The Virtual Cathedral and the Virtual Bazaar
DATABASE for Advances in Information Systems, Vol. 38, No. 4, pp. 33-39, November 2007
7 Pages Posted: 12 Nov 2007
Applying economic analysis, we explore the potential benefits and risks associated with firm-based and social production models and derive conditions that determine when open or closed innovation models are more appropriate. We contrast the newly emerging "user-generated approach" to innovation in virtual worlds with the traditional "producer-controlled approach". Taking the cases of World of Warcraft and Second Life, we show how the two virtual world providers use very different strategies to organize the creation of game content. We conclude with presenting a roadmap that businesses can use to conceive effective innovation and development strategies for designing virtual world offerings.
Keywords: Digital Entertainment, Innovation, Non-Market Collaboration, Outsourcing, Peer Production, Producer-Consumer Collaboration, Social Production, Theory of the Firm, User-Generated Content, Virtual Worlds
JEL Classification: D23, L11, L14, L15, L22, O32
Suggested Citation: Suggested Citation