Economics of Product Development by Users: The Impact of “Sticky” Local Information
Name
mnsc.44.5.629.pdf
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288.19 KB
Format
Adobe PDF
Checksum (MD5)
7dc76bb16908e43fc8c84bc02c1d1bf2
Author(s)
von Hippel, Eric A
Date Issued
May 1998
Journal
Management Science
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Citation
von Hippel, Eric et al. "Economics of Product Development by Users: The Impact of “Sticky” Local Information." Management Science (May 1998): 595-741 © 1998 INFORMS
Version
Final published version
Abstract
Those who solve more of a given type of problem tend to get better at it—which suggests that problems of any given type should be brought to specialists for a solution. However, in this paper we argue that agency-related costs and information transfer costs (“sticky” local information) will tend drive the locus of problem-solving in the opposite direction—away from problem-solving by specialist suppliers, and towards those who directly benefit from a solution and who have difficult-to-transfer local information about a particular application being solved, such as the direct users of a product or service. We examine the actual location of design activities in two fields in which custom products are produced by “mass-customization” methods: application-specific integrated circuits (ASICs) and computer telephony integration (CTI) systems. In both, we find that users rather than suppliers are the actual designers of the application-specific portion of the product types examined. We offer anecdotal evidence that the pattern of user-based customization we have documented in these two fields is in fact quite general, and we discuss implications for research and practice.
Description
Another version of this paper is available in the Sloan Working Papers collection at https://dspace.mit.edu/handle/1721.1/2712.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution NoDerivatives 4.0 International License.
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DOI of Published Version
https://doi.org/10.1287/mnsc.44.5.629
