This book explores the institutional conditions of the origin of innovation, arguing that prior to the emergence of competitive entrepreneurial firms and the onset of new industries is a little-understood but crucial phase of cooperation under uncertainty: the innovation commons. An innovation commons is a governance institution to incentivize cooperation in order to pool distributed information, knowledge, and other inputs into innovation to facilitate the entrepreneurial discovery of an economic opportunity. In other words, the true origin of innovation is not entrepreneurial action per se, ... More

This book explores the institutional conditions of the origin of innovation, arguing that prior to the emergence of competitive entrepreneurial firms and the onset of new industries is a little-understood but crucial phase of cooperation under uncertainty: the innovation commons. An innovation commons is a governance institution to incentivize cooperation in order to pool distributed information, knowledge, and other inputs into innovation to facilitate the entrepreneurial discovery of an economic opportunity. In other words, the true origin of innovation is not entrepreneurial action per se, but the creation of a common-pool resource from which entrepreneurs can discover opportunities. The true origin of innovation, and therefore of economic evolution, occurs one step further back, in the commons. Innovation has a cooperative institutional origin. When the economic value or worth of a new technological prospect is shrouded in uncertainty—which arises because information is distributed or is only experimental obtained—a commons can be an economically efficient governance institution. Specifically, 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). A commons will often be an efficient governance solution to the hard economic problem of opportunity discovery. This new framework for analysis of the origin of innovation draws on evolutionary theory of cooperation and institutional theory of the commons and carries important implications for our understanding of the origin of firms and industries, and for the design of innovation policy.