The User Innovation Paradigm: Impacts on Markets and Welfare
构建微观经济模型，分析企业利用用户创新的条件，发现用户创新增加时企业转向支持用户创新过晚，导致效率损失，但整体上用户创新能提升社会福利。
Innovation has traditionally been seen as the province of producers. However, theoretical and empirical research now shows that individual users—consumers—are also a major and increasingly important source of new product and service designs. In this paper, we build a microeconomic model of a market that incorporates demand-side innovation and competition. We explain the conditions under which firms find it beneficial to invest in supporting and harvesting users’ innovations, and we show that social welfare rises when firms utilize this source of innovation. Our modeling also indicates reasons for policy interventions with respect to a mixed user and producer innovation economy. From the social welfare perspective, as the share of innovating users in a market increases, profit-maximizing firms tend to switch “too late” from a focus on internal research and development to a strategy of also supporting and harvesting user innovations. Underlying this inefficiency are externalities that the producer cannot capture. Overall, our results explain when and how the proliferation of innovating users leads to a superior division of innovative labor involving complementary investments by users and producers, both benefitting producers and increasing social welfare. This paper was accepted by Lee Fleming, entrepreneurship and innovation.