Next Steps for Free Innovation Research and Practice

This chapter suggests several ways to make progress in free innovation research, policymaking, and practice. It sets expectations for the role the free innovation paradigm might play in these efforts; compares and contrasts the research lenses offered by free innovation, user innovation, peer production, and open innovation; and proposes steps to improve the measurement of free innovation. Next the chapter suggests research steps for incorporating free innovation into innovation theory and policymaking. Finally, this chapter looks at how the free innovation paradigm can help us to understand the economics of household sector creative activities even beyond innovation, such as “user-generated content” ranging from fan fiction to contributions to Wikipedia.

The Broad Scope of Free Innovation

This chapter shows that free innovation extends well beyond product innovation—the type of innovation focused upon by almost all studies of household sector innovation to date. It reviews field-specific empirical studies that find significant levels of free innovation present in services, processes, marketing methods, and new organizational methods. The chapter also discusses illustrative examples of the sources of innovation across five innovation categories used in official Organisation for Economic Co-operation and Development (OECD) government statistics. Thus, the chapter argues that the scope of free innovation in the household sector is indeed broad—and perhaps as broad as that of producer innovation with respect to products, services, and processes of interest to consumers.

Viability Zones for Free Innovation

This chapter explores the conditions under which innovation pays for both free innovators and producers. Drawing heavily upon previous research, the chapter defines and describes three basic innovation modes: free innovation by single individuals, collaborative free innovation by multiple individuals, and producer innovation. It then explores the conditions under which each of these modes is “viable”—that is, will provide a net benefit to innovators engaging in it. Building upon innovation mode viability calculations, the chapter reveals that continuing improvements to free innovators' design tools and communication capabilities are making free innovation viable for an increasing range of innovation opportunities. As a result, the chapter concludes that free innovation will steadily grow in importance relative to producer innovation.

Evidence for Free Innovation

This chapter presents evidence that free innovation is a very substantial phenomenon with respect to the development of products consumed within the household sector. Today, tens of millions of consumers annually spend tens of billions of dollars creating and modifying products to better serve their own needs. In fact, aggregate household sector product development expenditures rival the scale of business sector expenditures by producers developing products for consumers. The chapter then shows how more than 90 percent of the developers of product innovations in the household sector meet both of the criteria for free innovation specified in the previous chapter. Finally, the chapter explores the nature of transaction-free self-rewards central to the viability of free innovation, and discusses why it can make economic sense for free innovators to reveal their innovations for free.

Division of Labor between Free Innovators and Producers

This chapter explains the value of a division of innovative labor between free innovators and producer innovators. As previous studies show, both social welfare and producer profits very generally increase if producers avoid developing types of innovations that free innovators already make available “for free.” Instead, producers should learn to focus on developing innovations that complement free innovation designs rather than substitute for them. The chapter reviews four basic interactions between the free and producer innovation paradigms, explaining the relationships among these interactions and the effects found on both producers' profits and social welfare. The chapter goes on to show that, under some conditions, producers can profit by actually subsidizing free innovation.

Diffusion Shortfall in Free Innovation

This chapter identifies an important inbuilt difference between the two paradigms with respect to innovation diffusion. The difference springs from the fact that, unlike producers, free innovators do not protect their innovations from free adoption, and they do not sell them. As a result, benefits that free-riding adopters may gain are not systematically shared with free innovators—there is no market link between these parties. This chapter thus presents evidence for the systematic shortfall in free innovators' incentives to invest in the diffusion of free innovations, and then argues that it is caused by the absence of a market link between free innovators and free-riding adopters. The chapter then concludes with suggested ways for addressing this situation.

Preserving Free Innovators’ Legal Rights

This chapter reviews household sector innovators' legal rights to engage in innovation and innovation diffusion. It reveals that free innovators have very strong legal rights, at least in the United States, with respect to both innovation development and innovation diffusion. Despite their generally favorable situation, however, free innovators' freedom to operate is frequently curtailed, and free innovation costs are often raised, by regulations or legislation promulgated for other purposes—often without awareness that free innovation even exists. To conclude, this chapter makes specific suggestions for improving this scenario, and also proposes an increase in awareness of free innovation as well as the benefits it brings to society.

Personality Traits of Successful Free Innovators

This chapter identifies personality traits significantly associated with successful free innovation in the household sector. It draws upon a 2016 study conducted among a sample of 546 German consumers, focusing on three successive innovation process stages: having an idea for an innovation for personal use; building a prototype for personal use; and diffusing the innovation either by free, peer-to-peer transfer or to a producer firm. In addition, this study uses the five-factor model of personality (also known as the Big Five model) consisting of five underlying traits in personality that display minimal overlap: openness, extraversion, conscientiousness, agreeableness, and neuroticism. Based on this study, the chapter suggests two possible ways to increase the amount of successful free innovation.

Tightening the Loop between Free Innovators and Producers

This chapter looks at how both free innovators and commercial project sponsors are increasingly competing to “tighten the loop” between themselves and free innovators to obtain a larger share of voluntary and unpaid design efforts. Crowdsourcing calls by both free innovators and producers asking for assistance on innovation projects from the household sector are on the rise. Producers are also learning to support free innovators, seeking to channel their work into privately profitable directions. Hence, the chapter explains how producers are learning to support free innovators in ways that benefit themselves but not their rivals. It then explores how lower-cost pathways to commercialization are becoming available to household sector innovators. Finally, the chapter discusses how, via crowdsourcing, free innovators and producers are both learning to more effectively recruit free innovation labor from the household sector.

Pioneering by Free Innovators

This chapter shows that there are basic differences in the types of innovations developed, and in the timing of innovations developed, within the two paradigms. This is because the incentives and behaviors of innovators acting within each paradigm fundamentally differ, thus innovation outcomes also systematically differ. Free innovators, being self-rewarding, are free to follow their own interests. Unlike producers, they need not work only on projects they expect the market to reward. They therefore generally pioneer functionally new applications and markets prior to producers understanding the opportunity. Producer innovators generally enter later, after the nature and the commercial potential of markets have become clear.