Social Welfare Gains from Innovation Commons: Theory, Evidence, and Policy Implications

34 Pages Posted: 3 Sep 2021

See all articles by Jason Potts

Jason Potts

RMIT University

Andrew W. Torrance

University of Kansas School of Law; MIT Sloan School of Management

Dietmar Harhoff

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

Eric A. von Hippel

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

Date Written: September 2, 2021

Abstract

Innovation commons – which we define as repositories of freely-accessible, “open source” innovation-related information and data - are a very significant resource for innovating and innovation-adopting firms and individuals: Availability of free data and information reduces the innovation-specific private or open investment required to make the next innovative advance. Despite the clear social welfare value of innovation commons under many conditions, academic innovation research and innovation policymaking have to date focused almost entirely on enhancing private incentives to innovate by enabling innovators to keep some types of innovation-related information at least temporarily apart from the commons, via intellectual property rights.
In this paper, our focus is squarely on innovation commons theory, evidence, and policy implications. We first discuss the varying nature of and contents of innovation commons extant today. We summarize what is known about their functioning, their scale, the value they provide to innovators and to general social welfare, and the mechanisms by which this is accomplished. Perhaps somewhat counterintuitively, and with the important exception of major digital platform firms, we find that many who develop innovation-related information at private cost have private economic incentives to contribute their information to innovation commons for free access by free riders. We conclude with a discussion of the value of more general support for innovation commons, and how this could be provided by increased private and public investment in innovation commons “engineering”, and by specific forms of innovation policymaking to increase social welfare via enhancement of innovation commons.

Keywords: innovation commons, economics of data, intellectual property, innovation policy

JEL Classification: D02, D23, D62, H4, L4, O3, O36, O38

Suggested Citation

Potts, Jason and Torrance, Andrew W. and Harhoff, Dietmar and von Hippel, Eric, Social Welfare Gains from Innovation Commons: Theory, Evidence, and Policy Implications (September 2, 2021). Available at SSRN: https://ssrn.com/abstract=3915997 or http://dx.doi.org/10.2139/ssrn.3915997

Jason Potts (Contact Author)

RMIT University ( email )

Andrew W. Torrance

University of Kansas School of Law ( email )

Green Hall
1535 W. 15th Street
Lawrence, KS 66045-7577
United States

MIT Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
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Dietmar Harhoff

Max Planck Institute for Innovation and Competition ( email )

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Munich, Bayern 80539
Germany
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+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)

London
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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