THE LESSON LEARNT FROM Baldwin & von Hippel. 2009. Modeling a paradigm shift: From producer innovation to user and open collaborative innovation

In this paper, the author demonstrated a paradigm shift in innovation. In producer innovation paradigm, it was assumed that "a producer serving many customers can afford to invest more in an innovation design than any single user" (p. 2); and there are four reasons contributing to this preeminence of mass-produced products in economy: (1) computational resources were scarce, (2) there was a close tie between design of items and the mass-production technologies, (3) modular design methods were not well understood, and (4) cheep and rapid communication was not technologically possible.

Here, from the factors of design cost and communication cost, the feasibility of each innovation model was argued. Adopting Chandler's logic, they expected a particular organizational form to be prevalent when its technologically determined cost are low and to be ascendent when its costs are declining relative to the costs of other forms (p. 8). They do not believe that producer innovation will disappear but they do expect it to become less pervasive and ubiquitous than was the case during most of the 20th century. Examples of producer innovators are: (1) a firm or individual that patents an invention and licenses it to others; (2) a firm that develops a new process machine to sell to its customers; (3) a firm that develops an enhanced service to offer its

A given mode of innovation is viable with respect to a particular innovation opportunity if the innovator finds it worthwhile to incur the requisite costs to gain the anticipated value of the innovation (p. 9). Innovation opportunity has four generic costs: design cost, communication cost, production cost, and transaction cost. To make the argument as clear as possible, the author first focus on the communication and design cost, holding production and transaction costs constant. clients. With respect to an open collaborative innovation project are: (1) the participants are not rivals to the innovation design and (2) they do not individually or collectively plan to sell products or services, such as an open source software project.

In the circumstance of single user innovation, the effort of innovation is worthwhile if the value is greater than the user's design cost: d[s]

In the circumstance of producer innovation, producers can economically justify undertaking larger designs than can single users, because they expect to spread their design costs over many purchasers. Here, producers were assumed to know their customers' willing-to-pay for innovative products: Expected profit = p*Q*-d[p]-c[p]. Here the design costs are higher than the value of the innovation to a single user. And, when the communication cost is low so that the sum of design and communication costs fall below the producer's bound, the producer could

innovate. (1) The size of the potential market, and (2) the need to communicate are affecting the viability of producer innovation.

The bounds of open collaborative innovation are the communication cost of user i is lower than his expected benefit from communicating (the probability that member j will respond; the fraction of remaining design that member j can provide; and the value that user i may obtain). When working together and contributing his or her own part, the total design investment will be the sum of their individual design costs. Thus, OCI operating within a task-divisible and modular architecture can pursue much larger innovation opportunities than single user innovators acting alone.

About the production cost, the author emphasized that there were differences between information products and physical products. There is a contrast between mass production and mass customization. Sometimes, the product-specific production systems make the producer innovation model dominate. About the transaction cost, the free reveal activity of users made the cost decrease but alike to classic transaction costs in patent and secrecy, there would be cost of enforcing GPL. The regulation may also bring costs to OCI.