A detailed survey of 498 high technology small and medium-sized enterprises in the Netherlands shows process innovation by user firms to be common practice. Fifty-four percent of these firms reported developing entirely novel process equipment or software for their own use and/or modifying these, both at significant private expense. Twenty-five percent of the user innovations in our sample were transferred to commercializing producer firms. Many transfers were made without any direct compensation. Very importantly from the perspective of effective diffusion of user innovations, innovations with higher commercial potential – and more general appeal for users – are much more likely to be transferred to producers. The pattern we document of frequent innovation by individual user firms at substantial cost, followed in many cases by voluntary, no-charge information spillovers to producers, suggests that “open source economics” may be a general pattern in the economy.
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