Fundamentally, in a free economy, the organizational forms that survive are ones with benefits exceeding their costs (Fama and Jensen 1983a,b). Costs in turn are determined by technology and change over time. Chandler (1977) argued that the modern corporation became a viable form of organization (and the dominant form in some sectors) as a consequence of the decline in mass production costs due to technological advances, together with declines in transportation and energy costs. Adopting Chandler's logic, we should expect a particular organizational form to be prevalent when its technologically determined costs are low and to grow relative to other forms when its costs are declining relative to the costs of other forms.
To understand that the zones of viability for single and collaborative free innovation are growing over time requires only that one understand that design and communication costs for individuals have been decreasing due to exogenous technical trends, and that this is likely to continue.
Very generally, reductions in the cost of design in many fields are being driven by the rapidly declining cost and the increasing quality of personally accessible computer-based design tools. In fields where design is not implemented by digital methods, rapid progress in the development of field-specific tools is having the same effect. For example, in do-it-yourself biology, simple and powerful techniques to manipulate the genome are enabling individuals with little training to engage in genetic engineering and innovation (Delfanti 2012).
Reductions in communication costs for free innovation projects have been largely Internet-enabled. As in the case of design tools, "virtual reality” tools, and other new communication-related tools not yet envisioned, will extend the scale and scope of free innovation and diffusion. The central technological trend appears to be always toward increased fundamental understandings leading quickly or eventually to important capability advances accessible to household sector innovators.
With respect to production of physical products based on free designs, technical trends are increasingly empowering householders to complete the full development process by putting what they have designed into physical, usable form. As was mentioned earlier, personal and commercial production machines increasingly have the ability to produce a single unique item at a cost no higher than the cost per unit of a stream of identical items made with the same machines (Pine 1993; Tseng and Piller 2003).
In net, as a consequence of these exogenous technical trends, producer innovators—and innovation researchers and policymakers— increasingly must understand and contend with free single innovators and collaborative innovation projects as developers of innovative products, processes, and services (Benkler 2006, Baldwin and von Hippel 2011). To visualize the effect, imagine that figure 3.3 was populated with numerous points, each representing an innovation opportunity. As design and communication costs fall, each point moves down and to the left. Because of this general movement, some innovation opportunities would leave the region where only producer innovation is viable and cross into a region where single free and open collaborative innovation are also viable.
Although not all designs are equally affected, Baldwin and I believe that declining computation costs, communication costs, and singleunit production costs are having enough of an effect across the economy to change the relative importance of the three different models of innovation discussed in this chapter.