Measuring Consumer Innovation

Comparing Business and Household Sector Innovation in Consumer Products: Findings from a Representative Study in the United Kingdom – von Hippel, de Jong and Flowers (2012)

This paper explores an exciting new path in innovation literature. It is a significant effort to measure consumer, household sector innovation.

Since the work of Schumpeter (1934), innovation has largely been considered a producer activity – a highly technical process hiding in the research labs of large corporations and government science laboratories. Following directly from this thought, policy has directly focused on intellectual property protection, or Research and Development (R&D) subsidies (and tax credits). These are solutions to the innovation problem focusing purely on the bottom line – $ $ $.

Over the previous decade, various scholars have pointed towards user and consumer innovation. While this has been accepted as a valuable contribution, it remained intangible “dark matter”[1]. Due to this, it sat outside the scope of policymakers and firms – left alone and ignored. Consumer innovation may have great impacts for social welfare – an alternative to the deadweight losses associated with intellectual property rights.

In this paper, von Hippel et al. (2012) bridge this gap. They bring consumer innovation to a more tangible aspect of the innovation process. Rather than seeing consumer innovation a small filler in the overall system, it has substance and value. Hopefully this catches the attention of policy makers and firms.

Results – Briefly, the authors undertake a survey of 1,173 UK consumers aged 18 and over. The results show nearly 2.9 million individuals (approximately 6.1% of UK consumers) have engaged in product innovation during the previous three years. From an aggregate perspective, consumers’ annual product development expenditures are more than 1.4 times larger than the annual consumer product R&D expenditures of all firms in the UK combined. This is significant, and valuable.

While there are some issues with the methodology – particularly in the accuracy of responses, ‘false positives’ and response bias – this should not take away from the importance of this study. In the words of von Hippel et al. (2012):

“In this first study of consumer innovation in a representative national sample, we have found it to be a phenomenon of major scope and scale.”[2]

This sheds light on the possible biases and inaccuracies of national innovation statistics, and, more importantly, possible misdirection of government innovation policy and firm investment.

The paper can be found here:

[1] von Hippel et al. (2012), p 2

[2] von Hippel et al. (2012), p 18

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