Profiting from Voluntary Information Spillovers: How Users Benefit by Freely Revealing Their Innovations

33 Pages Posted: 3 Sep 2009 Last revised: 24 Dec 2014

Dietmar Harhoff

Max Planck Institute for Innovation and Competition; Ludwig-Maximilians-Universität München; Centre for Economic Policy Research (CEPR)

Joachim Henkel

TUM School of Management - Technische Universität München (TUM); Centre for Economic Policy Research (CEPR)

Eric A. von Hippel

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

Date Written: January 2003

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.

Keywords: innovation, spillovers, diffusion, lead users

Suggested Citation

Harhoff, Dietmar and Henkel, Joachim and von Hippel, Eric A., Profiting from Voluntary Information Spillovers: How Users Benefit by Freely Revealing Their Innovations (January 2003). MIT Sloan Research Paper No. 4749-09. Available at SSRN: https://ssrn.com/abstract=1467786 or http://dx.doi.org/10.2139/ssrn.1467786

Dietmar Harhoff (Contact Author)

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, 80539
Germany
+49 89 24246 550 (Phone)
+49 89 24246 599 (Fax)

HOME PAGE: http://www.ip.mpg.de

Ludwig-Maximilians-Universität München ( email )

Munich, 80539
Germany

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Joachim Henkel

TUM School of Management - Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80333
Germany

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Eric Von Hippel

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)

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