Innovation Commons: The Origin of Economic Growth

Innovation is among the most important topics in understanding economic sustained economic growth. Jason Potts argues that the initial stages of innovation require cooperation under uncertainty and draws from insights on the solving of commons problems to shed light on policies and conditions conducive to the creation of new firms and industries. The problems of innovation commons are overcome, Potts shows, when there are governance institutions that incentivize cooperation, thereby facilitating the pooling of distributed information, knowledge, and other inputs. The entrepreneurial discovery of an economic opportunity is thus an emergent institution resulting from the formation of a cooperative group, under conditions of extreme uncertainty, working toward the mutual purpose of opportunity discovery about a nascent technology or new idea. Among the problems commons address are those of the identity; cooperation; consent; monitoring; punishment; and independence. A commons is efficient compared to the creation of alternative economic institutions that involve extensive contracting and networks, private property rights and price signals, or public goods (i.e. firms, markets, and governments). In other words, the origin of innovation is not entrepreneurial action per se, but the creation of a common pool resource from which entrepreneurs can discover opportunities. Potts' framework draws on the evolutionary theory of cooperation and institutional theory of the commons. It also has important implications for understanding the origin of firms and industries, and for the design of innovation policy. Beginning with a discussion of problems of knowledge and coordination as well as their implications for common pool environments, the book then explores instances of innovation commons and the lifecycle of innovation, including increased institutionalization and rigidness. Potts also discusses the possible implications of the commons framework for policies to sustain innovation dynamics.

Table of Contents:
Foreword - Against Prometheus Acknowledgements Chapter 1 We innovate together Introduction 1.1 The origin of innovation 1.2 The commons in the innovation commons What is a commons? An innovation commons is a knowledge commons Common-pooling and peer-production in an innovation commons 1.3 Clunkers and Homebrew 1.4 The Republic of Letters 1.5 Why groups, why cooperation, why open? Overview of book Chapter 2 The innovation problem Introduction 2.1 Trade and new knowledge explain growth 2.2 The innovation problem as economic problem The Schumpeter-Nelson-Arrow version of the innovation problem The Hayek version of the innovation problem 2.3 The origin of the innovation trajectory 2.4 The economic problem of innovation 2.5 Innovation problem is a collective action problem 2.6 Innovation happens in groups Discovery failure Discovery costs Conclusion Chapter 3 Innovation is a knowledge problem Introduction 3.1 Innovation problem I - Social contract problem (McCloskey) 3.2 Innovation problem II - Distributed knowledge problem (Hayek) 3.3 Innovation problem III - Idiosyncratic risk (Williamson) 3.4 Innovation problem IV - Rules for cooperation (Ostrom) Conclusion Chapter 4 Four theories of the innovation commons Introduction 4.1 Two commons 4.2 Evolution of cooperation 4.3 Defense against enclosure 4.4 Institutional uncertainty Conclusion Chapter 5 Origin of the innovation trajectory Introduction 5.1 The zero-th phase of the innovation trajectory 5.2 The fundamental transformation 5.3 The Proto-Entrepreneur, the Dual-Discovery Problem, and the Two Commons Solution The Proto-Entrepreneur seeks Non-Price Information The Proto-Entrepreneur faces a Dual Discovery Problem The Two Commons Solution 5.4 Modelling the innovation commons 5.5 The innovation commons in institutional space 5.6 The innovation commons as higher-order discovery Conclusion Chapter 6 Rules of the Innovation commons Introduction 6.1 Cooperation behind the veil of ignorance 6.2 An emergent social order 6.3 The use of society in knowledge 6.4 Problems the innovation commons must solve Identity, Cooperation, Consent, Monitoring, Punishment and conflict, Independence, Economic problems the rules must solve 6.5 Origin of rules 6.6 Core Design Principles 6.7 Can evolution explain the innovation commons? Evolution of cooperation Evolution of cooperation in the commons Is cooperation for innovation the institutional equivalent of war? The innovation commons as higher-order discovery Conclusion - We innovate together Chapter 7 Lifecycle of an innovation commons Introduction 7.1 Institutions of collective innovation Institutional varieties of collective innovation Institutional transformations over an innovation trajectory 7.2 Origin of industry 7.3 The standard model of industry associations 7.4 A new model of industry associations; private governance for discovery of public goods 7.5 Industry associations construct niches 7.6 The demic phase of industry associations Conclusion Chapter 8 Theory of Innovation Policy Introduction 8.1 The innovation commons critique of modern innovation policy Theory of innovation policy Mechanisms of innovation policy Critique of Innovation Policy Political economy of innovation policy Rules as policy Innovation policy as a public and private goods problem Innovation Policy and its discontents, a summary 8.2 Discovery Failure 8.3 Efficient Institutions of Innovation Policy The Comparative Institutional Approach The low social costs (and high private benefits) of innovation commons 8.4 New innovation policy Diagnosing the innovation problem Benefits to groups, regions, nations, and the world This comes from civil society The innovation economy cannot be planned Conclusion Chapter 9 Inclusive Innovation Policy Introduction 9.1 Two types of innovation policy 9.2 Innovation seen and unseen 9.3 Against innovation: theory 9.4 A better approach to innovation policy 9.5 Inclusive innovation: A new social contract Chapter 10 Conclusion 10.1 The institutional origin of innovation 10.2 Implications for economic theory 10.3 The innovation sharing economy References Index Figures and Tables Figure 1.1 Economic goods Figure 2.1 The innovation commons as the zero-th phase of an innovation trajectory Figure 3.1 Market (choice) versus governance (contracting) models of innovation economics Figure 3.2 Comparative institutions of innovation contracting Figure 7.1 Public and private ordering definitions of industry Figure 8.1 The Institutional Possibility Frontier (source Djankov et al 2003) Figure 8.2 Institutional possibilities of innovation policy Figure 9.1 Two innovation policy approaches Figure 9.2 Why friends of innovation prefer to engage government Table 2.1 The innovation problem as market failure vs collective action Table 2.2 Transformation costs, transaction costs and discovery costs Table 2.3 Taxonomy of discovery costs Table 6.1 Design rules Table 7.1 Institutional varieties of Collective Innovation Table 8.1 Innovation policy ranged between private and public instruments.