Edited by Fred Gault
Innovation is not only the domain of enterprises that seek to sell what they create. It is also done by firms and individual end users who wish to use what they create rather than sell it. User innovation is increasingly displacing producer innovation in many parts of modern economies, but official innovation indicators still do not capture the activity properly. This chapter discusses the distinguishing features of user innovation compared with traditional, producer-centered innovation, summarizes the empirical evidence, and reviews the state of the art in the measurement of user innovation. Ever since Schumpeter (1934) introduced his theory of economic development, economists, policy makers and business managers have assumed that most important innovations originate from producers and are supplied to consumers through goods or services that are for sale. This view seems reasonable on the face of it; producers generally serve many users and so can profit from multiple copies of a single innovative design more than individual users would. In contrast, if individual users innovate, they could only depend upon their in-house benefits to recover their innovation investments. Presumably, therefore, a producer who serves many customers can afford to invest more in innovation than any single user could. From this, it follows that producer-centered innovation should dominate in most parts of the economy.
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