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Abstract:
In the traditional new product development process, manufacturers first explore user needs and then develop responsive products. Developing an accurate understanding of user needs is not simple or fast or cheap however, and the traditional approach is coming under increasing strain as user needs change more rapidly, and as firms increasingly seek to serve "markets of one."

Toolkits for user innovation is an emerging alternative approach in which manufacturers actually abandon the attempt to understand user needs in detail in favor of transferring need-related aspects of product and service development to users. Experience in fields where the toolkit approach has been pioneered show custom products being developed much more quickly and at a lower cost. In this paper we explore toolkits for user innovation and explain why and how they work.

Toolkits, User Innovation, Product Development

Abstract:
In this paper we propose that "norms-based" intellectual property systems exist today, and are an important complement to or substitute for law-based intellectual property systems. Norms-based IP systems, as we define them, operate entirely upon the basis of implicit social norms that are held in common by members of a given community. Within that community, they offer functionality similar to contemporary law-based IP systems with respect to both the nature of rights protected and the effectiveness of protection provided.

We document the existence of a norms-based IP system among a sample of accomplished French chefs. These chefs consider recipes they develop to be a very valuable form of intellectual property. At the same time, recipes are not a form of innovation that is effectively covered by law-based intellectual property systems. Via grounded research, we identify three strong implicit social norms related to the protection of recipe IP. Via quantitative research, we find that accomplished chefs enforce these norms, and apply them in ways that enhance their private economic returns from their recipe-related IP.

In our discussion, we compare the attributes of norms-based and law-based IP systems, arguing that each has different advantages and drawbacks. We also point out that the existence of norms-based IP systems means that many "information commons" may prove to be criss-crossed by norms-based fences, with community access controlled by community IP owners.

intellectual property systems, intellectual property rights, norms-based

Abstract:
Innovation is rapidly becoming democratized. Users, aided by improvements in computer and communications technology, increasingly can develop their own new products and services. These innovating users - both individuals and firms - often freely share their innovations with others, creating user-innovation communities and a rich intellectual commons. In Democratizing Innovation I look closely at this emerging user-centered innovation system, which is affecting both information products and physical products.

Drawing on work done with several coauthors, I explore why and when users find it profitable to develop new products and services for themselves, and why it often pays users to reveal their innovations freely for the use of all. Drawing on work with Nikolaus Franke, Pam Morrison and others, I document that product and service development is concentrated among lead user firms and individuals. Lead users that are ahead on marketplace trends do not replicate manufacturer development efforts.

Instead, they develop products that are not yet available. Later manufacturers find many of these user-developed products to be the basis for commercial products. Drawing upon work with Dietmar Harhoff, Joachim Henkel and others, I report that user innovation has a positive impact on social welfare, and propose that government policies, including R&D subsidies and tax credits, should be realigned to eliminate biases against it.

An electronic version of this book is available under a Creative Commons license.

User Innovation, Lead User, Open Source Software, Open Innovation

Abstract:
Open source software products represent the leading edge of innovation development and diffusion systems conducted for and by users themselves - no manufacturer required. Research into this phenomenon has so far focused on how the major tasks of software development are organized and motivated. But a complete user system requires the execution of "mundane but necessary" tasks as well. In this paper, we explore how the mundane but necessary task of field support for open source Apache server software is organized, and how and why users are motivated to participate in providing it. We find that the present system works well and that information providers are largely rewarded by benefits directly received from a related task. We also find, however, that the present help system is by and for only a few - and that changes would be needed if and as volume increases. General lessons for user-based innovation systems includes the clear willingness of users to openly reveal their proprietary information. This bodes well for the efficiency of user-only innovation systems. Open revealing is rational behavior if the information has low competitive value and/or if information providers think that other users know the same thing they do, and would reveal the information if they did not.

Abstract:
Manufacturers must accurately understand user needs in order to develop successful products - but the task is becoming steadily more difficult as user needs change more rapidly, and as firms increasingly seek to serve "markets of one." User toolkits for innovation allow manufacturers to actually abandon their attempts to understand user needs in detail in favor of transferring need-related aspects of product and service development to users along with an appropriate toolkit.

User toolkits for innovation are specific to given product or service type and to a specified production system. Within those general constraints, they give users real freedom to innovate, allowing them to develop their custom product via iterative trial-and-error. That is, users can create a preliminary design, simulate or prototype it, evaluate its functioning in their own use environment, and then iteratively improve it until satisfied. As the concept is evolving, toolkits guide the user to insure that the completed design can be produced on the intended production system without change.

Pioneering applications in areas ranging from the development of custom integrated circuits to the development of custom foods show that user toolkits for innovation can be much more effective than traditional, manufacturer-based development methods.

Abstract:
Innovation development, production, distribution and consumption networks can be built up horizontally - with actors consisting only of innovation users (more precisely, "user/self-manufacturers"). "Free" and "open source" software projects are examples of such networks, and examples can be found in the case of physical products as well. User innovation networks can function entirely independently of manufacturers when (1) at least some users have sufficient incentive to innovate, (2) at least some users have an incentive to voluntarily reveal their innovations, and (3) diffusion of innovations by users is low cost and can compete with commercial production and distribution. When only the first two conditions hold, a pattern of user innovation and trial and improvement will occur within user networks, followed by commercial manufacturer and distribution of innovations that prove to be of general interest. In this paper we explore the empirical evidence related to each of these matters and conclude that conditions favorable to user innovation networks are often present in the economy.

Innovation Networks, User Innovation, Open Source Software

Abstract:
In this paper we model the pathways commonly traversed as user innovations are transformed into commercial products. First, one or more users recognize a new set of design possibilities and begin to innovate. They then join into communities, motivated by the increased efficiency of collective innovation. User-manufacturers then emerge, using high variable cost/low-capital production methods. Finally, as user innovation slows, the market stabilizes enough for high-capital, low variable cost manufacturing to enter. We test the model against the history of the rodeo kayak industry and find it supported. We discuss implications for "dominant design" theory and for innovation practice.

user innovations, user-manufacturers

Abstract:
Firms and governments are increasingly interested in learning to exploit the value of lead user innovations for commercial advantage. Improvements to lead user theory are needed to inform and guide these efforts. In this paper we empirically test and confirm the basic tenants of lead user theory. We also discover some new refinements and related practical applications.

Using a sample of users and user-innovators drawn from the extreme sport of kite surfing, we analyze the relationship between the commercial attractiveness of innovations developed by users and the intensity of the lead user characteristics those users display. We provide a first empirical analysis of the independent effects of its two key component variables. In our empirical study of user modifications to kite surfing equipment, we find that both components independently contribute to identifying commercially attractive user innovations. Component 1 (the "high expected benefits" dimension) predicts innovation likelihood, and component 2 (the "ahead of the trend" dimension) predicts both the commercial attractiveness of a given set of user-developed innovations and innovation likelihood due to a newly-proposed innovation supply side effect. We conclude that the component variables in the lead user definition are indeed independent dimensions and so neither can be dropped without loss of information - an important matter for lead user theory. We also find that adding measures of users' local resources can improve the ability of the lead user construct to identify commercially-attractive innovations under some conditions.

The findings we report have practical as well as theoretical import. Product modification and development has been found to be a relatively common user behavior in many fields. Thus, from 10% to nearly 40% of users report having modified or developed a product for in-house use in the case of industrial products, or for personal use in the case of consumer products, in fields sampled to date. As a practical matter, therefore, it is important to find ways to selectively identify the user innovations that manufacturers will find to be the basis for commercially attractive products in the collectivity of user-developed innovations. We discuss the implications of these findings for theory and also for practical applications of the lead user construct, i.e. how variables used in lead user studies can profitably be adapted to fit specific study contexts and purposes.

Lead User Theory

Abstract:
The "lead user construct" was developed to preferentially identify commercially attractive innovation-related information developed by users of products and services. In this research, we use data drawn from users of Apache, an open source software project, to assess the association between each of the two components of the lead user construct and the likely commercial attractiveness of innovations developed by users. We find both construct components have significant explanatory value with respect to the likelihood of innovation by users. We also find that one component - being at the leading edge of important marketplace trends - does selectively identify user-developed innovations having higher marketplace potential.

Lead Users, Innovation, Open Source Software

Abstract:
Proprietary brands are a major vehicle for producer profits: consumers have been shown willing to pay a considerable "brand premium" for a branded product over an otherwise identical unbranded product. Prior literature has implicitly assumed that only producers develop brands. In this paper, we report that user communities also can and do develop strong proprietary brands capable of commanding significant brand premiums. Communities, we find, create their brands at essentially no cost - a costless side effect of member participation in community activities and relationships. In an empirical study of German and English-speaking outdoor communities, we find that most have created their own community "brands," sometimes involving logos that are applied to products commonly used by community members, etc.. In a detailed study of one community, we find community brands can gain very powerful positive associations within community memberships, and that many members are willing to pay considerable premiums for products bearing the community brand. These findings suggest that producers face a previously-unexamined source of both competition and collaboration with respect to profiting from brands. One interesting possibility is that producer brands may lose significant market share to user community brands under some conditions. Another is that producers may sometimes find it profitable to co-brand with user communities: this form of co-branding created the highest brand premiums we observed in our study.

community, brand-premium, consumer-generated brands

Abstract:
Many services can be self-provided. An individual user or a user firm can, for example, choose to do its own accounting – choose to self-provide that service - instead of hiring an accounting firm to provide it. Since users can ‘serve themselves’ in many cases, it is also possible for users to innovate with respect to the services they self-provide. In this paper, we explore the histories of 47 functionally novel and important commercial and retail banking services. We find that, in 85% of these cases, users self-provided the service before any bank offered it. Our empirical findings differ significantly from prevalent producer-centered views of service development. We speculate that the patterns we have observed in the banking industry will be found to be quite general. If so, this will be an important matter: perhaps 75% of GDP in advanced economies today is derived from services. We discuss the implications of our findings for research and practice in service development.

service innovators, banking

Abstract:
The literature on new goods and social welfare generally assumes that manufacturers develop innovations. But innovation by users has been found to also be an important part of innovative activity in the economy. In this Paper we explore the impact of users as a source of innovation on product diversity, innovation, and welfare. We examine the impact of user innovation on inefficiencies that bias the provision of new goods, and find that most are either alleviated or non-existent for user innovation. There are three major reasons for this. First, user innovations tend to complement manufacturer innovations, filling small niches of high need left open by commercial sellers. Second, user innovation helps to reduce information asymmetries between manufacturers and users. Third, user innovations are more likely to be freely revealed than manufacturer innovations. We conclude that, compared to a counterfactual world without such innovation, social welfare is most likely to be increased by the presence of user innovation. We derive implications for policy-makers and managers.

User innovation, product diversity, social welfare, inefficiencies

Abstract:
The literature on new goods and social welfare generally assumes that innovations are developed by manufacturers. But innovation by users has been found to also be an important part of innovative activity in the economy. In this paper we explore the impact of users as a source of innovation on product diversity, innovation, and welfare. We examine the impact of user innovation on inefficiencies that bias the provision of new goods, and find that most are either alleviated or non-existent for user innovation. There are three major reasons for this. First, user innovations tend to complement manufacturer innovations, filling small niches of high need left open by commercial sellers. Second, user innovation helps to reduce information asymmetries between manufacturers and users. Third, user innovations are more likely to be freely revealed than manufacturer innovations. We conclude that, compared to a counterfactual world without such innovation, social welfare is most likely to be increased by the presence of user innovation. We derive implications for policy makers and managers.

User Innovation, Product Diversity, Social Welfare, Inefficiencies

Abstract:
In a study of innovations developed by mountain bikers, we find that user-innovators almost always utilize "local" information - information already in their possession or generated by themselves - to assess the need for and to develop solutions for their innovations. We argue that this finding fits the economic incentives operating on users. Local need information is the most relevant to user-innovators, since the bulk of their innovation-related rewards typically come from in-house use. Local solution information that is already "in stock" is preferred because it can be applied to innovation-related problem-solving at a relatively low cost. Our findings suggest that innovation development is distributed among users in an economical way: user-innovations tend to be developed by "low-cost providers." It also suggests that the likely function and solution type employed in most user innovations can be predicted on the basis of preexisting user activity patterns and stocks of solution-related information. This in turn opens the way to new methods for efficiently screening user populations for the presence of innovations of any specified type.

User Innovation, Local Information, Mountain Biking

Abstract:
User needs for a given product type can be quite heterogeneous. Segmenting the market and providing solutions for average user needs in each segment is a partial answer that will typically leave many dissatisfied - some seriously so. We hypothesize that providing users with "toolkits for user innovation" to enable them to more easily design customized products for themselves will increase user satisfaction under these conditions. We test this hypothesis via an empirical study of Apache security software - "open source" software that is designed to be modifiable by skilled users. We find that heterogeneity of need is high, and that many Apache users are dissatisfied with standard security functionality on offer. We also find that users creating their own software modifications are significantly more satisfied than are non-innovating users. We conclude by suggesting that the "toolkits for user innovation" approach to enhancing user satisfaction might be generally applicable to markets characterized by heterogeneous user needs.

Open Source, Apache Security Software, Innovation, Innovation Toolkits

Abstract:
Statistical indicators have not kept pace with innovation research. Today, it is well understood that many industrial and consumer products are developed by users, and that many innovations developed at private cost are freely shared. New statistical indicators will empower policymakers to take advantage of the latest research findings in their innovation policymaking, and will enable them to benefit from improved measurement of resulting policy impacts.

In this paper, we report upon a pilot project in which a novel set of statistical indicators were deployed in a 2007 survey of 1,219 Canadian manufacturing plants. The plants all developed or modified "advanced" process technologies for in-house use. Responses to the survey showed that data on both user innovation and the transfers of these innovations could be reliably collected, and that novel findings important to policymaking would result. One such finding: About 20% of the user-innovators surveyed reported transferring their innovations to other users and/or equipment suppliers - and the majority of these at least sometimes did so at no charge to recipients. Since cost-free sharing of innovations is understood to result in greater social welfare than licensing for a fee, innovation rates being equal, this finding has important public policy implications. Current government innovation policies tend to favor and even to subsidize the obtaining of intellectual property rights as a means of encouraging innovation. If a significant fraction of user-innovators in the economy are already freely revealing their innovations - despite the availability of intellectual property grants - perhaps intellectual property rights policies should be reexamined.

We propose that improved versions of the novel statistical indicators piloted here should be integrated into official statistics so that user innovation, and related matters such as voluntary spillovers of innovation-related information, can be better monitored, better understood, and better managed.

user innovation, process technologies

Abstract:
Objective: To determine, through a review of the medical literature and author contact, the role of clinicians in the discovery of off label use of Food and Drug Administration approved prescription drugs.

Data Sources: The literature was accessed through MEDLINE (1999-December 2003). Additional sources accessed included the U.S. Patent Office and Micromedex, Thompson Scientific and Healthcare, Inc.

Data Synthesis: A survey of new therapeutic uses for New Molecular Entity drugs approved in 1998 was conducted for the subsequent 5 years of commercial availability. During that time period, a total of 144 new applications were identified in a computerized search of the literature for the 29 new drugs approved in 1998. Literature and patent searches were conducted to identify the first report of each new application. Authors of the seminal articles were contacted via survey and telephone interview to determine whether they were in fact the originators of the new applications. If they were, examinations of article contents and author surveys were used to explore whether each new application was discovered via clinical practice that was independent of pharmaceutical company or university research (field discovery) or whether the discovery was made by or with the involvement of pharmaceutical firm or university researchers (central discovery).

Conclusions: Post-NDA discoveries of new, off-label uses for new drugs were present in 22 of the 29 drugs in our sample. We found that 59% (85/144) of the drug therapy innovations in our sample were discovered by practicing clinicians via field discovery. The major role of clinicians in the discovery of new, off-label drug therapies has not been previously documented or explored. We propose that this finding has important regulatory and health policy implications.

off label drug use, prescription drugs, new molecular entities, lead users

Abstract:
Currently two models of innovation are prevalent in organization science. The "private investment" model assumes returns to the innovator results from private goods and efficient regimes of intellectual property protection. The "collective action" model assumes that under conditions of market failure, innovators collaborate in order to produce a public good. The phenomenon of open source software development shows that users program to solve their own as well as shared technical problems, and freely reveal their innovations without appropriating private returns from selling the software. In this paper we propose that open source software development is an exemplar of a compound model of innovation that contains elements of both the private investment and the collective action models. We describe a new set of research questions this model raises for scholars in organization science. We offer some details regarding the types of data available for open source projects in order to ease access for researchers who are unfamiliar with these, and also offer some advice on conducting empirical studies on open source software development processes.

Open source software, innovation, incentives, collective action

Abstract:
A detailed survey of 498 high tech SMEs in the Netherlands shows process innovation by user firms to be common practice. Fifty four percent of these relatively small firms reported developing entirely novel process equipment or software for their own use and/or modifying these at significant private expense. Twenty five percent of the user innovations in our sample were transferred to commercializing producer firms. Many transfers were made without any direct compensation, i.e. 48% were simply given away. Very importantly from the perspective of effective diffusion of user innovations, innovations with higher commercial potential for producers - and with more general appeal for users - are much more likely to be transferred. The pattern we document of frequent innovation by individual user firms at substantial cost, followed in many cases by voluntary, no-charge information spillovers to producers, suggests that open source economics may be a general pattern in the economy.

User innovation, SME innovation, innovation transfer, innovation diffusion, innovation measurement, open source

Abstract:
The need to economically identify rare subjects within large, poorly-mapped search spaces is a frequently-encountered problem for social scientists and managers. It is notoriously difficult, for example, to identify the best new CEO for our company, or the best three lead users to participate in our product development project. Mass screening of entire populations or samples becomes steadily more expensive as the number of acceptable solutions within the search space becomes rarer. Pyramiding can be significantly more efficient under many conditions.

Pyramiding is a search process based upon the view that people with a strong interest in a topic or field tend to know people more expert than themselves. In this paper we empirically explore the efficiency of pyramiding searches relative to mass screening in search spaces where there is only one best solution. In four experiments, we find that pyramiding in each case identifies the best solution within the search space using an average of only 30% of the effort required by mass screening. Based on our findings, we propose conditions under which pyramiding will be a more efficient approach to exploring a search space than screening.

pyramiding

Abstract:
Empirical studies of innovation have found that end users frequently develop important product and process innovations. Defying conventional wisdom on the negative effects of uncompensated spillovers, innovative users also often openly reveal their innovations to competing users and to manufacturers. Rival users are thus in a position to reproduce the innovation in-house and benefit from using it, and manufacturers are in a position to refine the innovation and sell it to all users, including competitors of the user revealing its innovation. In this paper we explore the incentives that users might have to freely reveal their proprietary innovations. We then develop a game-theoretic model to explore the effect of these incentives on users’ decisions to reveal or hide their proprietary information. We find that, under realistic parameter constellations, free revealing pays. We conclude by discussing some implications of our findings.

innovation, spillovers, diffusion, lead users

Abstract:
Innovation development, production, distribution and consumption networks can be built up horizontally – with actors consisting only of innovation users (more precisely, "user/self-manufacturers"). Some open source software projects are examples of such networks, and examples can be found in the case of physical products as well. In this paper we discuss three conditions under which user innovation networks can function entirely independently of manufacturers. We then explore related empirical evidence and conclude that conditions favorable to horizontal user innovation networks are often present in the economy.

horizontal innovation networks, user innovation, information revealing

Abstract:
A central tenant of open innovation is free revealing of the detailed workings of novel products and services, so that others may use them, learn from them, and perhaps improve them as well. We explain that innovators frequently do freely reveal proprietary information and knowledge regarding both information-based products and physical products they have developed. We explain why free revealing can make good economic sense for innovators and for society as well. The article develops the case for free revealing in terms of a private collective model of innovation incentives.

Abstract:
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 projects. We analyze the design costs and architectures and communication costs associated with each model. We conclude that innovation by individual users and also open collaborative innovation increasingly compete with - and may displace -producer innovation in many parts of the economy. We argue that a transition from producer innovation to open single user and open collaborative innovation is desirable in terms of social welfare, and so worthy of support by policymakers.

Abstract:
The impact of user innovation on social welfare isanalyzed by comparing user innovators to manufacturer innovators in terms oftheir innovation incentives and knowledge.Following a review of theliterature on product development by users, it is argued that the introductionof user innovation in a marketplace can offset the tendency of manufacturers tounder-provide product diversity and can reduce inefficiencies created byinformation asymmetries. If manufacturers anticipate that users will develop innovations that theycan learn from, manufacturer incentives to innovate, as well as social welfare,are likely to grow; on the other hand, if manufacturers anticipate that userswill use information spillovers from a manufacturer innovation to createsubstitutes, social welfare and manufacturers' innovation incentives are likelyto diminish.Although there are clearly both positive and negative effectsfrom spillovers of innovation-related information between user and manufacturerinnovators, an innovation system that includes user innovation is moreconducive to social welfare than a system that features only manufacturerinnovation.(SAA)

Social welfare, Spillover effects, User needs, Innovation process, Product development, Information asymmetry, Customers, Business conditions, Manufacturing industries

Abstract:
Presents a series of studies showing that the sources of innovation vary greatly; possible sources include innovation users, suppliers of innovation-related components, and product manufacturers. These types of roles are known as functional areas. Specific areas of innovation are marked by having innovators predominantly in one specific functional area. Using empirical data from industrial histories, the authors show that this innovation-function relationship has held in scientific instrument, semiconductor and printed circuit board assembly process innovations. Users are predominantly the innovators in these fields. Also identifies a few industries where manufacturers are typically the innovators and a few others where suppliers tend to be. Analysis of the economic rents of innovation expected by potential innovators can often, if not always, by itself predict the functional source of innovation. Innovating firms will do so only when these rents prove attractive. Two factors suggest that this will tend to limit exploitation of the innovation to a functional area. First, it is difficult for innovators to adopt new functional relationships to their innovations. Second, innovators face a poor ability to capture innovation rents by licensing their innovation-related knowledge to others. This hypothesis and its implications are tested against the empirical datasets used initially. The role of informal R&D know-how trading is also discussed and analyzed using the Prisoner's Dilemma. Guidance is given to innovation managers and policymakers. (CAR)

Information exchange, Know-how, Economic rents, Innovation management, User needs, Suppliers, Licensing strategies, Industrial research, R&D, Innovation policies, Information behavior, Innovation process, Manufacturing firms

Abstract:
Innovation development, production, distribution and consumption networks can be built up horizontally with actors consisting only of innovation users (more precisely, user/self-manufacturers ). Some open source software projects are examples of such networks, and examples can be found in the case of physical products as well. In this article, we discuss three conditions under which user innovation networks can function entirely independently of manufacturers. We then explore related empirical evidence, and conclude that conditions favorable to horizontal user innovation networks are often present in the economy.

Abstract:
Empirical studies of innovation have found that end users frequently develop important product and process innovations. Defying conventional wisdom on the negative effects of uncompensated spillovers, innovative users also often openly reveal their innovations to competing users and to manufacturers. Rival users are thus in a position to reproduce the innovation in-house and benefit from using it, and manufacturers are in a position to refine the innovation and sell it to all users, including competitors of the user revealing its innovation. In this paper, we explore the incentives that users might have to freely reveal their proprietary innovations. We then develop a game-theoretic model to explore the effect of these incentives on users' decisions to reveal or hide their proprietary information. We find that, under realistic parameter constellations, free revealing pays. We conclude by discussing some implications of our findings.

innovation, spillovers, diffusion, lead user