49
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290
6 Why Users Often Freely Reveal Their Innovations
to fully understand that information or put it to use. However, if
the possessor of the information does not profit from any such ex-
291
Products, services, and processes developed by users become
penditures made by its adopters, the information itself is still freely
more valuable to society if they are somehow diffused to others
revealed, according to our definition. This definition of free reveal-
that can also benefit from them. If user innovations are not dif-
ing is rather extreme in that revealing with some small constraints,
fused, multiple users with very similar needs will have to invest to
as is sometimes done, would achieve largely the same economic
(re)develop very similar innovations, which would be a poor use of
effect. Still, it is useful to discover that innovations are often freely
resources from the social welfare point of view. Empirical research
revealed even in terms of this stringent definition.
shows that new and modified products developed by users often do
diffuse widely---and they do this by an unexpected means: user-
Routine and intentional free revealing among profit-seeking firms
295
innovators themselves often voluntarily publicly reveal what they
was first described by Allen (1983). He noticed the phenomenon,
have developed for all to examine, imitate, or modify without any
which he called collective invention, in historical records from the
payment to the innovator.
nineteenth-century English iron industry. In that industry, ore was
processed into iron by means of large furnaces heated to very
292
In this chapter, I first review evidence that free revealing is frequent.
high temperatures. Two attributes of the furnaces used had been
Next, I discuss the case for free revealing from an innovators' per-
steadily improved during the period 1850--1875: chimney height
spective, and argue that it often can be the best practical route for
had been increased and the temperature of the combustion air
users to increase profit from their innovations. Finally, I discuss the
pumped into the furnace during operation had been raised. These
implications of free revealing for innovation theory.
two technical changes significantly and progressively improved the
energy efficiency of iron production---a very important matter for
293
Evidence of Free Revealing
producers. Allen noted the surprising fact that employees of com-
294
When my colleagues and I say that an innovator “freely reveals”
peting firms publicly revealed information on their furnace design
proprietary information, we mean that all intellectual property rights
improvements and related performance data in meetings of profes-
to that information are voluntarily given up by that innovator and all
sional societies and in published material.
parties are given equal access to it---the information becomes a
public good (Harhoff, Henkel, and von Hippel 2003). For example,
After Allen's initial observation, a number of other authors searched
296
placement of non-patented information in a publicly accessible site
for free revealing among profit-seeking firms and frequently found
such as a journal or public website would be free revealing as we
it. Nuvolari (2004) studied a topic and time similar to that studied by
define it. Free revealing as so defined does not mean that recipi-
Allen and found a similar pattern of free revealing in the case of im-
ents necessarily acquire and utilize the revealed information at no
provements made to steam engines used to pump out mines in the
cost to themselves. Recipients may, for example, have to pay for
1800s. At that time, mining activities were severely hampered by
a subscription to a journal or for a field trip to an innovation site
water that tended to flood into mines of any depth, and so an early
to acquire the information being freely revealed. Also, some may
and important application of steam engines was for the removal of
have to obtain complementary information or other assets in order
water from mines. Nuvolari explored the technical history of steam
50
Democratizing Innovation
engines used to drain copper and tin mines in England's Cornwall
modifications they had developed. Reasons given for not reveal-
District. Here, patented steam engines developed by James Watt
ing the remainder had nothing to do with considerations of intel-
were widely deployed in the 1700s. After the expiration of the Watt
lectual property protection. Rather, users who did not share said
patent, an engineer named Richard Trevithick developed a new
they had no convenient users' group forum for doing so, and/or
type of high-pressure engine in 1812. Instead of patenting his in-
they thought their innovation was too specialized to be of interest
vention, he made his design available to all for use without charge.
to others.
The engine soon became the basic design used in Cornwall. Many
Innovating users of sports equipment also have been found to
mine engineers improved Trevithick's design further and published
298
freely reveal their new products and product modifications. Franke
what they had done in a monthly journal, Leans Engine Reporter.
and Shah (2003), in their study of four communities of serious
This journal had been founded by a group of mine managers with
sports enthusiasts described in chapter 2, found that innovating
the explicit intention of aiding the rapid diffusion of best practices
users uniformly agreed with the statement that they shared their in-
among these competing firms.
novation with their entire community free of charge---and strongly
297
Free revealing has also been documented in the case of more re-
disagreed with the statement that they sold their innovations (p <
cent industrial equipment innovations developed by users. Lim
0.001, t-test for dependent samples). Interestingly, two of the four
(2000) reports that IBM was first to develop a process to manu-
communities they studied engaged in activities involving signifi-
facture semiconductors that incorporated copper interconnections
cant competition among community members. Innovators in these
among circuit elements instead of the traditionally used aluminum
two communities reported high but significantly less willingness to
ones. After some delay, IBM revealed increasing amounts of pro-
share, as one might expect in view of the potentially higher level of
prietary process information to rival users and to equipment sup-
competitive loss free revealing would entail.
pliers. Widespread free revealing was also found in the case of
Contributors to the many open source software projects extant
299
automated clinical chemistry analyzers developed by the Techni-
(more than 83,000 were listed on SourceForge.net in 2004) also
con Corporation for use in medical diagnosis. After commercial
routinely make the new code they have written public. Well-known
introduction of the basic analyzer, many users developed major
open source software products include the Linux operating system
improvements to both the analyzer and to the clinical tests pro-
software and the Apache web server computer software. Some
cessed on that equipment. These users, generally medical per-
conditions are attached to open source code licensing to ensure
sonnel, freely revealed their improvements via publication, and at
that the code remains available to all as an information commons.
company-sponsored seminars (von Hippel and Finkelstein 1979).
Because of these added protections, open source code does not
Mishina (1989) found free, or at least selective no-cost revealing
quite fit the definition of free revealing given earlier in this chapter.
in the lithographic equipment industry. He reported that innovating
(The licensing of open source software will be discussed in detail
equipment users would sometimes reveal what they had done to
in chapter 7.)
machine manufacturers. Morrison, Roberts, and I, in our study of
library IT search software (discussed in chapter 2 above), found
Henkel (2003) showed that free revealing is sometimes practiced
300
that innovating users freely revealed 56 percent of the software
by directly competing manufacturers. He studied manufacturers
51
Democratizing Innovation
that were competitors and that had all built improvements and ex-
able from holding an innovation secret or licensing it, free revealing
tensions to a type of software known as embedded Linux. (Such
should be the preferred course of action for a profit-seeking firm or
software is “embedded in” and used to operate equipment ranging
individual.
from cameras to chemical plants.) He found that these manufac-
Others Often Know Something Close to “Your” Secret
turers freely revealed improvements to the common software plat-
304
form that they all shared and, with a lag, also revealed much of the
Innovators seeking to protect innovations they have developed as
305
equipment-specific code they had written.
their intellectual property must establish some kind of monopoly
control over the innovation-related information. In practice, this can
301
The Practical Case for Free Revealing
be done either by effectively hiding the information as a trade se-
302
The “private investment model” of innovation assumes that inno-
cret, or by getting effective legal protection by patents or copyrights.
vation will be supported by private investment if and as innovators
(Trademarks also fall under the heading of intellectual property, but
can make attractive profits from doing so. In this model, any free re-
we do not consider those here.) In addition, however, it must be
vealing or uncompensated “spillover” of proprietary knowledge de-
the case that others do not know substitute information that skirts
veloped by private investment will reduce the innovator's profits. It
these protections and that they are willing to reveal. If multiple in-
is therefore assumed that innovators will strive to avoid spillovers of
dividuals or firms have substitutable information, they are likely to
innovation-related information. From the perspective of this model,
vary with respect to the competitive circumstances they face. A
then, free revealing is a major surprise: it seems to make no sense
specific innovator's ability to protect “its” innovation as proprietary
that innovators would intentionally give away information for free
property will then be determined for all holders of such information
that they had invested money to develop.
by the decision of the one having the least to lose by free reveal-
ing. If one or more information holders expect no loss or even a
303
In this subsection I offer an explanation for the puzzle by pointing
gain from a decision to freely reveal, then the secret will proba-
out that free revealing is often the best practical option available
bly be revealed despite other innovators' best efforts to avoid this
to user innovators. Harhoff, Henkel, and von Hippel (2003) found
fate.
that it is in practice very difficult for most innovators to protect their
innovations from direct or approximate imitation. This means that
Commonly, firms and individuals have information that would be
306
the practical choice is typically not the one posited by the private
valuable to those seeking to imitate a particular innovation. This
investment model: should innovators voluntarily freely reveal their
is because innovators and imitators seldom need access to a spe-
innovations, or should they protect them? Instead, the real choice
cific version of an innovation. Indeed, engineers seldom even want
facing user innovators often is whether to voluntarily freely reveal
to see a solution exactly as their competitors have designed it:
or to arrive at the same end state, perhaps with a bit of a lag, via in-
specific circumstances differ even among close competitors, and
voluntary spillovers. The practical case for voluntary free revealing
solutions must in any case be adapted to each adopter's precise
is further strengthened because it can be accomplished at low cost,
circumstances. What an engineer does want to extract from the
and often yields private benefits to the innovators. When benefits
work of others is the principles and the general outline of a possi-
from free revealing exceed the benefits that are practically obtain-
ble improvement, rather than the easily redevelopable details. This
52
Democratizing Innovation
information is likely to be available from many sources.
many other help-line participants also knew a solution, and could
have provided an answer if they themselves had not done so (table
307
For example, suppose you are a system developer at a bank and
6.1).
you are tasked with improving in-house software for checking cus-
Table 6.1 Even very specialized information is often widely known.
tomers' credit online. On the face of it, it might seem that you would
309
Tabulated here are answers to a question asked of help-line infor-
gain most by studying the details of the systems that competing
mation providers: “How many others do you think knew the answer
banks have developed to handle that same task. It is certainly true
to the question you answered?”
that competing banks may face market conditions very similar to
your bank, and they may well not want to reveal the valuable inno-
310
vations they have developed to a competitor. However, the situa-
Frequent providers (n = 21)
tion is still by no means bleak for an imitator. There are also many
Other providers (n = 67)
non-bank users of online credit checking systems in the world---
Many
38%
61%
probably millions. Some will have innovated and be willing to reveal
A few with good Apache knowledge
38%
18%
what they have done, and some of these will have the information
A few with specific problem experience
24%
21%
you need. The likelihood that the information you seek will be freely
revealed by some individual or firm is further enhanced by the fact
that your search for novel basic improvements may profitably ex-
Source: Lakhani and von Hippel 2003, table 10.
311
tend far beyond the specific application of online credit checking.
Even in the unlikely event that a secret is held by one individual,
312
Other fields will also have information on components of the solu-
that information holder will not find it easy to keep a secret for long.
tion you need. For example, many applications in addition to online
Mansfield (1985) studied 100 American firms and found that “infor-
credit checking use software components designed to determine
mation concerning development decisions is generally in the hands
whether persons seeking information are authorized to receive it.
of rivals within about 12 to 18 months, on the average, and in-
Any can potentially be a provider of information for this element of
formation concerning the detailed nature and operation of a new
your improved system.
product or process generally leaks out within about a year.” This
observation is supported by Allen's previously mentioned study of
308
A finding by Lakhani and von Hippel (2003) illustrates the possi-
free revealing in the nineteenth-century English iron industry. Allen
bility that many firms and individuals may have similar informa-
(1983, p. 17) notes that developers of improved blast furnace de-
tion. Lakhani and von Hippel studied Apache help-line websites.
signs were unlikely to be able to keep their valuable innovations
These sites enable users having problems with Apache software
secret because “in the case of blast furnaces and steelworks, the
to post questions, and others to respond with answers. The au-
construction would have been done by contractors who would know
thors asked those who provided answers how many other help-line
the design.” Also, “the designs themselves were often created by
participants they thought also knew a solution to specific and often
consulting engineers who shifted from firm to firm.”
obscure problems they had answered on the Apache online forum.
Information providers generally were of the opinion that some or
Low Ability to Profit from Patenting
313
53
Democratizing Innovation
314
Next, suppose that a single user-innovator is the only holder of a
for excluding imitators or for capturing royalties in most industries.
particular unit of innovation-related information, and that for some
(Fields generally cited as exceptions are pharmaceuticals, chem-
reason there are no easy substitutes. That user actually does have
icals, and chemical processes, where patents do enable markets
a real choice with respect to disposing of its intellectual property: it
for technical information (Arora et al. 2001).) Most respondents
can keep the innovation secret and profit from in-house use only, it
also say that the availability of patent protection does not induce
can license it, or it can choose to freely reveal the innovation. We
them to invest more in research and development than they would
have just seen that the practical likelihood of keeping a secret is
if patent protection did not exist. Taylor and Silberston (1973) re-
low, especially when there are multiple potential providers of very
ported that 24 of 32 firms said that only 5 percent or less of their
similar secrets. But if one legally protects an innovation by means
R&D expenditures were dependent on the availability of patent pro-
of a patent or a copyright, one need not keep an innovation secret in
tection. Levin et al. (1987) surveyed 650 R&D executives in 130
order to control it. Thus, a firm or an individual that freely reveals
different industries and found that all except respondents from the
is forgoing any chance to get a profit via licensing of intellectual
chemical and pharmaceutical industries judged patents to be “rela-
property for a fee. What, in practical terms, is the likelihood of
tively ineffective.” Similar findings have been reported by Mansfield
succeeding at this and so of forgoing profit by choosing to freely
(1968, 1985), by Cohen et al. (2000, 2002), by Arundel (2001), and
reveal?
by Sattler (2003).
315
In most subject matters, the relevant form of legal protection for in-
Despite recent governmental efforts to strengthen patent enforce-
317
tellectual property is the patent, generally the “utility” patent. (The
ment, a comparison of survey results indicates only a modest
notable exception is the software industry, where material to be
increase between 1983 and 1994 in large firms' evaluations of
licensed is often protected by copyright.) In the United States, util-
patents' effectiveness in protecting innovations or promoting
ity patents may be granted for inventions related to composition of
innovation investments. Of course, there are notable exceptions:
matter and/or a method and/or a use. They may not be granted for
some firms, including IBM and TI, report significant income from
ideas per se, mathematical formulas, laws of nature, and anything
the licensing of their patented technologies.
repugnant to morals and public policy. Within subject matters po-
tentially protectable by patent, protection will be granted only when
Obtaining a patent typically costs thousands of dollars, and it can
318
the intellectual property claimed meets additional criteria of useful-
take years (Harhoff, Henkel, and von Hippel 2003). This makes
ness, novelty, and non-obviousness to those skilled in the relevant
patents especially impractical for many individual user-innovators,
art. (The tests for whether these criteria have been met are based
and also for small and medium-size firms of limited means. As a
on judgement. When a low threshold is used, patents are easier to
stark example, it is hard to imagine that an individual user who has
get, and vice-versa (Hall and Harhoff 2004).)
developed an innovation in sports equipment would find it appeal-
ing to invest in a patent and in follow-on efforts to find a licensee
316
The real-world value of patent protection has been studied for more
and enforce payment. The few that do attempt this, as Shah (2000)
than 40 years. Various researchers have found that, with a few ex-
has shown, seldom gain any return from licensees as payment for
ceptions, innovators do not think that patents are very useful either
their time and expenditures.
54
Democratizing Innovation
319
Copyright is a low-cost and immediate form of legal protection that
nificant money and time to ensure that their innovations are seen
applies to original writings and images ranging from software code
in a favorable light, and that information about them is effectively
to movies. Authors do not have to apply for copyright protection;
and widely diffused. Writers of computer code may work hard to
it “follows the author's pen across the page.” Licensing of copy-
eliminate all bugs and to document their code in a way that is very
righted works is common, and it is widely practiced by commercial
easy for potential adopters to understand before freely revealing it.
software firms. When one buys a copy of a non-custom software
Plant owners may repaint their plant, announce the availability of
product, one is typically buying only a license to use the software,
tours at a general industry meeting, and then provide a free lunch
not buying the intellectual property itself. However, copyright pro-
for their visitors.
tection is also limited in an important way. Only the specific original
writing itself is protected, not the underlying invention or ideas. As
Innovators' active efforts to diffuse information about their innova-
323
a consequence, copyright protections can be circumvented. For
tions suggest that there are positive, private rewards to be obtained
example, those who wish to imitate the function of a copyrighted
from free revealing. A number of authors have considered what
software program can do so by writing new software code to im-
these might be. Allen (1