Section 6: Innovation Policy, User Innovation Measurement Studies


User innovation and the transfer of user innovations to producer firms is currently not well measured by government surveys and traditional statistical indicators. Colleagues and I are working to change this. Recently, colleagues and I have conducted national and targeted surveys on these matters using new indicators designed for the purpose. Papers reporting on these are below, along with papers discussing innovation policies and practices needed to support innovation by individual and corporate users.

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


 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.

Innovation in China: Impacts of Income and Development”  MIT Sloan School of Management Working Paper


 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.

von Hippel, Eric, Jeroen de Jong, and Daan Rademaker (2017) “Household Sector Innovation” Mohammed Bin Rashid Centre for Government Innovation, UAE, (July)


There is a significant level of household level innovation (around 5% of the population) occurring in the UAE which to date has been unaccounted for.Targeted policies can ensure that the country makes the most of this untapped potential, by:

  • Tackling current bottlenecks (e.g. lack of innovation diffusion)
  • Creating platforms for household innovators to connect (based on the survey results, students could be a primary target)
  • Measuring household innovation at regular intervals (this would allow to measure the impact of interventions and could help in raising the UAE global innovation rankings as international institutions progressively embrace the household innovation paradigm)Developing a comprehensive policy to support household innovation would give the UAE a leading position in an emerging field, provide it with a competitive advantage and position it as a powerful advocate for rethinking innovation measurement globally.

de Jong, Jeroen P.J., Eric von Hippel, Fred Gault, Jari Kuusisto, and Christina Raasch (2015)“Market failure in the diffusion of consumer-developed innovations: Patterns in Finland.” Research Policy


It has been argued that the diffusion of user-developed innovations is negatively affected by a new type of market failure: value that others may gain from a user-developed product can often be an externality to consumer-developers. As a result, consumer innovators may not invest in supporting diffusion to the extent that would be socially optimal. In this paper, we utilize a broad sample of consumers in Finland to explore the extent to which innovations developed by individual users diffuse – and the (minimal) efforts they exert to diffuses their innovations. Our empirical analysis supports the hypothesis that a market failure is affecting the diffusion of user innovations developed by consumers for their own use. Implications and possible remedies are discussed.

Torrance, Andrew and Eric von Hippel (2015) “The right to innovate.” Michigan State Law Review  pp. 793 – 829


Rules and regulations are so pervasive in many countries that it is easy to assume that only professionals are allowed—or should be allowed— to innovate. Is it really safe to let just anyone innovate? It is true that innovation is not always risk-free and that many individuals and social institutions are risk averse. So it is fortunate for us all that individuals, especially in common law democracies like the United States, the United Kingdom, and Canada, have broad legal rights to develop and use innovations.

In this article, my colleague Andrew Torrance and I review the fundamental legal rights of household sector innovators, including free innovators. I then describe how governments can and do encroach on those important rights—often without intent, and in pursuit of other objectives. We conclude that a strengthened social awareness of the need to protect individuals’ rights to innovate would be very valuable. We suggest how this might be accomplished.


von Hippel, Eric, and Chen Jin. “The Major Shift Towards User-centered Innovation: Implications for China’s Innovation Policymaking.” Journal of Knowledge-based Innovation in China 1, no. 1 (January 2009): 16–27 (PDF)

Gault, Fred, and Eric A von Hippel. The Prevalence of User Innovation and Free Innovation Transfers: Implications for Statistical Indicators and Innovation Policy. MIT Sloan Working Papers. MIT Sloan School of Management, February 3, 2009. (PDF)

Abstract: Statistical indicators have not kept pace with innovation research. Today, it is well understood that many industrial and consumer products are developed by users, and that many innovations developed at private cost are freely shared. New statistical indicators will empower policymakers to take advantage of the latest research findings in their innovation policymaking, and will enable them to benefit from improved measurement of resulting policy impacts.In this paper, we report upon a pilot project in which a novel set of statistical indicators were deployed in a 2007 survey of 1,219 Canadian manufacturing plants. The plants all developed or modified “advanced” process technologies for in-house use. Responses to the survey showed that data on both user innovation and the transfers of these innovations could be reliably collected, and that novel findings important to policymaking would result. One such finding: About 20% of the user-innovators surveyed reported transferring their innovations to other users and/or equipment suppliers – and the majority of these at least sometimes did so at no charge to recipients. Since cost-free sharing of innovations is understood to result in greater social welfare than licensing for a fee, innovation rates being equal, this finding has important public policy implications. Current government innovation policies tend to favor and even to subsidize the obtaining of intellectual property rights as a means of encouraging innovation. If a significant fraction of user-innovators in the economy are already freely revealing their innovations – despite the availability of intellectual property grants – perhaps intellectual property rights policies should be reexamined.We propose that improved versions of the novel statistical indicators piloted here should be integrated into official statistics so that user innovation, and related matters such as voluntary spillovers of innovation-related information, can be better monitored, better understood, and better managed.

de Jong, Jeoron P. J., and Eric A von Hippel. Measuring User Innovation in Dutch High Tech SMEs: Frequency, Nature and Transfer to Producers. MIT Sloan Working Papers. MIT Sloan School of Management, February 2009. (PDF)

Abstract: A detailed survey of 498 “high tech” SMEs in the Netherlands shows process innovation by user firms to be common practice. Fifty four percent of these relatively small firms reported developing entirely novel process equipment or software for their own use and/or modifying these at significant private expense. Twenty five percent of the user innovations in our sample were transferred to commercializing producer firms. Many transfers were made without any direct compensation, i.e. 48% were simply given away.

Very importantly from the perspective of effective diffusion of user innovations, innovations with higher commercial potential for producers – and with more general appeal for users – are much more likely to be transferred. The pattern we document of frequent innovation by individual user firms at substantial cost, followed in many cases by voluntary, no-charge information spillovers to producers, suggests that “open source economics” may be a general pattern in the economy.

von Hippel, Eric A., Jeroen P. J. de Jong, and Steven Flowers. “Comparing Business and Household Sector Innovation in Consumer Products: Findings from a Representative Study in the UK.” SSRN eLibrary (September 27, 2010). (SSRN)

Abstract: In a first survey of its type, we measure development and modification of consumer products by product users in a representative sample of 1,173 UK consumers aged 18 and over. We estimate this previously unmeasured type of innovation to be quite large: 6.1% of UK consumers – nearly 2.9 million individuals – have engaged in consumer product innovation during the prior three years. In aggregate, consumers’ annual product development expenditures are more than 1.4 times larger than the annual consumer product R&D expenditures of all firms in the UK combined.

Consumers engage in many small projects which seem complementary to the innovation efforts of incumbent producers. Consumer innovators very seldom protect their innovations via intellectual property, and 17% diffuse to others. These results imply that official statistics partly miss relevant innovation activity, and that existing companies should reconfigure their product development systems to find and build upon prototypes developed by consumers.