In this paper, we assess the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single-user

Carliss Baldwin, Eric von Hippel

In this paper, we assess the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single-user individuals or firms and open collaborative innovation. We analyze the design costs and architectures and communication costs associated with each model. We conclude that both innovation by individual users and open collaborative innovation increasingly compete with and may displace producer innovation in many parts of the economy. We explain why this represents a paradigm shift with respect to innovation research, policy making, and practice. We discuss important implications and offer suggestions for further research.

  • Mark NottinghamOPMEnglish
    2·
    8 months ago

    Argues that producer-led innovation is ceding ground to innovation by single users and open collaborative innovation (e.g., open standards and open source). Part of the reason for this is that computing and the Internet reduced two costs relevant to these models: design and communication.

    Another interesting assertion:

    Regulation can be viewed as a form of transaction cost imposed by the government on all three innovation models. Drugs, commercial aircraft, and automobiles are among the product types that must meet heavy safety-related regulatory burdens before being allowed to enter the marketplace. Regulation in the form of standard setting affects many other industries, such as telecommunications. Within our theoretical framework, regulation and standard setting tend to decrease the value of innovation opportunities, thus shrinking the bounds of viability.