Public domain fosters follow-on and drives down costs.

Uptake and use of material from the public domain is similar to the phenomenon of user-led innovation, in which end consumers adapt and modify products, later sharing them with each other and with producing firms. In as much as enterprises are able to successfully capture value from the user innovation process, these activities are similar to using inspiration and material from the public domain to create new products. Limited empirical evidence from the software industry suggests that some companies that normally enjoy exclusive copyright in their products are beginning to promote user innovation as part of their business strategy, finding benefits in the practice (Haefliger et al., 2010). Such benefits might include community reputation as well as added utility from new users of a product due to network effects. The presence of private benefits combined with the low cost of widely disseminating details of an innovation has led to a reassessment of the “free riding” problem in user communities. If the cost of freely revealing is lower than the expected private benefit of doing so, researchers Eric von Hippel and Georg von Krogh suggest that participants are likely to engage in a “private-collective” model of innovation. Firms in our study exploited public domain inputs for many of the same reasons that user-innovators engage in private-collective innovation. In particular, they often bundled their public domain products with other complementary goods in order to appropriate the value associated with their own innovation practice. Managers also reported lower costs associated with using public domain materials as an incentive. Incorporating free and open-source inputs early in a new product helped some developers to “fulfill the credible promise” of a prototype, stimulating further contributions and investment. Some respondents actively engaged with communities of users, for example, fans of Sherlock Holmes or H.P. Lovecraft, to develop new adaptations of those public domain works. The openness of such works to collective remixing led to more innovative and more radically collaborative products.