The Dominant Role of “local” Information in User Innovation: the Case of Mountain Biking

Firms that manufacture products and services have an incentive to develop innovations that appeal as strongly as possible to as wide a customer base as possible in order to enhance their innovation-related profits. Research into the incentives operating on user-innovators, however, leads us to hypothesize that this category of innovators will display a very different pattern. Prior research has shown that users that develop new products and services typically profit only from their own, in-house use of their innovations. This is because users that seek to benefit financially from diffusion of an innovation to other users in a marketplace must obtain some form of intellectual property protection followed by licensing. Both are typically costly to attempt, and have very uncertain outcomes (Harhoff et al 2002). If users do derive their innovation-related benefit only from in-house use of their innovations, they should find it rational to ignore the general needs of the marketplace in favor of developing innovations that are very precisely tailored to serve their own specific needs. The innovations they develop to serve their own needs may, of course, also prove to serve a more general demand by happenstance. In this paper we examine the specificity with which innovations developed by user-innovators address their in-house needs. To do this, we compare the characteristics of a sample of user-developed innovations in mountain biking equipment with the direct need experience of the users developing them. We find a close relationship: user-innovators do tend to develop innovations to serve precisely their own needs. They do not do this out of ignorance of the market: user-innovators in our sample have an accurate understanding of the breadth of potential marketplace demand for the innovations that they have developed. In addition to finding that user-innovators do not stray significantly from attempting to solve their own in-house needs, we also find that user-innovators tend to use only their own pre-existing stocks of solution-related knowledge to develop their innovations. In other words, we find that innovators largely rely upon both need and 3 solution information that is " local " to them to generate their innovations. (We define local information as that an innovator already has " on site " prior to innovating, or generates on site during the course of innovation development.) Reliance on local need and solution information has the effect of sharply reducing innovators' innovation-related costs. With respect to need information, consider that users …