Abstract

http://ssrn.com/abstract=2275562
 


 



Market Failure in the Diffusion of User Innovations: The Case of 'Off-Label' Innovations by Medical Clinicians


Eric A. Von Hippel


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Harold J. DeMonaco


Harvard University - Massachusetts General Hospital; Massachusetts Institute of Technology (MIT) - Sloan School of Management

June 6, 2013


Abstract:     
User innovators develop innovations in order to use them. For this reason, the benefits that others might obtain from adopting user innovations will be at least partially an externality for innovating users. This circumstance creates the possibility of a market failure. An innovators' investment in diffusion can lower adoption costs for many. However, as user innovators may have no or "too low" incentives to invest for this purpose, diffusion of user innovations may be not optimal from a social welfare perspective.

In this paper, we conduct a first empirical exploration of the possible under-diffusion of user-developed innovations due to inadequate incentives. We survey medical clinician’s incentives to diffuse information regarding novel "off-label" applications for approved drugs and medical devices that they developed for use in their own medical practices. We find that there is indeed a mismatch between the costs the clinicians must incur to widely diffuse their innovations and their incentives to do so – resulting in under-diffusion of this type of innovation from the social welfare perspective. We consider how this problem of under-diffusion could be addressed by reductions in user-innovator’s diffusion costs and/or increases in their benefits from diffusion.

Number of Pages in PDF File: 33

Keywords: user innovation, diffusion

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Date posted: June 8, 2013 ; Last revised: September 18, 2013

Suggested Citation

von Hippel, Eric A. and DeMonaco, Harold J., Market Failure in the Diffusion of User Innovations: The Case of 'Off-Label' Innovations by Medical Clinicians (June 6, 2013). Available at SSRN: http://ssrn.com/abstract=2275562 or http://dx.doi.org/10.2139/ssrn.2275562

Contact Information

Eric Von Hippel (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
E62-455
Cambridge, MA 02142
United States
617-253-7155 (Phone)
617-253-2660 (Fax)
Harold J. DeMonaco
Harvard University - Massachusetts General Hospital ( email )
Boston, MA 02114
United States
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States
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