Why Do the Rates of Innovation by Both Free Innovators and Producer Innovators Decline?

We now understand why free innovators would be the ones to pioneer new markets and applications for use in the household sector. But what accounts for the decline in innovation frequency that is prominently visible in figures 4.1 and 4.2? As can be seen in the figures, this decline affects both user innovators and producer innovators, even as the markets increase in size. In contrast with pioneering, in other words, this effect applies to actors in both the free innovation paradigm and the producer innovation paradigm.

Baldwin, Hienerth, and I explained this pattern by arguing, first, that a new "design space” is opened up by the discovery of a new field or market (Baldwin, Hienerth, and von Hippel 2006). For example, the idea of intentionally engaging with rough white water in kayaks, as opposed to avoiding it as kayakers had historically done, was the creation of a new design space. This space contains all potential types of activities—not yet explored or even imagined at the time the new space is first perceived—that can be done in white water with manually powered kayaks. It also includes all possible designs of technique and equipment needed to realize them. However, any fixed design space has a limited number of valuable innovation opportunities within it. As time passes and search continues, it is reasonable that the valuable opportunities in the new design space will get progressively discovered and "mined out.” The cost of searching for each of the increasingly rare undiscovered opportunities remaining will therefore rise, eventually making further searching unviable for innovators. This "mining out” is, my colleagues and I think, the reason why the number of innovations discovered in both whitewater kayaking and two types of scientific instruments declined with the passage of time.

Note, however, that in figures 4.1-4.2 we can see that the decline in the rate of producer innovation lags behind the decline in the rate of free or user innovation in both whitewater kayaking and scientific instruments. Why is this the case if the design spaces were in fact being mined out? The answer is that the steady rise in sales (shown for ESCA and AES instruments in figure 4.2b) made more and more innovation opportunities present in the design space financially viable for producers. Innovations of relatively smaller value to many people—the ones remaining as the space is mined out—can be justified only if there are many potential purchasers. In contrast, of course, the number of viable innovation opportunities in the design space does not increase for free innovators as the commercial market grows: their self-rewards are not affected by the size of the market.

Although "mining out” is a useful explanation for declining rates of innovation in our two cases, I caution that the effect exists only within a stable and even confining definition of a "legitimate” design space. For example, the rules of whitewater kayaking contests implicitly require that only manually propelled kayaks may be used—motors and motorboats are not allowed. If motors were allowed in the definition of the sport, the legitimate design space would clearly be larger, and "mining out” might take much longer. In the case of the two scientific instruments, the design space was defined to include only two instrument types with a common operating principle. If the design space had been widened to include any possible means to analyze the chemical composition of solid surfaces, it clearly would be much larger. Further, in cases in which there is no consensus on the boundaries of a design space (for example, today there is no apparent restriction on functions that people feel can be legitimately included in a smartphone), mining out is not a useful concept for understanding changes in the cost and rate of opportunity discovery and innovation development.

Finally, let me note that what was being mined out in our two case studies were opportunities for major innovations. Within any defined design space, opportunities also will exist at the level of what Hyysalo (2009) terms "micro innovations.” These may never be mined out. For example, each whitewater kayaker is probably frequently motivated to make subtle adjustments to his or her equipment to better fit his or her physical condition, specific method of executing a given maneuver, and so forth as these change. Similarly, users of scientific instruments will continuously find needs for micro innovations to adapt to small changes in experimental protocols, changes to other instruments also being used in an experiment being done, and so on. Opportunities such as these may continue to exist within even a fixed design space and may be acted upon by both free innovators and producer innovators indefinitely.

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