Private-Collective Innovation and the Fragility of Knowledge Sharing

The focus for the Centre is research into individual and strategic decision-making using a combination of theoretical and experimental methods. On the theory side, members of the Centre investigate individual choice under uncertainty, cooperative and non-cooperative game theory, as well as theories of psychology, bounded rationality and evolutionary game theory. Members of the Centre have applied experimental methods in the fields of Public Economics, Individual Choice under Risk and Uncertainty, Strategic Interaction, and the performance of auctions, markets and other economic institutions. Much of the Centre's research involves collaborative projects with researchers from other departments in the UK and overseas. Private-collective innovation and the fragility of knowledge sharing Incentives to innovate is a central element of innovation theory. In the private-investment model, innovators privately fund innovation and then use intellectual property protection mechanisms to appropriate returns from these investments. In the collective-action model, public subsidy funds public goods innovations, characterized by non-rivalry and non-exclusivity. Recently, these models have been compounded in the private-collective innovation model where innovators privately fund public goods innovations (von Hippel and von Krogh, 2003). Private-collective innovation can be illustrated in the case of open source software development. The current paper contributes to the work on private-collective innovation by investigating incentives that motivate innovators to share their knowledge in an initial situation devoid of community activity. We use game theory to predict knowledge sharing behavior, and test these predictions in a laboratory setting. The results show that knowledge sharing is a coordination game with multiple equilibria, reflecting the fragility of knowledge sharing between innovators with conflicting interests. The experimental results demonstrate important asymmetries in the fragility of knowledge sharing and, in some situations, much more knowledge sharing than theoretically predicted. A behavioral analysis suggests that knowledge sharing is not only affected by the material incentives, but also by social preferences. The results offer general insights into the relationship between incentives and knowledge sharing and contribute to a better understanding of the inception of private-collective innovation. Explaining why and under what conditions innovation happens is a major task of innovation theory. The mainstream view has been that innovation is most effectively supplied by innovators who privately fund their innovations, and use intellectual property mechanisms to secure the appropriation of returns from these investments. Innovators retain the rights to their knowledge and any spillover of knowledge to the public represents a loss of revenue from innovation-related investments. An additional …