Economic Viability of Innovation Models
The working paper “Modeling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation” published in the HBS Working Knowledge magazine provides an analysis of the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single user individuals or firms, and open collaborative innovation projects.
HBS professor Carliss Y. Baldwin and MIT Sloan School of Management professor Eric von Hippel analyze the three models in terms of their technological properties, specifically their design costs and architectures, and their communication requirements. The researchers argue that as design and communication costs decline, single user and open collaborative innovation models will be viable for a steadily wider range of design. These two models will present an increasing challenge to the traditional paradigm of producer-based design—but, when open, they are good for social welfare and should be encouraged by policymakers. Key concepts include:
- When it is technologically feasible, the transition from closed producer innovation or single user innovation to open single user or open collaborative innovation is desirable in terms of social welfare and is worthy of support by policymakers.
- Free dissemination of innovation designs is associated with the open model. Open innovation generates innovation without exclusivity or monopoly, and so should improve social welfare, other things being equal.
- Intellectual property rights grants can be used as the basis for licenses that help keep innovation open as well as closed.
- Policymakers should seek out and eliminate points of conflict between present intellectual property policies designed to support closed innovation that at the same time inadvertently interfere with open innovation.
- As design costs fall, many more innovations will originate with single users.
- Open collaborative innovation projects thrive on low communication costs.