6.2. User innovation

There is a long history of studying the role of users, both as individuals and as firms, in the innovation process. Much of the conventional literature on user innovation is based on detailed case studies of individual firms, sectors or specific products. This has changed recently with systematic surveys undertaken in the Netherlands and Canada. The thematic report “Prevalence of User Innovation in the EU” is the first to explore user innovation amongst a large cross section of EU27 firms. Further in contrast to many of the previous studies, which focus mainly on process innovation, this thematic report analyses different forms of user innovation, distinguishing between: User Process Innovation, User Product Innovation, and User Involvers.

The findings, based on an analysis of the Innobarometer surveys of 2007 and 2009, show that while a substantial minority of innovative firms in the EU27 are involved in process and product modification (around 30%), more than half such firms involve users in support of their innovative activities. User innovation is also more or less evenly spread across industrial sectors and across EU27 countries categorized according to their innovative capabilities. Large firms are more likely to be involved in all forms of user innovation than small firms. For example 39% of all innovative firms with more than 500 employees are User Process Innovators, and in the case of User Involvers this rises to 61%.

A clear message from the analysis is that firms engaged in user innovation can be classed as “super-innovators”. Compared to other innovative firms, they are more likely to introduce new products, processes or services. They are also more likely to initiate new organizational methods. Moreover a higher proportion of user innovators carries out both intra and extra mural R&D and applies for patents. The main internal sources of ideas for user innovators are management and production engineers and technicians. Externally the most important source of information, advice or support to help customize or modify comes from the original developer or supplier of these products.
These findings raise a series of issues for the future measurement of this form of innovative activity and the policies that may be developed to support it. A number of promising new directions for future research also emerge from the findings.

Innovation by modification has been a significant activity for both process and product innovators, but the report leaves a number of questions unanswered. For example in the case of product modification, it is unclear from the IB survey responses the form that such modifications take. This could involve firms that engage in complex systems integration, repurposing products in ways their suppliers had not anticipated, or simply re-working partly finished products as part of more conventional manufacturing process. Being able to distinguish between these very different forms of behaviour would enable a more complete picture of User Product Innovation to emerge.

Similarly, User Process Innovation only focuses on one aspect – modification – while the broader conventional definition of user innovation also includes the creation of new process technologies from scratch. Being able to distinguish between the conditions under which each form of innovative activity takes place and the precise role of external actors, e.g. suppliers, would be a valuable addition to our understanding. For example, it would enable innovations to begin to be tracked within value chains and enable spillovers between user firms and their suppliers to be identified and monitored. It would also enable a more detailed picture of the parameters within which activities such as process modification and creation take place, and give us a better understanding of the various measures used by firms to safeguard their intellectual property.

Future studies of user innovation at firm level could explore in more detail the expenditures associated with this activity, both in terms of direct costs and staff time. Collecting more detailed data on the sources of funding for this form of innovation and how that is related to more traditional forms of R&D would further illuminate the importance of the phenomenon.

Our understanding of User Involvement remains at an early stage of development. Although it is clear that users are being involved it is unclear at what stage, and by what mechanisms, their contributions are become relevant to firm innovation processes. It could be that users are involved passively, simply providing suggestions or they may be more actively engaged in design, testing or idea generation. Similarly, it is unclear whether we are looking at business to business relationships (in which the user is another firm) or business to consumer relationships (in which the user is an individual or a community of individuals). At the same time we know little about the role played by internet communities in firm innovation processes. The Innobarometer survey presents a firm-based account of innovation and overlooks the role of individual consumers and communities of individual consumers in innovation. Early research in this area suggests that consumers are active user innovators albeit at a low level, with significant positive spillover effects. Extending the survey to incorporate this aspect would provide a more complete account of innovation within the EU27.

Modification in both products and processes makes relatively little use of the skills and expertise within an R&D department and relies more on production engineers and managers. This suggests that subsidies for R&D will have little direct effect on this form of innovation and policy to support such innovative activities need to rely on alternative mechanisms, possibly focusing on capability development. The part played by modification within firm innovation processes also raises issues for policy on intellectual property. Innovation is clearly a dynamic process and little is known about what happens to intellectual property when firms engage in product and process modification. Similarly, if firms are seeking to draw their users into their innovation processes, what is the status of the intellectual property that is created in this process?

The understanding of user innovation and the implications for policy remains incomplete. Further research, based on surveys or qualitative case studies, needs to focus on the possible role of policy, for example in relation to the barriers faced by firms in undertaking user innovation. In the case financial barriers, this would require policy instruments designed to provide direct support, and incentives to optimise the economic benefits of user innovation. Further research should be aimed at providing the evidence base for devising policies that are sensitive to the contexts in which user innovation arises and the mechanisms by which it flourishes.