Traditionally, we have tended to think of businesses (or individuals who then start businesses) as the principal source of innovative new products or services in a market economy. But, in a thought-provoking new working paper, Carliss Y. Baldwin of Harvard Business School and Eric von Hippel of the MIT Sloan School of Management argue that sources of innovation are changing in today’s economy.
In particular, the professors make the case that, as a result of declining design and communication costs and increasing use of modular design architectures, two other types of innovation are competitive in more and more situations. Those two types? Innovation by users and open collaborative innovation projects (like open source software projects, for example).
The authors don’t expect that what they call producer innovation (in other words, innovation by makers of goods and services that are then sold to customers) will disappear — but they do expect that it will become less dominant than it was during most of the twentieth century. They argue that a paradigm shift to more open models of innovation can offer benefits for society — and that policymakers should consider policies that are conducive to innovation-sharing.