Chapter 21. Open Beyond Software

Sonali K. Shah

Teams of employees at firms innovate. Scientists and engineers at universities and research institutions innovate. Inventors at private labs innovate. Regular people consume. Wrong! Regular people innovate too. Users have been the source of many large and small innovations across a wide range of product classes, industries, and even scientific disciplines.

We are accustomed to thinking of firms as the primary engine of innovative activity and industrial progress. The research and development activities of most firms are based on a proprietary model; exclusive property rights provide the basis for capturing value from innovative investments, and managerial control is the basic tool for directing and coordinating innovative efforts. The proprietary model does not, however, stand alone.

The " community-based" model has generated many of the innovations we use on a daily basis. The social structure created by this model has cultivated many entrepreneurial ventures and even seeded new industries and product categories. In stark contrast to the proprietary model, the community-based model relies neither on exclusive property rights nor on hierarchical managerial control. The model is based upon the open, voluntary, and collaborative efforts of usersa term that describes enthusiasts, tinkerers, amateurs, everyday people, and even firms that derive benefit from a product or service by using it.

Open source software development is perhaps the most prominent example of the community-based model. Although often viewed as an anomaly unique to software production, the community-based model extends well beyond the domain of software. Innovative communities have been influential in product categories as diverse as automobiles, sports equipment, and personal computers.

In this chapter, I describe and discuss three elements of the community-based model. First, users and manufacturers generate different sets of information. This allows users to develop innovations distinct from those typically developed within firms. Specifically, innovations embodying novel product functionality tend to be developed by users. Second, users may choose to share their innovations within user communities. The structures of these communities vary, but those observed to date are built on the principles of open product design and open communication. Third, innovations developed by users and freely shared within user communities have provided the basis for successful commercial ventures. Data drawn from the windsurfing, skateboarding, and snowboarding industries illustrates these processes. Four additional examples of the community-based modelspanning fields and centuriesare then presented. I conclude by reframing my view of the innovation process as driven by the activities of firms and research institutions and discussing implications for firms and policy.