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Free Innovation$
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Eric von Hippel

Print publication date: 2016

Print ISBN-13: 9780262035217

Published to MIT Press Scholarship Online: September 2017

DOI: 10.7551/mitpress/9780262035217.001.0001

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Division of Labor between Free Innovators and Producers

Division of Labor between Free Innovators and Producers

(p.77) 6 Division of Labor between Free Innovators and Producers
Free Innovation

Eric von Hippel

The MIT Press

This chapter explains the value of a division of innovative labor between free innovators and producer innovators. As previous studies show, both social welfare and producer profits very generally increase if producers avoid developing types of innovations that free innovators already make available “for free.” Instead, producers should learn to focus on developing innovations that complement free innovation designs rather than substitute for them. The chapter reviews four basic interactions between the free and producer innovation paradigms, explaining the relationships among these interactions and the effects found on both producers' profits and social welfare. The chapter goes on to show that, under some conditions, producers can profit by actually subsidizing free innovation.

Keywords:   division of innovative labor, free innovators, producer innovators, social welfare, producer profits, subsidizing free innovation

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