Historical look at Open Innovation
Is Open Innovation a new paradigm? A break with the past? No, it’s not really a break, it's just that we don’t understand or remember the past very well. This is James Bessen and Allesandro Nuvolari's main thesis in their recent work which Bessen presented at EPIP 2012. They argue that one of the reasons we perceive open innovation to be new is that the majority of textbooks and museums perpetuate the myth of the great inventor. In his presentation, Bessen pointed out that most of the development of the steam engine, subsequent to James Watt, was freely shared.
In the accompanying paper, the two researchers look at other examples. The power loom was freely shared as revenues from cloth sales dominated potential profits from licensing and sales of machinery. Another example is that of Bessemer steel, which was initially produced by an imperfect, patented process. As the technique improved and a patent pool developed, sharing of information within the pool via publications, employee mobility and sharing of patents and know-how, greatly improved the process. In both cases, manufacturing was more profitable than licensing.
Bessen and Nuvolari note that open innovation through sharing of knowledge tends to be limited in duration and occur in the earlier phases of the technology. Rather than the canonical model (where innovators require the legal monopoly of IP to appropriate the returns from innovation), open innovation implies sharing and diffusing information can be profitable. Like true economists, they argue that in the case of open innovation, the benefits must outweigh the potential harms. That is, that the choice not to seek patent protection suggests there are economic benefits associated with sharing.
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| Threads of innovation |
Bessen and Nuvolari note that open innovation through sharing of knowledge tends to be limited in duration and occur in the earlier phases of the technology. Rather than the canonical model (where innovators require the legal monopoly of IP to appropriate the returns from innovation), open innovation implies sharing and diffusing information can be profitable. Like true economists, they argue that in the case of open innovation, the benefits must outweigh the potential harms. That is, that the choice not to seek patent protection suggests there are economic benefits associated with sharing.
As Bessen and Nuvolari sum up this argument in their paper,
This historical perspective on open innovation suggests that our modern approach to innovation may not have the inventive step we thought it did. However, how do we, as Bessen and Nuvolari suggest, translate these findings into policy? [On the other hand, Merpel asks, what is "Open Innovation"? It seems to mean different things to different people. Should it be capitalised?]"... these examples make clear that patents are not universally important to innovation. Indeed, many of these technologies developed outside the purview of the patent system. In some cases, such as with aviation, aggressive patenting put an end to a period of extensive knowledge sharing. Yet in other cases, knowledge sharing and patents coexisted, such as the Bessemer patent pool or the early mechanics who would freely share patented inventions with other mechanics but not with manufacturers (Wallace 1978). In other cases, patents may nevertheless be crucial to encouraging innovation. The relationship between innovation, patents and knowledge sharing is a subtle and complex one. The optimal policy needs to apply to the full range of market conditions, technological maturity, etc., in order to encourage both knowledge sharing and proprietary incentives."
