Edited by Dominique Foray
Chapter 23: Adapting Policy to User-centered Innovation
Eric von Hippel OVERVIEW 23.1 At least since Schumpeter (1934 ), economists and policy-makers have assumed that the dominant mode of innovation is a ‘producers’ model’.1 That is, it has been assumed that economically important innovations originate from producers who need to be able to protect these innovations through intellectual property rights in order to secure monopolies over their innovations for some period of time (Arrow, 1962). Differences found in the social versus private rates of return for innovations also suggested that drawing forth more innovations would increase public welfare (for example, Mansfield et al., 1977). Accordingly, around the world, policies have been developed and progressively elaborated to support producers in their innovation-related efforts. Prominent among these are various kinds of government subsidy for the ‘properly documented’ research and development expenditure of private firms, and intellectual property law protections to increase the profits of those who introduce innovations into the marketplace. If, as we now are discovering, users are an important – and perhaps the most important – developers of innovations, two things must be done: (1) present, producer-centric innovation policies must be re-examined to determine their possible impacts on user innovation; and (2) new policies should be considered that might provide valuable additional support to user innovation. In what follows, I first very briefly summarize what we know about the importance of user innovation (section 23.2). Then I suggest that user innovation must be better measured by governments, and offer an example of how this can be done (section 23.3). Next...
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