Eric von Hippel
- Published in print:
- 2016
- Published Online:
- September 2017
- ISBN:
- 9780262035217
- eISBN:
- 9780262335461
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262035217.003.0006
- Subject:
- Business and Management, Innovation
This chapter explains the value of a division of innovative labor between free innovators and producer innovators. As previous studies show, both social welfare and producer profits very generally ...
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This chapter explains the value of a division of innovative labor between free innovators and producer innovators. As previous studies show, both social welfare and producer profits very generally increase if producers avoid developing types of innovations that free innovators already make available “for free.” Instead, producers should learn to focus on developing innovations that complement free innovation designs rather than substitute for them. The chapter reviews four basic interactions between the free and producer innovation paradigms, explaining the relationships among these interactions and the effects found on both producers' profits and social welfare. The chapter goes on to show that, under some conditions, producers can profit by actually subsidizing free innovation.Less
This chapter explains the value of a division of innovative labor between free innovators and producer innovators. As previous studies show, both social welfare and producer profits very generally increase if producers avoid developing types of innovations that free innovators already make available “for free.” Instead, producers should learn to focus on developing innovations that complement free innovation designs rather than substitute for them. The chapter reviews four basic interactions between the free and producer innovation paradigms, explaining the relationships among these interactions and the effects found on both producers' profits and social welfare. The chapter goes on to show that, under some conditions, producers can profit by actually subsidizing free innovation.
Eric von Hippel
- Published in print:
- 2016
- Published Online:
- September 2017
- ISBN:
- 9780262035217
- eISBN:
- 9780262335461
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262035217.003.0004
- Subject:
- Business and Management, Innovation
This chapter shows that there are basic differences in the types of innovations developed, and in the timing of innovations developed, within the two paradigms. This is because the incentives and ...
More
This chapter shows that there are basic differences in the types of innovations developed, and in the timing of innovations developed, within the two paradigms. This is because the incentives and behaviors of innovators acting within each paradigm fundamentally differ, thus innovation outcomes also systematically differ. Free innovators, being self-rewarding, are free to follow their own interests. Unlike producers, they need not work only on projects they expect the market to reward. They therefore generally pioneer functionally new applications and markets prior to producers understanding the opportunity. Producer innovators generally enter later, after the nature and the commercial potential of markets have become clear.Less
This chapter shows that there are basic differences in the types of innovations developed, and in the timing of innovations developed, within the two paradigms. This is because the incentives and behaviors of innovators acting within each paradigm fundamentally differ, thus innovation outcomes also systematically differ. Free innovators, being self-rewarding, are free to follow their own interests. Unlike producers, they need not work only on projects they expect the market to reward. They therefore generally pioneer functionally new applications and markets prior to producers understanding the opportunity. Producer innovators generally enter later, after the nature and the commercial potential of markets have become clear.
