Profiting from voluntary information spillovers: how users benefit by freely revealing their innovations

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.     

The dominant role of users in the scientific instrument innovation process

A sample of one hundred and eleven scientific instrument innovations was studied to determine the roles of instrument users and instrument manufacturers in the innovation processes which culminated in the successful commercialization of those instruments. Our key finding was that approximately 80% of the innovations judged by users to offer them a significant increment in functional utility were in fact invented, prototyped and first field-tested by users of the instrument rather than by an instrument manufacturer. The role of the first commercial manufacturer of the innovative instrument in all such cases was restricted, we found, to the performance of product engineering work on the user prototype (work which improved the prototype's reliability, ‘manufacturability’, and convenience of operation, while leaving its principles of operation intact) and to the manufacture and sale of the resulting innovative product. Thus, this research provides the interesting picture of an industry widely regarded as innovative in which the firms comprising the industry are not in themselves necessarily innovative, but rather — in 80% of the innovations sampled — only provide the product engineering and manufacturing function for innovative instrument users.We term the innovation pattern observed in scientific instruments a ‘user dominated’ one and suggest that such a pattern may play a major role in numerous industries.     

Missing children: how Chilean schools evaded accountability by having low-performing students miss high-stakes tests

Educational Assessment, Evaluation and Accountability - High-stakes testing pressures schools to raise test scores, but schools respond to pressure in different ways. Some responses produce real,...     

Transfers of user process innovations to process equipment producers: A study of Dutch high-tech firms

A detailed survey of 498 high technology small and medium-sized enterprises in the Netherlands shows process innovation by user firms to be common practice. Fifty-four percent of these firms reported developing entirely novel process equipment or software for their own use and/or modifying these, both at significant private expense. Twenty-five percent of the user innovations in our sample were transferred to commercializing producer firms. Many transfers were made without any direct compensation. Very importantly from the perspective of effective diffusion of user innovations, innovations with higher commercial potential - and more general appeal for users - are much more likely to be transferred to producers. The pattern we document of frequent innovation by individual user firms at substantial cost, followed in many cases by voluntary, no-charge information spillovers to producers, suggests that “open source economics” may be a general pattern in the economy.     

“Pyramiding: Efficient search for rare subjects”

The need to economically identify rare subjects within large, poorly mapped search spaces is a frequently encountered problem for social scientists and managers. It is notoriously difficult, for example, to identify “the best new CEO for our company,” or the “best three lead users to participate in our product development project.” Mass screening of entire populations or samples becomes steadily more expensive as the number of acceptable solutions within the search space becomes rarer.The search strategy of “pyramiding” is a potential solution to this problem under many conditions. Pyramiding is a search process based upon the idea that people with a strong interest in a topic or field tend to know people more expert than themselves. In this paper we report upon four experiments empirically exploring the efficiency of pyramiding searches relative to mass screening. We find that pyramiding on average identified the most expert individual in a group on a specific topic with only 28.4% of the group interviewed - a great efficiency gain relative to mass screening. Further, pyramiding identified one of the top 3 experts in a population after interviewing only 15.9% of the group on average. We discuss conditions under which the pyramiding search method is likely to be efficient relative to screening.