Millions of consumers innovate at private cost and for non-commercial reasons, and some of their innovations are useful to others. However, recent studies show that diffusion of generally valuable consumer innovations is... [ view full abstract ]
Millions of consumers innovate at private cost and for non-commercial reasons, and some of their innovations are useful to others. However, recent studies show that diffusion of generally valuable consumer innovations is hampered by a lack of incentives (de Jong et al., 2015). We first replicate this market failure drawing on multi-source survey data of 164 German consumers and their innovations. Innovations with high general use value only diffused if the innovator was highly willing to commercialize, while his/her willingness to freely reveal did not affect diffusion.
Our main contribution is that we investigated factors alleviating the market failure. We focused on three factors suggested by the user and free innovation literature (Baldwin & von Hippel, 2011; von Hippel, 2016): community involvement, being ahead of trends, and the novelty of consumer innovations. We find that general use value and diffusion are positively related if a community of like-minded individuals was engaged for help, feedback or advice. We find marginal evidence that if the innovator is a person who is generally ahead of trends, his/her innovation is more likely to be adopted provided that it offers general use value. Finally, we find a significant relationship between general use value and diffusion for highly novel innovations.
For policy our findings shed light on the circumstances in which the market failure is most present: for individual consumer innovators developing innovations with medium or low novelty. The market failure can be alleviated by 1. Stimulating open-collaborative forms of consumer innovation, 2. Expanding policies to facilitate individual innovators who are willing to commercialize, 3. Experimenting with new interventions to diminish diffusion effort, and/or to mobilize potential demand for consumer innovations. For academic research, next steps include to quantify the welfare loss associated with the market failure, to study the psychology of consumer innovators, and to explore the effectiveness of new interventions.
Baldwin, C., von Hippel, E. (2011), Modeling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation, Organization Science 22(6), 1399-1417.
de Jong, J.P.J., von Hippel, E., Gault, F., Kuusisto, J., Raasch, C. (2015), Market failure in the diffusion of consumer-developed innovations: Patterns in Finland, Research Policy 44(10), 1856-1865.
von Hippel, E. (2016), Free Innovation, MIT Press: Cambridge, MA.
OUI_paper_submitted_final_version.pdf 