2018-19 Papers

Gambardella, Alfonso and Eric von Hippel (2018) “Open sourcing as a profit-maximizing strategy for downstream firms”  Strategy Science, forthcoming

ABSTRACT

This paper characterizes and explores a corporate strategy in which downstream firms collaborate to develop open substitute designs for proprietary hardware they would otherwise purchase from upstream suppliers.  This strategy centrally involves the downstream firms distributing design costs over multiple downstream firms – a strategy that is routine to producers selling to multiple downstream firms, but which has been in the past typically not practical for coalitions of downstream firms.  Today, downstream firms find it increasingly feasible to co-design products they may all purchase due to two technological trends.  First, CAD-CAM and other design technologies are lowering downstream firms’ costs to develop designs for purchased hardware inputs.  Second, better communication technologies are lowering the costs of doing such projects collaboratively, even among large groups of downstream customer firms.

Downstream firms collaborating to develop a design for a hardware input they all purchase could in principle choose to protect their design as a club good.  However, opening up collaboratively-created designs to free riders can increase the profits of the contributing firms for several reasons we explore and model.  Important among these is that free revealing draws free riders away from purchases of proprietary software or hardware to customer-developed free substitutes.  This “scale stealing” mechanism reduces the markets of upstream suppliers of competing proprietary inputs.  In the case of hardware only, free riders also contribute to reducing the average manufacturing costs of the open hardware by increasing purchase volumes and so creating increased economies of scale. Resulting reduced unit purchase costs benefit downstream firms contributing to the free design as well as free riders.

 

Sichel, Dan, and Eric von Hippel (2019) “Household Innovation, R&D, and New Measures of Intangible Capital” MIT Sloan School of Management Working Paper

ABSTRACT

 Household R&D (or household innovation) is an important source of innovation that has to date been largely overlooked in research related to national accounts.  Indeed, it is not currently counted as investment in the literatures on household production and human capital.  In this paper we develop time series estimates of nominal investment, real investment, and real capital stocks for household R&D investment for product innovations in the U.S. – survey data on services innovations in the household sector are not yet available.  In the U.S., we find that household product R&D is significant.  Our estimate of real investment in 2017 is $41 billion (2012 dollars).  This is about half of what producers spend in R&D to develop new products for consumers – a sizeable fraction.  Our estimate of the real capital stock of household product R&D in 2017 is $233 billion.  We conclude that household R&D is an important feature of household activity and, more generally, of the overall landscape of innovation.  We propose that the measurement community should take note.

 

Stock, Ruth, Eric von Hippel, Christian Holthaus, and Lennart Gillert (Updated 2018) “Problem solving without problem formulation: Documenting need-solution pairs in a laboratory setting.”

ABSTRACT

Discoveries for solutions via serendipitous means are known to occur, but it is unclear how such discoveries transpire.  Recent work by von Hippel and von Krogh (2016) have offered a possible explanation; rather than starting the process of solution-finding with problem formulation, people may also find solutions by having insights regarding both a previously unidentified need and a responsive solution – a “need-solution pair.” In this paper, we examine if need-solution pairs emerge from a robust recognition system that relies on action-oriented, function-based reasoning about objects. To test this, we conducted an experiment in which we manipulated functional object reasoning by adjusting (1) object familiarity and (2) the level of instructions to actively solve problems. Our results demonstrated that solutions by need-solution pair recognition occurred just as often as need-first solutions, with need-solution pair recognition being best supported when constraints on functional object understanding were reduced. Specifically, identification of need-solution pairs was enhanced most in environments with unfamiliar objects, where participants were not directed to solve specific problems. These results indicate that functional based reasoning about objects can result in problem-free, serendipitous solution-finding. We conclude with a discussion of implications of our findings for further research and improved practice.

 

Kaulartz, Sandro and Eric von Hippel (2018) Lead user innovation identification: Rapid semantic analyses of user-generated content. MIT Sloan School of Management WP.

ABSTRACT

 Prior research has established that lead users, both industrial and consumer, innovate ahead of general market demand. Producers have an interest in identifying and selectively commercializing innovations developed by lead users, but many have been deterred from making this a regular practice by the difficulty and cost of lead user identification methods developed to date.

In this paper, we describe a method based upon semantic network analytic and memory model techniques for efficient identification of lead user innovations.  The data used are “user-generated content” found on thousands of websites that have been made openly available to all. In a test-of-concept application, we test the new method in kiteboarding equipment, a consumer product category.  We describe our method in detail, and demonstrate that it is possible to identify a sample of commercially-valuable lead user innovations with a one-or two-person team over the course of a week.  We suggest that this same method will be found generally applicable to identification of lead user innovations in other consumer product categories both large and small. We conclude with suggestions for further research, and with a discussion of implications for innovation research and practice.

 

Chen, Jin, Yu-Shan Su, Jeroen P.J. de Jong, Eric von Hippel (2018) “Household Sector Innovation in China: Impacts of Income and Development”  MIT Sloan School of Management Working Paper

ABSTRACT

 In this paper, we report findings from a first nationally-representative survey of household sector innovation in China, and offer two major new findings to that literature stream. First, we find that 23.2 million Chinese citizens are household innovators when we include householders who develop innovations for any motivation, not just for their own use. When we include only householders who innovate motivated by personal need, as was done in previous household sector innovation surveys, the estimate is 16.5 million individuals.  Reanalysis of data obtained from two earlier national surveys show that the same adjustment factor of approximately 1.5 holds in those samples too. If this result holds in other nations as well, it will represent a significant increase in the measured frequency of household sector innovation in general.

A second major finding from our China survey is that higher individual incomes are strongly associated with increased frequency of household sector innovation and diffusion. Income was not measured in previous national surveys of household sector innovation. When, in this study, we combine personal income effects with the positive impact of educational levels and technical training on the frequency of household sector innovation and also diffusion, a general picture emerges of a phenomenon that increases along with gains in national development. That is, as national levels of income, education and technical knowledge increase globally, a related increase in the economic importance of household sector innovation can be anticipated.

Both of these novel findings, we think, contribute substantially to researchers understanding of and ability to manage the phenomenon of household sector innovation.

 

Torrance, Andrew, and Eric von Hippel (2018) “A Meeting of Innovation Minds” Northwestern Law Review (Vol 112, pp. 177-186)

ABSTRACT

Eric von Hippel and Andrew W. Torrance are two scholars who might never have met, let alone become close colleagues and collaborators. In 2008, these two scholars began discussing, exchanging, and sometimes debating ideas with each other. They quickly found common ground and soon began a close and productive collaboration. Each has helped the other understand new aspects of innovation. The result has been a synthesis of ideas that has benefited both of them.  This somewhat unorthodox Essay, written jointly by von Hippel and Torrance at the request of the Northwestern University Law Review, relates how their collegial collaboration began and expanded to enrich their understandings of innovation, in the hopes of encouraging more researchers to pursue cross-disciplinary collaboration.