Where & When Can Open Collaborative Innovation

Thrive? A Theory of Performance

Sheen S. Levine Michael J. Prietula

Eighth Annual International Open and User Innovation Workshop

Characteristics of Phenomenon

1 von Krogh & von Hippel 2003 3 Shah 2005 5 von Krogh, Spaeth & Lakhani 20032 Lee & Cole 2003 4 Mockus, Fielding & Herbsleb 2005 6 Lakhani & von Hippel 2003

Open source software

Wikipedia

File sharing

User forums

Creates products of economic value, has measureable performance 1,3

Interaction and exchange activities are central 5

yet Work

purposefulloosely coordinated

2,4

Open access to contribute and consume

1,2,3

Questions about PerformanceOpen collaborative innovation differs

from firm-based innovation(Lee & Cole 2003; von Hippel & von Krogh 2003)

How it survives despite massive free-riding/non-contributing users?

When expands beyond software? In which environments can it thrive?

How to design open innovation systems?

What affects performance?

THE MODELGOODS, BEHAVIOR, NEEDS

GoodsHow rival?

BehaviorHow cooperative are

participants?

NeedsHow similar or

dissimilar?

How Rival are the Goods?To what extent does one’s consumption of the good interfere with another’s consumption of the same good

More rival Less rival

FoodClothesHousingHardware

TV broadcast

RoadPublic safety

Software

How Cooperative are Participants?Empirically, human population composed of individuals with different inclinations (or strategies) for cooperation

(Kurzban & Hauser, 2005)

CooperatorsReciprocators Free ridersContribute to others unconditionally

Contribute if others

contribute too

Do not contribute

13% 53% 20%Remaining 14% are inconsistent

How Similar are the Needs?Participants may have a variety of needs or very similar needs. Their needs can differ or resemble each other.

Similar Needs

Dissimilar Needs

Everybody is looking for the same thing

Each is looking for

different things

THE METHODAGENTS INTERACT & EXCHANGE

Agent-based Model Each agent has skills and needs, which

rarely overlap Searches the network to fulfill needs,

subject to cooperation and rivalry characteristics

If search fails, develops or finds outside network

PerformanceTo what extent goals are accomplished through

collaboration?

Network of Exchange Interactions

WHAT AFFECTS PERFORMANCE?THE IMPACT OF COOPERATION

Cooperators Matters

1% 5% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Mean

Cooperators in Population

Perf

orm

an

ce

(G

oals

Ach

ieved

via

Exch

an

ge)

Kurzban-Hauser Ratio

How Cooperation Matters?Cooperators improve performance

Decreasing marginal returns from cooperators

Reciprocators Matter Greatly

Max

MinWhat

causes the variance?

Performance Robust with Few Cooperators, Many Reciprocators

Max

MinMany Reciprocators

Few Free-Riders

Many Free-RidersFew Reciprocators

Many ReciprocatorsFew Free-Riders

Many Free-RidersFew Reciprocators

Kurzban-Hauser Ratio

How Cooperation Matters?Cooperators improve performance

Decreasing marginal returns from cooperators

Reciprocators substitute cooperators

Free riders matter little

WHAT AFFECTS PERFORMANCE?THE IMPACT OF RIVALRY AND NEEDS

Non-Rival 100% Rival0%

10%

20%

30%

40%

50%

60%

70%

80%

Similar Needs

Dissimilar Needs

Rivalry

Perf

orm

ance

Need Similarity Matters

Kurzban-

Houser

How Rivalry & Needs Matter?Rivalry decreases performance

Rivalry interacts with need similarity

WHAT DOES IT MEAN?IMPLICATIONS

Rivalry & Needs Interact to Affect Performance

Rivalr

ySim

ilarity

in Needs

Perfo

rma

nce

Rivalry has non-linear effect on performance

Rivalry–Needs compensatory effect

28

Implications to PracticeGoods

Low rivalry produces higher performance, but...

When needs are dissimilar, high performance possible even with high rivalry

Cooperation Cooperators are important, not very

important; Good performance even with tiny core

Reciprocators are underappreciated majority Free-riders matter little in realistic settings

ImplicationsNeeds

Dissimilar needs are an advantage; diversity is valuable

Yet, even similar needs can be satisfied in most cases

Propositions about Performance How it survives despite massive free-

riding/non-contributing users?Free riders matter only in the extreme

In which environments can it succeed? How to design open innovation systems? Near non-rival goods, diversity of participant needs, many cooperators or reciprocators

If conditions are less than ideal... Some elements can compensate for others!

TakTack

Cooperation & Needs Interact

Non-Rival 100% Rival0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%P

erf

orm

ance

98% Recipro-cators

Similar NeedsDissimilar Needs

98% Coop-erators

Kurzban-Houser