Proceedings of the 8th International Conference on Intellectual ...

Giedrius Jucevičius
safeguard and deterrent against <strong>the</strong> free-riding is played by <strong>the</strong> intellectual property rights legislation.
If private investment is carried out by an R&D partnership <strong>of</strong> several firms, <strong>the</strong> value appropriation is
usually carried out through formal contracts. The collective action model, on <strong>the</strong> o<strong>the</strong>r hand, suggests
that innovators contribute to <strong>the</strong> public goods innovations, usually on <strong>the</strong> basis <strong>of</strong> public subsidy. The
outcome <strong>of</strong> such innovation (e.g. publicly funded science or Wikipedia) is available to everyone and
poses little conflict as far as “appropriation” <strong>of</strong> benefits is concerned. The only major restraints
concern <strong>the</strong> limitations <strong>of</strong> public subsidy and potentially uneven absorptive capacities <strong>of</strong> different
public and private actors.
However, in recent years we have seen <strong>the</strong> emergence <strong>of</strong> hybrid models <strong>of</strong> innovation, such as <strong>the</strong>
model <strong>of</strong> private-collective innovation. It means investing private resources into <strong>the</strong> production <strong>of</strong>
public goods, while at <strong>the</strong> same time obtaining private benefits for <strong>the</strong> firm despite <strong>the</strong> fact that
knowledge / information is made available to everyone - freely and inexclusively. The open source
s<strong>of</strong>tware, user-generated equipment and product design are just a few examples <strong>of</strong> private-collective
innovation, based on <strong>the</strong> principle <strong>of</strong> free revealing. However, free revealing strongly relies on a
positive motivation <strong>of</strong> <strong>the</strong> parties involved.
One can distinguish six major motives for firms / individuals to open up <strong>the</strong>ir internal knowledge
resources to <strong>the</strong> external communities (Stuermer et al., 2009).
The protection <strong>of</strong> own knowledge in dynamic and volatile environment may turn out to be more
costly than sharing it and co-developing concepts with <strong>the</strong> community. It is particularly true when
“o<strong>the</strong>rs already know something close to your secret” (von Hippel, von Krogh, 2006) and it is just
a matter <strong>of</strong> time when this “substitutable” knowledge becomes available first to <strong>the</strong> competitors
and <strong>the</strong>n to <strong>the</strong> public.
The external community may provide valuable intellectual contribution to <strong>the</strong> development <strong>of</strong> <strong>the</strong>
initial concepts (e.g. open source s<strong>of</strong>tware codes) and provide an excellent base for product
testing. It may also stimulate organizational learning in <strong>the</strong> lead company.
Free revealing streng<strong>the</strong>ns <strong>the</strong> positive reputation <strong>of</strong> knowledge holder among various
stakeholder groups (users, o<strong>the</strong>r producers, government), which may lead to o<strong>the</strong>r related
benefits.
Possibility to pr<strong>of</strong>it from <strong>the</strong> first mover advantage and <strong>the</strong> possible network externalities that stem
from wide acceptance <strong>of</strong> <strong>the</strong> shared concept / s<strong>of</strong>tware / technology, especially if <strong>the</strong> latter
becomes <strong>the</strong> “dominant design” in <strong>the</strong> market.
Free revealing <strong>of</strong> inside knowledge may lead to crowdsourcing <strong>of</strong> <strong>the</strong> ideas, what helps reduce
<strong>the</strong> labour cost within <strong>the</strong> company.
The freely revealed information may save <strong>the</strong> R&D costs for manufacturers, who at <strong>the</strong> same time
refine <strong>the</strong> original product (this incentive is more limited to open source s<strong>of</strong>tware development).
Von Hoppel et al. (2006) draws an interesting conclusion that unlike in private investment model (i.e.
innovation as private good based on private investment) and collective action model (i.e. innovation
as public good based on public subsidy), in private-collective model <strong>the</strong> knowledge sharers are not
too concerned about <strong>the</strong> free-rider effect, which is <strong>of</strong> a key concern in first two cases. For example,
firms, such as Linux, encourage <strong>the</strong> widest possible use <strong>of</strong> its open source s<strong>of</strong>tware. The benefits to
<strong>the</strong> innovators appear to be greater than to <strong>the</strong> free-riders because <strong>the</strong>y receive valuable inputs from
<strong>the</strong> expert community, as well as different positive externalities (e.g. network effect, new business
opportunities, etc.)
On <strong>the</strong> o<strong>the</strong>r hand, Stuermer et al. (2009) acknowledge <strong>the</strong> possibility <strong>of</strong> <strong>the</strong> so-called “hidden costs”
to <strong>the</strong> free revealing party. In order to reap <strong>the</strong> benefits from knowledge partnership, <strong>the</strong> sharing firm
may need to invest into explaining <strong>the</strong> concept to <strong>the</strong> potential contributors, train <strong>the</strong>m, develop online
tutorial (e.g. in <strong>the</strong> case <strong>of</strong> open source s<strong>of</strong>tware development). The knowledge sharing party may
also risk losing control over <strong>the</strong> future development <strong>of</strong> <strong>the</strong> technology that stems from <strong>the</strong> shared
internal information / knowledge.
There are several possible safeguards in this case. The company may choose to share <strong>the</strong> general
information / knowledge, while keeping to itself its more specific aspects. In <strong>the</strong> case <strong>of</strong> open source
s<strong>of</strong>tware development, <strong>the</strong> company may rely on <strong>the</strong> General Public License (GPL) that provides
fur<strong>the</strong>r users with permission to use and modify <strong>the</strong> source code, but not to use in any commercial
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