their new title (Ige, 2000). Prior to that adoption, towards the end of the 19th century, inventive new ways of manufacturing helped trigger large scale industrialization accompanied by such phenomena as rapid city growth, expansion of railway network, investments of capital and growing trade transaction.  Idris(2012) states that the invention of movable typing and printing press by Johamas Gutenberg around 1440 contributed to the birth of the first copyright system in the world. Sople, (2010) explains that Trademarks are believed to date back to at least 3500 years when potters’ marks were used to identify the source of earthen pots. However, jurisdiction and statutes for the protection of trademarks appear to date back to only 350 years, i.e. seventeenth century in England.

Right from the medieval to several years over, intellectual property started developing. In Roman times, it was common for pottery to be embossed or impressed with a mark, for example a representation of a dolphin or the maker’s initial. Merchant’s marks were used in commerce in Britain from the thirteenth century. William Caxton used the mark W74C, in his Gold and Silver articles and these were hallmark as early as the fourteenth century. By the end of the sixteenth century it was very common for shopkeepers to erect signs illustrating their trade (Nwokocha, 2012). Traders took to using cards bearing their name and address, often accompanied by a device of some sort, an early form of what we have today as business card. The industrial revolution saw an enormous growth in the use of names and marks in advertising and thus modern trade mark was born. This marked the early development of the modern Trademark Law.

In the area of patent, the first recorded patent for an industrial invention was granted in 1421 in Firenze, Italy to Architect and Engineer Filippo Brunelleschi. The claim was that he had thought of a better method for transporting goods on the River Aron. He undertook with the Florentine authorities that to divulge details of his new invention he would be granted a monopoly in respect of the exploitation of the invention within Firenze for a number of years (Nwokocha, 2012). After this, any person would be free to exploit the invention or introduce further improvements to the technology.

Copyright awareness on the other hand, arose with the growth of the printing press, and the need for the authors and publishers of popular works to profit for their task. In 1709 the UK Parliament enacted the world’s first Copyright Act, the so-called Statue of Anne. This Act established principles of copyright law which remain valid today and have developed to the current Copyright laws existing in most countries.

Subsequently, the United National Bureau for protection of intellectual property relocated to Geneva in 1960 and in 1967 the World Intellectual Property Organization (WIPO) was established by a treaty as an agency of the United Nations.  The establishment of WIPO naturally led to sensitization, awareness and growing interest in intellectual property protection. Companies started investing in research and development. The evolution reveals the emergence of 3 basic trends in intellectual property; Research, Development, and Innovation over the decades that follow.  Idris (2012: 19) identifies these trends as follows:

  • Protection has been strengthened, broadened and harmonized internationally especially in the 1980’s
  • The number of applicants and grants has risen exponentially between 1980’s and 2001 as compared to the previous period especially in United States and United Kingdom. Basically two technical fields contributed to these surge, Information and communication technology, (ICT) and Biotechnology.
  • Innovation has also expanded rapidly. An important indicator is the increase in research and development spending,

Today, intellectual property is a value concept. It forces us to acknowledge value conflicts in public policies of various governments and firm’s and also conflicts of value in inventions, creations and innovations.For many firms in this modern economy, intellectual property is their most important asset not physical property. Companies engage in acquisition of intellectual property due to various reasons. Such reasons as the expected benefit that is accruable to it. Some of these benefits they believe will have a positive effect on the performance of the company and the various indices of performance.  This includes the productivity of the firm, profitability, sustainability, and long term viability of the organization. Marrand Neely(2003) argue that a firm’s value is often partly based on the intangible intellectual capital which is referred to as intellectual property that it possesses.

Just like the physical properties, intellectual properties also need to be protected. Countries usually establish a system whereby these properties are managed in order to not only benefit those that generated the ideas leading to the establishment of these properties, but also to be used as an economic tool.Northern Italy is said to be the cradle of intellectual property system. In recent time however, more emphasis is being placed on such properties rather than physical properties. It is necessary to note here that even though the term is increasingly used today, it is still little understood. For too many people, it is still an obscured legal concept of little relevance to everyday life. In most developing countries, intellectual property is a novel concept especially for manufacturing companies and public research institutes.Yet when these properties are introduced, they need to be established, protected and generally managed by the inventors, owners and other stake holders like managers and operators of industries. Secondly, the process of protection of these new products cannot again be effectively established without a well-balanced, affordable and reliable system of management thus the management of Intellectual Property. Thirdly, most writers’believe that if IP is linked to firm performance, firms and investors would benefit from this concept. It is also probable that the expected future economic benefit will flow to the entity and the cost of the asset can be reliably measured.These requirements are consistent with international standards, yet the criteria are rarely met by IP and so IP is hardly ever disclosed quantitatively in the accounts

The human capacity for intelligence, creativity, and collaboration produces an abundance of new information, inventions, and artistic creations. As long as these fruits of the mind are afforded legal protection, they constitute intellectual property(Kamil, 2000). In his own contribution, Kubis (2011),   states that IP is known in the industrial world as the most valued asset owned by a company because it is generally believed that an investment in knowledge always pays. He goes further to say that  as Ben Franklin quoted, “if a man empties his purse into his head, no man can take it away from him”  Current development  in the global economy have brought the best interest about the ascendency of intellectual property. The brick and mortar economy is being replaced with economy of ideas. In the new global economy, wealth is generated towards harnessing the value of knowledge. The concept of creative enterprise has evolved from ideas, innovations, inventions and knowledge and investors and company/firms are increasingly investing on that.  Innovators thus seek property rights that allow them to own their creativity and innovations in the same way that they can own physical property.

Intellectual property is seen as a key concern in the quest for growth, development andcompetitiveness. Advancement in knowledge broadly conceived is a key driver of economicprosperity in the twenty-first century. The ongoing revolution in information and communicationtechnologies (ICT) has dramatically reduced the costs of creating, processing and transmittingknowledge, both nationwide and across borders. The pace of innovation has acceleratedsignificantly. These developments lead to closer international economic integration and morerapid innovation which create new challenges for IP regimes and policymaking.At the same time, both the innovation processes itself, and the production activities of firms are globalizing rapidly. To be competitive in the globalized economy, the United Nations member states (UN) have tomaintain, adapt and create institutional and legal frameworks conducive to the creation ofknowledge and its commercialization (Adewopo, 2000).Certain rights are thus allowed to these properties which are used to control the usage.

Intellectual property rights have a key role to play in thisregard.This raises challenges in terms of managing, protecting and enforcingintellectual property rights across borders. Belle, (2006) observes thatcountries with economies in transition face additional challenges to the challenges experienced by developed countries. They struggle to integrate into theincreasingly global production networks and to find their own niche in the increasingly globalvalue chains. To be successful, they need to assign high priority to developing their owninnovative capacities, as well as their ability to absorb and adapt technological innovations fromabroad, and to move up the value chain over time. Again, Intellectual property regimes have a key role to play in this regard.Like other property, intellectual property may be commercially exploited.

There are laws on intellectual properties but most people do not know about the existence of such laws while those that know about it do not know how to enforce it when violated due to ignorance or so many other factors militating against it.This situation is applicable mainly to developing countries in which Nigeria is one. Large organizations, industries and manufacturing firms are increasingly seeking intellectual property through investments and research and development. Again, this is applicable mainly to developed countries. In the third world countries, most manufacturing firms do not even have a research and development, (R&D), department. Huge amount of money is spent on research and development and these investments are meant for breakthroughs such that protection against competitors and intruders becomes necessary. In the advanced world, companies invest billions annually in research and development also to differentiate themselves from their competitors and ultimately to offer superior products in terms of quality, cost and future superiority. The result of such efforts however include both tangible and intangible asset such as intellectual property. Intellectual property is thus a significant contributor to a firm’s value.  Gassman, Zeigler, Ruther, and Bader(2012:18), believe that intangible asset can account for more than 70% of a firm’s value. It is therefore a considerable valuable asset for most companies but managers often do not fully appreciate and extract value from those assets. The problem then lies on how to manage and/or implement a plan to successfully turn this substantial market value into cash to meet needs.  Secondly, how does one significantly extract value from it so that it will contribute to a firm’s sustainability, efficiency, and general performance? It is therefore obvious that management of any organization cannot be effectively and efficiently done without protection of these properties.  To protect them, intellectual property rights are obtained as tools to use. These rights also act as incentives to invent or innovate, enhancement of technology innovation andas tools for ensuring equitable and fair utilization of genetic resources (Gassman et al.,2012).

The first industrial property protection in Nigeria was in respect of Trademarks. This was with regards to the trade mark proclamation in1900 by which the UK Trade Mark Act wasmade applicable to the then Protectorate of Southern Nigeria. This wasextended to the entire country following the amalgamation of the Southernand Northern Protectorates in 1914 (Wakhungu. Nyukuri, and Sikoyo, 2009)

In respect of patents, in the late 19th and early 20th centuries, patentsregistered in the UK were in Nigeria.The colonial masters first introduced the patent system in the former colonyof Lagos and Southern Nigeria in 1900 by the Patents Ordinance No. 17 of1900 and the Patents Proclamation Ordinance No. 27 of 1900 respectively.The Patents Proclamation Ordinance No. 12 of 1902 introduced similarlegislation in Northern Nigeria. The respective instruments provided for afull-fledged patent office headed by aRegistrar as was provided in the patent acts. However, in Okafor(2012), it is believed thatthe introduction of patent administrative institution was nevermeant to encourage either indigenous inventive activity, local research and development, innovation or to accomplish an effective transfer oftechnology but instead it was geared towards the protection of propertyrights in machinery technology relevant for the exploitation of gold andother mineral and human resources in the colonies thereby enriching their own country.

Following the amalgamation of Southern and Northern Nigeria in 1914, separate legislation for the different regions were repealed andsubstituted by the Patents Ordinance No. 30 of 1916The new law only provided for the registration in Nigeria ofpatents already granted in the UK, an anomaly that persisted even long afterNigeria became independent in 1960. Effectively, Nigerians or otherapplicants had first to apply to the UK patent office to be granted a patentfor an invention before proceeding to Nigeria to have it registered. It alsomeant that it was the UK law that substantively applied to patentapplications and grant in Nigeria up till 1970 (Wutungu, et, al. 2009).In 1970, the Patents and Designs Act No. 60 was enacted.

The Act was modeled on the draft law prepared in 1965 bythe United International Bureau for the Protection of Intellectual Property(BPIP), the precursor of the World Intellectual Property Organization,(WIPO).  Beyond just nationalizing the patent application and grant process,there appeared to be no policy rationale or consideration as such behindadopting the model given that there was no national policy with regard to itsindustrial and technological development (WIPO, 2002) However, despite the fact that thecountry had since articulated its industrial and technological developmentpolicy and plan, these have not yet been reflected in the international propertylaws as the 1970Act is still in force.

1.2  Statement of the Problem

EFFECTS OF INTELLECTUAL PROPERTY MANAGEMENT ON PERFORMANCE OF SELECTED MANUFACTURING FIRMS IN SOUTH EAST NIGERIA