Giving Compass’ Take:
• In this Stanford Social Innovation Review post, author Eric von Hippel discusses new findings on the large scale and importance of innovation by consumers — and how that changes our understanding of the process.
• This phenomenon is also referred to as the “household sector.” In what ways can philanthropy support its growth and develop a way to measure its impact in more detail?
Free innovation involves innovations developed and given away by consumers as a “free good,” with resulting improvements in social welfare. It is an inherently simple, transaction-free, grassroots innovation process engaged in by tens of millions of people. As we will see, free innovation has very important economic impacts but, from the perspective of participants, it is fundamentally not about money.
I define a free innovation as a functionally novel product, service, or process that (1) was developed by consumers at private cost during their unpaid discretionary time (that is, no one paid them to do it), and (2) is not protected by its developers, and so is potentially acquirable by anyone without payment — for free. No compensated transactions take place in the development or in the diffusion of free innovations.
Free innovation is carried out in the “household sector” of national economies. In contrast to the business or government sectors, the household sector is the consuming population of the economy, in a word all of us, all consumers, “all resident households, with each household comprising one individual or a group of individuals.” Household production entails the “production of goods and services by members of a household, for their own consumption, using their own capital and their own unpaid labor.” Free innovation, therefore, is a form of household production.
Read the full article about what free innovation means by Eric von Hippel at Stanford Social Innovation Review.
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