Economics of Product Development by Users: The Impact of "Sticky" Local Information
Abstract
Those who solve more of a given type of problem tend to get better at it---which suggests that problems of any given type should be brought to specialists for a solution. However, in this paper we argue that agency-related costs and information transfer costs ("sticky" local information) will tend drive the locus of problem-solving in the opposite direction---away from problem-solving by specialist suppliers, and towards those who directly benefit from a solution and who have difficult-to-transfer local information about a particular application being solved, such as the direct users of a product or service. We examine the actual location of design activities in two fields in which custom products are produced by "mass-customization" methods: application-specific integrated circuits (ASICs) and computer telephony integration (CTI) systems. In both, we find that users rather than suppliers are the actual designers of the application-specific portion of the product types examined. We offer anecdotal evidence that the pattern of user-based customization we have documented in these two fields is in fact quite general, and we discuss implications for research and practice.Download Info
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Article provided by INFORMS in its journal Management Science.
Volume (Year): 44 (1998)
Issue (Month): 5 (May)
Pages: 629-644
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Keywords: User Innovation; Sticky Information; Local Information; Heterogeneous Markets; Mass Customization; Specialization in Problem Solving; Task Partitioning;References
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Poh Kam Wong & Lena Lee & Maw Der Foo, 2008. "Occupational Choice: The Influence of Product vs. Process Innovation," Small Business Economics, Springer, vol. 30(3), pages 267-281, March.
- Tietz, Robert & Morrison, Pamela D. & Lüthje, Christian & Herstatt, Cornelius, 2004. "The process of user-innovation: A case study on user innovation in a consumer goods setting," Working Papers 29, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
- Alexia Gaudeul, 2008.
"Open Source Licensing in Mixed Markets, or Why Open Source Software Does Not Succeed,"
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08-2, Centre for Competition Policy, University of East Anglia.
- Gaudeul, Alexia, 2008. "Open Source Licensing in Mixed Markets, or Why Open Source Software Does Not Succeed," MPRA Paper 19596, University Library of Munich, Germany.
- Swann, G. M. Peter, 2001. "Sales practice and market evolution: the case of virtual reality," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1119-1139, July.
- Fogliatto, Flavio S. & da Silveira, Giovani J.C., 2008. "Mass customization: A method for market segmentation and choice menu design," International Journal of Production Economics, Elsevier, vol. 111(2), pages 606-622, February.
- Pierre Azoulay, 2003. "Acquiring Knowledge Within and Across Firm Boundaries: Evidence from Clinical Development," NBER Working Papers 10083, National Bureau of Economic Research, Inc.
- Andrea Fosfuri & Marco S. Giarratana & Esther Roca, 2010. "Community-based strategies in action: building and sustaining a product differentiation advantage," Business Economics Working Papers id-10-01, Universidad Carlos III, Instituto sobre Desarrollo Empresarial "Carmen Vidal Ballester".
- S nchez Gonz lez, Gloria & Herrera, Liliana, 2009. "Effects of user's cooperation and location on innovation activity of firms: an input-output approach," Working Papers "New Trends on Business Administration". Documentos de Trabajo "Nuevas Tendencias en Dirección de Empresas". 2009-10, Interuniversity Research Master and Doctorate Program (with a quality mention of ANECA) on "Business Economics", Universities of Valladolid, Burgos, Salamanca and León (Spain). Until 2008, Interunive.
- Skiba, Florian & Herstatt, Cornelius, 2008. "Integration of innovative users as source of service innovations," Working Papers 54, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
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