Welfare Implications of User Innovation

Citation: Joachim Henkel, Eric von Hippel (2003) Welfare Implications of User Innovation.
DOI (original publisher): 10.2139/ssrn.425820
Semantic Scholar (metadata): 10.2139/ssrn.425820
Sci-Hub (fulltext): 10.2139/ssrn.425820
Internet Archive Scholar (search for fulltext): Welfare Implications of User Innovation
Download: http://ssrn.com/abstract=425820
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Summary

Authors "consider the impact of this added source [users] of innovations upon each of the several major effects that have been discussed in the literature on product diversity, innovation, and social welfare as inducing either over-provisioning or under-provisioning of product variety or innovation. We will find that the introduction of user innovation either eliminates or ameliorates deleterious effects under most conditions."

"A central observation is that user and manufacturer innovations tend to be of a different nature, with product innovations developed by users tending to fill small niches of high need left open by commercial sellers. Furthermore, innovation-related knowledge of users and manufacturers complement each other. Hence, the introduction of a user innovation can have an offsetting effect to the tendency of manufacturers to underprovide product diversity to a marketplace. This positive welfare effect is strengthened by the fact that, due to user needs evolving over time, innovations created by “lead users” for market niches often become relevant to the bulk of the market later."

Theoretical and Practical Relevance

Implication for policy: protect, promote user innovation.

Implication for innovators: make platforms open to user innovation, strategically participate in user innovation rather than protecting all IP as a rule