70 Pages Posted: 19 Aug 2017 Last revised: 18 Oct 2017
Date Written: August 16, 2017
This Article identifies and describes a crucial source of innovation failure — linked not to the market but to the structure of social relations that underlie market transactions — that this Article terms social network innovation failures. This source of innovation failure, however, has been obscured by two assumptions in traditional market failure models of innovation. First, market failure models assume that public, non-secret knowledge (or information) will flow freely among communities of innovators and be put to its optimal use. Second, market failure models pay little attention to how good ideas emerge; assuming that good ideas will follow from investment in research and development.
Social network failures are failures of social interaction. Drawing on studies from the sociology of networks, as well as original ethnographic research in innovator communities, this Article develops a taxonomy of social network innovation failures: (1) lack of social-cognitive ties; (2) cognitive distance; and (3) different (or clashing) evaluative frames. It then illustrates how these social network innovation failures are endemic in a wide variety of fields, including computer science, mathematics, public health, and medicine, allowing key pieces of publicly available knowledge and expertise needed to solve complex problems to remain trapped in communities of innovators that do not interact with each other. Understanding social barriers to information flow is especially important in light of findings in the sociology literature that breakthrough ideas arise from the work of teams that bring together knowledge from cognitively distant communities to find and frame new problems at their intersection. Breakthrough ideas are rare precisely because of social network failures.
Not only does patent law fail to address these social barriers to innovation, patent law as currently designed actually reinforces them. The assumption that public knowledge is free flowing, as well as an emphasis on problem-solving that assumes that problems to be solved are simply out there, underlie the key patent law doctrines of novelty, obviousness, and utility, often resulting in decisions that frustrate patent law’s fundamental goal of incentivizing innovation. Correcting social network innovation failures requires reorienting patent doctrine to reward not only problem-solving but also problem-finding and problem-framing.
Identifying the social causes underlying innovation failures is essential to the design of effective law and policy interventions. Just as market failure analyses of innovation identified free-riding as a root cause of market inefficiencies — justifying a property right in information as the targeted cure — social network failure analyses identify the social organization and division of knowledge as an independent cause of innovation failure that calls for the design of new, targeted legal interventions. The three types of social network failures identified in this Article recommend the reorganization of innovation policy to prioritize the building of knowledge infrastructures and the restructuring of research funding from a discipline-based to a problem-based model.
Keywords: Interdisciplinarity, Interdisciplinary collaboration, boundary-crossing, Patents, Sociology of Innovation, Sociology of Knowledge, Knowledge Networks, Utility, Obviousness, Novelty, Analogous Art, Market Failure, Problem-Solving, Problem-Finding, Structural Hole, Structural Fold
JEL Classification: K10, K19, K29, K39
Suggested Citation: Suggested Citation
Pedraza-Farina, Laura G., The Social Origins of Innovation Failures (August 16, 2017). Northwestern Public Law Research Paper No. 17-20; Northwestern Law & Econ Research Paper No. 17-11. Available at SSRN: https://ssrn.com/abstract=3020102