Determinants of User Innovation and

It is known that end users of products and services sometimes innovate, and that innovations developed by users sometimes become the basis for important new commercial products and services. It has also been argued and to some extent shown that such innovations will be found concentrated in a “lead user” segment of the user community. However, neither the characteristics of innovating users nor the scope of the community that they “lead” has been explored in depth. In this paper, we explore the characteristics of innovation, innovators and innovation sharing by library users of OPAC information search systems in Australia. This market has capable users, but it is nonetheless clearly a “follower" with respect to worldwide technological advance. We find that 26% of users in this local market nonetheless do modify their OPACs in both major and minor ways, and that OPAC manufacturers judge many of these user modifications to be of commercial interest. We find that we can distinguish modifying from nonmodifying users on the basis of a number of factors, including their “leading edge status” and their in-house technical capabilities. We find that many innovating users freely share their innovations with others, and find that we can distinguish users that share information about their modifications from users that do not. We conclude by considering some implications of our findings for idea-generation practices in marketing. *Senior Lecturer, University of New South Wales, Sydney, Australia **Professor, Australian Graduate School of Management, Sydney, Australia ***Professor, MIT Sloan School of Management, Cambridge, MA, USA 1.0: Introduction and Overview Empirical research in a number of fields has shown that users are frequently the first to develop and use prototype versions of what later become commercially significant new products and processes (Enos 1962, Knight 1963, Freeman 1968, Lionetta 1977, von Hippel 1976, 1977, 1988, VanderWerf 1990, Shaw 1985). It has also been argued and to some extent shown that innovation by users will tend to be concentrated among “lead users.” (Lead users are defined as those who combine two characteristics: (1) they expect attractive innovation-related profits from a solution to their needs and so are likely to innovate; (2) they experience needs ahead of the majority of a target market (von Hippel 1996, Urban and von Hippel 1988).) Since innovation is known to be an economically-motivated activity (e.g., Schmookler 1966, 1972), it is reasonable that those users in a user population expecting relatively higher benefit from developing an innovation – one of the two characteristics of lead users are more likely to innovate. Also, as lead users are by definition ahead of the bulk of a target market with respect to their needs, an attractively-sized market for products and services that lead users need today may not yet exist from a manufacturer’s point of view. When this is so, it is reasonable that manufacturers would be less likely to innovate, thus increasing the likelihood that lead users will develop their own innovative solutions for their own leading-edge needs (Gans and Stern 1999, Urban and von Hippel 1988). Up to this point, work on lead users has left undefined the scope of the communities they “lead.” Should we expect innovation to occur only among the users that lead the world with respect to a particular area of application and trend? Or, should we expect innovation among users that are at the leading edge of more local populations of users? We argue that innovation will occur among lead users in local communities when either or both of two conditions hold. First, when a local community has unique needs, and second, when it is cheaper to invent anew than it is to search for and acquire a needed innovation that may exist elsewhere. In this study, we explore these ideas by examining the occurrences of innovation, the characteristics of innovators, and innovation sharing patterns in a relatively large “local” user community – Australia – containing users that are capable but not globally leading-edge with respect to OPACs – a computerized information search system used by libraries. Our contributions to the literature are findings regarding user innovation and the characteristics of