Extending private-collective innovation: a case study

The private-collective innovation model proposes incentives for individuals and firms to privately invest resources to create public goods innovations. Such innovations are characterized by non-rivalry and non-exclusivity in consumption. Examples include open source software, user-generated media products, drug formulas, and sport equipment designs. There is still limited empirical research on private-collective innovation. We present a case study to (1) provide empirical evidence of a case of private-collective innovation, showing specific benefits, and (2) to extend the private-collective innovation model by analyzing the hidden costs for the company involved. We examine the development of the Nokia Internet Tablet, which builds on both proprietary and open source software development, and that involves both Nokia developers and volunteers who are not employed by the company. Seven benefits for Nokia are identified, as are five hidden costs: difficulty to differentiate, guarding business secrets, reducing community entry barriers, giving up control, and organizational inertia. We examine the actions taken by the management to mitigate these costs throughout the development period.

How Firms Make Friends: Communities in Private-Collective Innovation

When firms contribute to open source projects, they in fact invest into public goods which may be used by everyone, even by their competitors. This seemingly paradoxical behavior can be explained by the model of private-collective innovation where private investors participate in collective action. Previous literature has shown that companies benefit through the production process providing them with unique incentives such as learning and reputation effects. By contributing to open source projects firms are able to build a network of external individuals and organizations participating in the creation and development of the software. As will be shown in this doctoral dissertation firm-sponsored communities involve the formation of interorganizational relationships which eventually may lead to a source of sustained competitive advantage. However, managing a largely independent open source community is a challenging balancing act between exertion of control to appropriate value creation, and openness in order to gain and preserve credibility and motivate external contributions. Therefore, this dissertation consisting of an introductory chapter and three separate research papers analyzes characteristics of firm-driven open source communities, finds reasons why and mechanisms by which companies facilitate the creation of such networks, and shows how firms can benefit most from their communities.

The American Myth of Markets in Social Policy: Ideological Roots of Inequality

The American Myth of Markets in Social Policy examines how implementing American tropes in policy design inadvertently frustrates policy goals. It investigates multiple market-oriented designs including funding for private organizations to deliver public services, funding for individuals to buy services, and policies incentivizing or mandating private actors to provide social policy. The author shows that these solutions often not only fail to achieve social goals, but, in fact, actively undermine them, for example saddling the poor with debt or encouraging discrimination. The book carefully details the mechanisms through which this occurs, for example a mismatch between program goals and either contract terms or individual preferences. The author examines several policies in depth, covering universal social insurance programs like healthcare and pensions, as well as smaller interventions like programs for the homeless. The author builds the argument using detailed empirical evidence as well as anecdote, keeping the book accessible and entertaining.

Technical Efficiency in Public and Private Sectors in India: Evidence from the Post-Reform Years

While India's state-owned enterprises are widely believed to be inefficient, there is a dearth of studies that document such inefficiency on any rigorous basis. Yet, since improvement in firm efficiency is one of the basic objectives of privatization, it is important to assess whether efficiency is indeed lower in the public sector than in the private sector. This paper compares the performance of state-owned enterprises with those of private sector firms in respect of technical efficiency. The comparison is made in eight different sectors over the period 1991-92 to 1998-99. We measure technical efficiency using the method of Data Envelopment Analysis. Judging by the average levels of technical efficiency, no conclusive evidence of superior performance on the part of the private sector is found.

Productivity Growth and Efficiency in Indian Banking: A Comparison of Public, Private, and Foreign Banks

India's public sector banks (PSBs) are compared unfavorably with their private sector counterparts, domestic and foreign. This comparison rests, for the most part, on financial measures of performance, and such a comparison provides much of the rationale for privatization of PSBs.In this paper, we attempt a comparison between PSBs and their private sector counterparts based on measures of productivity that use quantities of outputs and inputs. We employ two measures of productivity: Tornqvist and Malmquist total factor productivity growth. We attempt these comparisons over the period 1992-2000, comparing PSBs with both domestic private and foreign banks. Out of a total of four comparisons we have made, there are no differences in three cases, PSBs do better in two, and foreign banks in one. To put it differently, PSBs are seen to be at a disadvantage in only one out of six comparisons. It is difficult, therefore, to sustain the proposition that efficiency and productivity have been lower in public sector banks relative to their peers in the private sector.

The Aggregate Demand for Private Health Insurance Coverage in the U.S.

This paper estimates the aggregate demand for private health insurance coverage in the U.S. using an error-correction model and by recognizing that people are without private health insurance for voluntary, structural, frictional, and cyclical reasons and because of public alternatives. Insurance coverage is measured both by the percentage of the population enrolled in private health insurance plans and the completeness of the insurance coverage. Annual data for the period 1966-1999 are used and both short and long run price and income elasticities of demand are estimated. The empirical findings indicate that both private insurance enrollment and completeness are relatively inelastic with respect to changes in price and income in the short and long run. Moreover, private health insurance enrollment is found to be inversely related to the poverty rate, particularly in the short-run. Finally, our results suggest that an increase in the number cyclically uninsured generates less of a welfare loss than an increase in the structurally uninsured.

The Social versus Private Incentive to Sue

The private value of lawsuits is based on plaintiffs' expected recovery at trial compared to their filing costs, whereas the social value consists of the incentives suits create for injurers to invest in accident avoidance. Generally, there is no relationship between these two values: there may be either too many or too few suits from a social perspective. Thus, there is scope for corrective measures, although there is no simple policy. Extending the model to consider a negligence rule rather than strict liability, and to allow for pretrial settlements, leads to some modified conclusions but does not alter the basic insights.

Redlining, the Community Reinvestment Act, and Private Mortgage Insurance

This paper examines whether neighborhood racial or income composition influences a lender's treatment of mortgage applications. Recent studies have found little evidence of differential treatment based on either the racial or income composition of the neighborhood, once the specification accounts for neighborhood risk factors. This paper suggests that lenders may favor applicants from CRA-protected neighborhoods if they obtain Private Mortgage Insurance (PMI) and that this behavior may mask lender redlining of low income and minority neighborhoods. For loan applicants who are not covered by PMI, this paper finds strong evidence that applications for units in low-income neighborhoods are less likely to be approved, and some evidence that applications for units in minority neighborhoods are less likey to be approved, regardless of the race of the applicant. This pattern is not visible in earlier studies because lenders appear to treat applications from these neighborhoods more favorably when the applicant obtains PMI.

A Note on the Social versus Private Value of Suits when Care is Bilateral

This paper re-examines the social versus private value of lawsuits when both injurers and victims can take care. The basic conclusions of that literature remain valid in this context: the private and social values generally differ, and there is no necessary relationship between them, meaning that there may be either too many or too few suits. Introducing the possibility of victim care does, however, alter the calculation of the deterrent effect of lawsuits. In particular, because allowing suits tends to reduce the incentives for victims to invest in precaution, the social value of prohibiting suits increases in direct relation to the productivity of victim care in lowering accident risk.