Three Possible Manifestations of Diffusion-Related Market Failure

It seems to me that there is a sequence of three choices made by developers of free innovations that can each and collectively result in

Table 5.1

Development and diffusion of user innovations: results of national surveys. All studies sampled consumers aged 18 and over, with the exception of Finland (consumers aged 18 to 65).

Source

Country

User innovators

Innovations

Percentage of population

Number

Diffused

Protected with IPRsa

von Hippel, de Jong, and Flowers 2012

UK

6.1%

2.9

million

17.1%

1.9%

von Hippel, Ogawa, and de Jong 2011

US

5.2%

16.0

million

6.1%

8.8%

von Hippel, Ogawa, and de Jong 2011

Japan

3.7%

4.7

million

5.0%

0.0%

de Jong et al. 2015

Finland

5.4%

0.17

million

18.8%

4.7%

de Jong 2013

Canada

5.6%

1.6

million

21.2%

2.8%

Kim 2015

S. Korea

1.5%

0.54

million

14.4%

7.0%

a. intellectual property rights systematic diffusion shortfalls within the free innovation paradigm. First, free innovators may not elect to design an innovation of value to others. Second, even if a design does have general value, free innovators may not elect to invest in development to an extent justified by the total value of the design to themselves and free-riding adopters. Third, free innovators may not elect to invest in actively diffusing innovation- related information to reduce the adoption costs of free riders. I next discuss each of these three choices conceptually, drawing in the relatively small amount of data currently available.

 
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