SOURCE: MIT Sloan Management Review

MIT Sloan Management Review

September 26, 2011 14:00 ET

"Consumer-Innovators" in the UK Outspend British Companies on R&D

Japanese and American Consumer-Innovators Also Spend Billions of Dollars Creating Their Own Innovations

CAMBRIDGE, MA--(Marketwire - Sep 26, 2011) - Research published Thursday in the Fall issue of MIT Sloan Management Review indicates that consumers in the UK spend $5.2 billion on product development and innovation for their personal use, far outstripping the $3.6 billion that UK companies spend on R&D. Consumers in the US and Japan are also significant "consumer-innovators," spending $20.2 billion and $5.8 billion, respectively, on their own product design and manufacture.

In the R&D-intensive countries of the US and Japan, consumers spend 33% and 13%, respectively, of the amount that commercial enterprises spend on consumer product R&D.

For the article, "The Age of the Consumer-Innovator," the researchers, Eric von Hippel, Susumu Ogawa and Jeroen P.J. de Jong, conducted first-ever national surveys designed to capture only real, new-to-the-market innovations that consumers had developed in their leisure time. They then applied out-of-pocket expenditures and time investment (evaluated at average wage rate for each nation) to calculate the total dollar investment.

The researchers use the evidence of the surprising extent of consumer innovation to propose a new, consumer-centric innovation paradigm. In Phase 1 users often innovate to create the products they want; then, in Phase 2, other users either reject or validate the initial innovation. If the innovation is validated through adoption, in Phase 3 the market has grown enough to be interesting to producing companies, which refine and commercialize the innovation for sale.

About MIT Sloan Management Review
A media company based at the MIT Sloan School of Management, MIT Sloan Management Review's mission is to lead the conversation among research scholars, business executives and other thought leaders about advances in management practice that are transforming how people lead and innovate.

Eric von Hippel is a professor of technological innovation at the MIT Sloan School of Management in Cambridge, Massachusetts. Susumu Ogawa is a professor of marketing at the Graduate School of Business Administration at Kobe University in Kobe, Japan. Jeroen P.J. de Jong is an assistant professor of strategic management and entrepreneurship at RSM Erasmus University in Rotterdam, the Netherlands.

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