Economics of Product Development by Users: the Impact of Sticky Local Information

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.

[1]  A. Arora,et al.  The changing technology of technological change: general and abstract knowledge and the division of , 1994 .

[2]  T. P. Wright,et al.  Factors affecting the cost of airplanes , 1936 .

[3]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[4]  R. Katz,et al.  Organizational issues in the introduction of new technologies , 1984 .

[5]  Rob Walters Computer Telephone Integration , 1993 .

[6]  J. Baron Thinking and Deciding , 2023 .

[7]  C.R. Strathmeyer An Introduction to Computer Telephony , 1996, IEEE Communications Magazine.

[8]  Paul Israel,et al.  The Sources of Innovation , 1990 .

[9]  Ashish Arora,et al.  Division of Labour and the Locus of Inventive Activity , 1997 .

[10]  T. J. Allen Studies of the Problem-Solving Process in Engineering , 1966 .

[11]  S. Kotha Mass Customization: The New Frontier in Business Competition , 1992 .

[12]  Gabriel Szulanski Exploring internal stickiness: Impediments to the transfer of best practice within the firm , 1996 .

[13]  D. L. Marples,et al.  THE DECISIONS OF ENGINEERING DESIGN , 1961, IRE Transactions on Engineering Management.

[14]  T. Nixon Design considerations for computer-telephony application programming interfaces and related components , 1996 .

[15]  K. Arrow The Economic Implications of Learning by Doing , 1962 .

[16]  E. Hippel Sticky Information and the Locus of Problem Solving: Implications for Innovation , 1994 .

[17]  John R. Harris,et al.  Inside the Black Box: Technology and Economics , 1984 .

[18]  Keith Pavitt,et al.  The objectives of technology policy , 1987 .

[19]  Karl Habermeier,et al.  Product use and product improvement , 1990 .

[20]  G. Pisano Knowledge Integration and the Locus of Learning: An Empirical Analysis , 1994 .

[21]  M. R. Haskard An introduction to application specific integrated circuits , 1990 .

[22]  R. Nelson The Role of Knowledge in R&D Efficiency , 1982 .

[23]  Jeffrey L. Hilbert Chapter 1 – Introduction to ASIC Technology , 1991 .

[24]  Jeffrey L. Hilbert,et al.  Application specific integrated circuit (ASIC) technology , 1991 .

[25]  R. Katz,et al.  Investigating the Not Invented Here (NIH) syndrome: A look at the performance, tenure, and communication patterns of 50 R & D Project Groups , 1982 .

[26]  Dorothea P. Simon,et al.  Expert and Novice Performance in Solving Physics Problems , 1980, Science.

[27]  Eric von Hippel,et al.  How learning by doing is done: problem identification in novel process equipment☆ , 1995 .

[28]  C. R. Strathmeyer Computer Telephony [Guest Editorial] , 1996 .