Currently, two modelsof innovation are prevalent in organization science. The "private investment" model assumes returns to the innovator resultfsu private goods andef ficient regimesof intellectual property protection. The "collective action" model assumes that under conditionsof market f ailure, innovators collaborate in order to produce a public good. The phenomenonof open sourcesofc are development shows that users program to solve their own as well as shared technical problems, andfd./( reveal their innovations without appropriating private returnsftu selling thesofL are. In this paper, we propose that open sourcesofc are development is an exemplarof a compound "private-collective" modelof innovation that contains elementsof both the private investment and the collective action models and canof f society the "bestof both worlds" under many conditions. We describe a new setof research questions this model raisesfi scholars in organization science.

Empirical studies of innovation have found that end users frequently develop important product and process innovations. Defying conventional wisdom on the negative effects of uncompensated spillovers, innovative users also often openly reveal their innovations to all users and manufacturers. Rival users are thus in a position to reproduce the innovation in-house and benefit from using it, and manufacturers are in a position to refine the innovation and sell it to all users, including competitors of the user revealing its innovation. In this paper we explore the incentives that users might have to freely reveal their proprietary innovations. We develop a game-theoretic model to explore the effect of these incentives on users' decisions to reveal or hide their proprietary information. We find that, under realistic parameter constellations, free revealing pays. We conclude by discussing some implications of our findings.

A number of potential advantages of industry agglomeration—or spatial clustering—have since long been identified in the research literature, notably related to shared costs for infrastructure, the build up of a skilled labour force, transaction efficiency, and knowledge spill-overs leading to firm learning and innovation. We identify two shortcomings of existing research on the clustering phenomenon. First, the abundance of theoretical concepts stands in sharp contrast with the general lack of work aiming to validate these mechanisms empirically and the contradictory evidence found in recent empirical work in the field. Secondly, there is a lack of a unified theoretical framework for analyzing spatial clustering. In an attempt to remedy the second shortcoming, this paper investigates the nature of the cluster from a knowledge creation or learning perspective. We argue for the need to establish a specific theory of the cluster where learning occupies center stage. The basic requirements for such a theory of the cluster are discussed. Two main components of such a theory are identified: it must explain the existence of the cluster on the one hand and its internal organization on the other.

What is the relationship between the performance of business firms and the growth of the national economy? Economists who study economic growth commonly treat nations themselves as the performing units that save, invest, and experience technological change. But business historians following the lead of Alfred Chandler often imply that the record of the national economy is not much more than the aggregation of the successes and failures of its major corporations. To quote Chandler: “First, and most important, the United States is not going the way of the United Kingdom in terms of long-term competitive strength...Today American companies remain powerful competitors in the most dynamic and transforming industries of the late twentieth century... ” (Chandler 1994, p. 57). To resolve this dichotomy, we have to ask who does the learning that constitutes technological progress for the economy, and how that knowledge is accumulated and implemented over time. With specific reference to the American surge into world economic leadership in the decades bracketing the turn of the twentieth century, this paper advances two propositions: First, that technological progress was a network phenomenon, growing out of the actions of large numbers of interacting people-- not necessarily in formally structured institutions

In this paper we suggest that historical studies of technology can help us to account for some, perplexing (at least for traditional economic reasoning) features of open source software development. When looked in historical perspective, open source software seems to be a particular case of what Robert Allen has termed "collective invention". We explore the interpretive value of this historical parallel in detail, comparing open source software with two remarkable episodes of nineteenth century technical advances.

In this paper, I explore the circumstances under which innovation processes without secrecy or intellectual property protection are viable, and where free revealing of innovations is a profit-maximizing strategy. Motivated by an empirical study of embedded Linux, I develop a duopoly model of quality competition. Firms require two complementary technologies as inputs, but di#er with respect to the relative importance of these technologies. I find that a regime with compulsory revealing can lead to higher product qualities and higher profits than a proprietary regime. When the decision to reveal is endogenized, equilibria with voluntary revealing arise, again superior to the proprietary outcome.

The aim of this paper is to provide an overview of recent research on the role of patent systems in the early phases of industrialization. Perhaps surprisingly, no consensus has been reached yet as to whether the emergence of modern patent systems exerted a favourable impact on inventive activities. However, the recent literature has shed light on a number of fundamental factors which affect the links between inventive activities and the patent system. The concluding section of the paper outlines some "history lessons " for the current debate on the role of Intellectual Property Rights in economic development. www.druid.dk

Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author. How user innovations become commercial products: a theoretical investigation and case study Carliss Baldwin*, Christoph Hienerth* * and Eric von Hippel*** In this paper we model the pathways commonly traversed as user innovations are transformed into commercial products. First, one or more users recognize a new set of design possibilities and begin to innovate. They then join into communities, motivated by the increased efficiency of collective innovation. User-manufacturers then emerge, using high variable cost / low-capital production methods. Finally, as user innovation slows, the market stabilizes enough for high-capital, low variable cost manufacturing to enter. We test the model against the history of the rodeo kayak industry and find it supported. We discuss implications for “dominant design ” theory and for innovation practice.

* Much of the material in this paper arises from the collaborative work done with Nicolas Jonard, and owes much to him. I also acknowledge the very helpful comments of Muge Ozman and encouraging words of Franco Malerba. 1

Innovation development, production, distribution and consumption networks can be built up horizontally - with actors consisting only of innovation users (more precisely, "user/self-manufacturers'). "Free" and "open source" software projects are examples of such networks, and examples can be found in the case of physical products as well. User innovation networks...