The importance of measuring household sector innovation

OECD BlueSky Hidden Innovators Sept 20

Jeroen de JongUtrecht University School of Economics

jjong@rsm.nl

This talk: Household sector innovation…

• Why it is important: 6 observations• How we can measure it

– social surveys: household sector innovation (HHS)

– firm surveys: adoption of HHS innovation

1: Consumers do innovate

World Wide Web(Tim Berners-Lee)

Whirlpool(Candido Jacuzzi)

Stethoscope(René Laënnec)

Wetsuit(Jack o’Neill)

Marfan Syndrome Aortic Root Support(Tal Galesworthy)

2: There’s millions of them

Team Country Year Sample FrequencyFlowers et al. UK 2009 1173 consumers 6.1%De Jong Netherlands 2010 533 consumers 6.2%Ogawa & Pongtalanert USA 2010 1992 consumers 5.2%Ogawa & Pongtalanert Japan 2011 2000 consumers 3.7%Kuusisto et al. Finland 2012 993 consumers 5.4%Dupuis et al. Canada 2013 2021 consumers 5.6%

Consumer innovation….creation of a new, or significant modification of existing… “object”…that is put into use…marked by functional novelty

3: Spending serious time and money

UK US Japan

Estimated total expenditures* by consumer innovators on consumer product development per year

$5.2 billion

$20.2billion

$5.8billion

Estimated consumer product R&D expenditures funded by companies per year**

$3.6billion

$62.0billion

$43.4billion

Source: von Hippel, Ogawa and de Jong 2011, Table 1* Total expenditures include out-of-pocket expenditures and time investment evaluated at average wage rate for each

nation. ** Calculated from national input-output tables.

Individual innovation expenditures per year on products for own use

4: Their innovations can be substantial projects (when developed collaboratively)

5: It enhances social welfare• It concerns products with new functionality (Riggs & von Hippel,

1994; Ogawa 1998)

• Upon supplier adoption, it induces radical innovation and better financial performance (Lilien et al 2002)

• It is at the edge of emerging industries (e.g. Tripsas and Shah 2007)

• In user-contested markets, it imposes price pressure, enhances consumer surplus (Gambardella, Raasch & von Hippel, 2016)

• In user-complemented markets, it contributes to general use value and producer profitability (Gambardella, Raasch & von Hippel, 2016)

• Household sector innovations may also spillovers to commercial producers, and producers may facilitate such spillovers (Gambardella et al., 2016)

Conceptual & empirical work

6: Household sector innovation is part of the ‘informal economy’ – relatively important in developing countries

Reversed innovation – Bottom of the Pyramid Innovation – Grassroots innovation

HHS innovation can be measured: Social surveys

a computer softwareb household fixtures or furnishingc transport or vehicle-relatedd tools or equipmente sports-, hobby- or entertainmentf children- or education-relatedg help-, care- or medicalh other

De Jong, J.P.J. & E. von Hippel (2013), User innovation: business and consumers, in: Gault, F. (ed), Handbook of Innovation Indicators and Measurement, Edward Elgar: Cheltenham, UK, p. 109-132.

Specific cues needed – like in the CIS

tinkerers

Job-related innovation

Create or modify?

Job-related?

Availableon market?

yes

no

no

No HHSinnovator

yes

yes

no

HHSinnovator

What? Why?(novelty)

yes

no

Challenges: phone vs web/pen&paper ; services ; screening

HHSinnovators

(HHS = household sector)

de Jong, Jeroen P.J., Surveying innovation in samples of individual end consumers (January 25, 2016). Available at SSRN: http://ssrn.com/abstract=2089422

valid excludedcomputer software

A software that is able to take screenshots simultaneously from several cameras. I like to see what happens in my street.

A statistics tool for personal trading made with spreadsheet. I guess this kind of program already exists .

household fixtures and furnishing

A foldaway bathtub. I am having a small bathroom and wanted to avoid big and expensive renovation work.

I made a bedroom shelf and attached some LED lights to it. It was not a very significant construction but it looks good and my partner likes it.

transport and vehicle-related

A steering and idle wheel solution for a two-wheel recumbent bicycle. It makes it easier to steer and more stable in slow speed.

I made a trailer that we used for the domestic needs and on the building site. The benefit for the employees is better ergonomics .

tools and equipment

A tool that helps to change tyres with less back pain. There are no similar product on the market. This one is for personal use.

A feeding machine for lambs. There are similar machines on sale but it was cheaper to make one myself.

sports, hobby and entertainment

New device for bee keeping, helps lifting the compartments of the beehive. This is usually done by two persons, but not anymore.

My ice skate sharpening machine is quite a heavy device. I put it on a trolley with big wheels so that i do not have to carry it.

children and education-related

A card game to learn to transpose. Cards have questions and tasks that can be solved by playing or by telling the answer.

A place for children to play in made of snow and twigs. Similar places have surely been made before as well but they are not very durable.

help, care and medical

Tools to help my disabled brother who can only use one arm. He can now peel, dice and slice and work with anything from bread to fruit.

Invention related to elderly people services. This is not just a product, but a full service concept to bring better care for elderly people.

food and clothes

A new way to fasten a button, as I was annoyed by the effort it makes to sew one. I wanted a light and convenient way to do it.

An acquaintance of mine had broken her jewel and I figured out how to repair it. I made new jewellery from the remaining parts.

other products or applications

A cylinder woven of acid-proof steel net to neutralize well water. Existing products did not match with my well.

I modified a cushion into the shape of the headrest to improve the massage table at my husband's company.

Niemi , M. & J. Kuusisto (2015, New indicators for measuring user innovation by Finnish firms and consumers, in : Nieminen, M & Lehtoranta, O. (eds), Measuring Broad-based innovation, VTT Technology 242 Finland, 139-153.

Pilot study:Users as a source

of firm innovation;Adding questions to

Finland CIS2010

Classic role of users

Co-creation

User innovation

Firm surveys: Measuring adoption of HHS innovations

To detect HHS

innovation, further

questions needed

Niemi , M. & J. Kuusisto (2015, New indicators for measuring user innovation by Finnish firms and consumers, in : Nieminen, M & Lehtoranta, O. (eds), Measuring Broad-based innovation, VTT Technology 242 Finland, 139-153.

Firms pick up user innovations – including HHS

What’s nextDevelop social surveys of household sector innovation

– Pilot studies merited: National social survey; larger scale; few countries

– Develop Manual – Example: Global Entrepreneurship Monitor

Revise firm innovation surveys – Oslo Manual: explicit measurement of adoption of

household sector innovations = follow-up on process innovation questions

S C R A P

3: Valuable innovations fail to diffuseget rid of Sesame street

User innovation

Commercialdiffusion

Peer diffusion No

diffusion

81%16%

6%Perceived

general value?

DiffusionEffort?

Sample of 176 validated innovations obtained from 2048 respondents, Finland

19%Any Diffusion

About one out of six consumer innovations spreads to others:

Valuable innovations are NOT more likely to diffuse peer-to-peer & minority diffuses > market failureValuable innovations more likely to diffuse commercially > less ‘failure’ (but: it’s minority & only high threshold

General value Peer

diffusionCommercial

diffusionDiffusion

effort: to peers

Diffusion effort:

commercial

Cluster I: to many (17%) 12% 15% 23% 19%

Cluster II: to some (44%) 19% 9% 21% 6%

Cluster III: to none (39%) 15% 0% 12% 0%

Total 16% 6% 18% 6%

chi-sq (df) .8 (2) 8.0 (2) 2.5 (2) 12.2 (2)

p-value .646 .018 .285 .002

(Valuable innovations fail to diffuse)

4: Consumers barely innovate for profit

Sample of 408 self-reported innovations from 2048 respondents, Finland

9% 37% 43% 11%

Cluster analysis of consumer innovation motives – few can at some point be observed in CIS

The lone Inventor

< 1920

Closed Innovation(R&D lab)1920-1980

EdisonFranklin,patents

GoodyearDiesel

Fahrenheit

General ElectricPhilips

IBM

OpenInnovation

1980-

Chesbrough

IntelApple

Dominant innovation paradigmsTrends: Education, tools, Web

DistributedInnovation

???

Consumers,Communities

7: Consumer innovation is increasing

Von Hippel