When Do User-Innovators Start Firms? Towards a Theory of User Entrepreneurship

Users of products and services often make product-related innovations that become taken-for-granted product features. Early research in this area found that while product users--be they firms or individuals--innovated, it was existing manufacturers who commercialized the innovation. Users benefited from using the innovation they created, while existing manufacturers reaped the financial rewards. More recent empirical work and anecdotal evidence however finds that users innovate and sometimes also start firms to produce the innovation for sale to others; thereby allowing the innovator to profit from her innovation both financially and through use. What accounts for this discrepancy in empirical findings--and more importantly what does this imply for existing models of entrepreneurship and industry emergence? In order to begin addressing these questions, this paper proposes a theoretical model that identifies the factors that influence user-innovators to start their own firms, that is, to become entrepreneurs or license their work rather than share their work with existing manufacturers. We illustrate our model with examples from the field of consumer sporting goods.