Exploring social preferences in private-collective innovation.

Firms, research institutions and individuals have long realised the advantages of innovating in an open manner. Companies such as IBM, Philips and Procter & Gamble, increasingly seek to cooperate with outside individuals and organisations to tap into their ideas for new products and services. This approach makes good business sense, but it is also difficult to achieve. In particular, mechanisms that motivate innovators to 'open up' are critical in achieving the benefits of open innovation. Private-collective innovation (PCI) has become an increasingly important model for explaining innovation at the boundaries of traditional, closed and open innovation regimes. Previous work has examined PCI both conceptually and empirically, and recent scholarship has focused specifically on the initiation of PCI as it relates to problems of collective action. This work shows that a project will not 'take off' unless the right incentives are in place for innovators to contribute their knowledge to open innovation from the beginning. Drawing on behavioural game theory, this paper expands on prior work by exploring social preferences in the initiation of PCI. The authors conducted a simulation study that shows how inequality aversion, reciprocity and fairness affect the underlying conditions that lead to the initiation of PCI. The results indicate that reciprocity and the potential gains for other participants explain changes in individual knowledge sharing in PCI.