Innovation is more important than ever, yet breakthroughs are becoming harder to achieve. Modern technologies, from artificial intelligence and 5G networks to biotech, are so complex that they require collaboration across companies, industries, and countries. Increasingly, firms are discovering that sharing knowledge can be more powerful, and more profitable, than guarding it. In Rethinking Innovation, distinguished economists Josh Lerner and Jean Tirole examine ways that corporations have embraced the sharing of knowledge as a competitive strategy. Open-source software, for example, has seen multibillion-dollar public offerings and shifting business strategies, producing high-profile disputes over what openness actually entails. Across high-tech industries, new forms of knowledge-sharing are transforming how companies develop and exploit new technologies.
Lerner and Tirole explore three key organizational structures that make this collaboration possible: patent pools, which bundle essential patents and make them available to firms seeking to license them; standard-setting organizations, where companies agree on common technical templates and commit to making related patents available on fair terms; and open-source communities, in which users share innovations freely with others. Drawing on decades of pioneering research, Lerner and Tirole explain how these institutions emerged, how they work in practice, and how they can both promote innovation and create new challenges for competition and policy. Combining economic insight with vivid case studies鈥攆rom early efforts to coordinate aircraft patents to contemporary battles over artificial intelligence and global technology standards鈥�Rethinking Innovation reveals how firms collaborate to develop and commercialize complex technologies. Clear and accessible throughout, this book offers a guide to the forces reshaping modern innovation for managers, policymakers, and scholars.
“In Rethinking Innovation, Lerner and Tirole reassess how innovation happens in an era in which progress is defined by software, algorithms, and the exchange of ideas. This is an important and insightful study of knowledge sharing and standard setting organizations, whose role may grow as we enter an economy reshaped by artificial intelligence.”—Chris Miller, author of Chip War: The Fight for the World's Most Critical Technology
“The garage-innovator myth—think alone, strike gold, become a billionaire—was always more legend than economics. Lerner and Tirole show why it’s now obsolete: today’s breakthroughs come from networks of rivals who must cooperate to compete. Patent pools, standard-setting bodies, and open source are where modern innovation actually happens. As a former competition enforcer, I found their framework exactly what regulators need: clear enough to use and honest enough to admit where the hard cases remain.”—Margrethe Vestager, former European Commissioner for Competition
“There are many books on innovation, but this one is distinguished by the fact that its authors are the leading scholars in the field. It offers a fascinating analysis of organizations established to share knowledge in increasingly complex contexts for innovation at the scientific frontier. It makes a significant contribution, providing not only new insights but also a superb synthesis of the authors’ body of work in this area.”—Diane Coyle, author of The Measure of Progress: Counting What Really Matters
"Understanding innovation, exploration, and implementation are all important to the modern firm. This book leads you through these topics and many more."—Hal Varian, former Chief Economist at Google
“The disagreements over the pros and cons of open-source AI dominate the current debate on AI governance. More generally, how should we coordinate innovation across firms so as to maximize our overall innovation capacity while limiting its long-term risks? Should we favor concentrated control or widespread access? Anyone interested in this and the broader issue of how to best conceive knowledge-sharing organizations, will learn enormously from this must-read masterpiece by Josh Lerner and Jean Tirole.”—Philippe Aghion, winner of the 2025 Nobel Memorial Prize in Economic Sciences
“From semiconductors to artificial intelligence, progress increasingly depends not just on brilliant ideas, but on the complementary assets and institutions needed to turn them into real-world impact. In Rethinking Innovation, Josh Lerner and Jean Tirole brilliantly illuminate the knowledge-sharing organizations that make this possible. This superb book also helps explain why innovation so often follows a J-curve, with the biggest gains arriving only after the right complements and structures are in place.”—Erik Brynjolfsson, coauthor of The Second Machine Age
“The Lerner and Tirole duo has done it again: a clear and insightful guide to how organizations share intellectual property. Read the chapters to learn the basic economics; read the appendices to enjoy the elegant underlying models.”—Carl Shapiro, University of California, Berkeley
“Rethinking Innovation covers an important and policy-relevant topic, presenting a much more nuanced—and, I believe, ultimately more useful—picture of intellectual property and the innovation process than is typically found. It offers rigorous economic arguments without being technical, and the exposition is clear and accessible throughout.”—Michael Andrews, University of Maryland Baltimore County
“Innovation no longer comes from lone geniuses, and the institutions we use to govern it have not kept up. Lerner and Tirole's book is the missing field guide to the patent pools, standard-setting bodies, and open-source organizations through which firms now coordinate invention—and to the difficult competition questions they raise. Cooperation among rivals can unlock technical progress no firm could achieve alone, but it can also blunt the competitive pressure that drives innovation in the first place, slowing the entry of new ideas and slowing the follow-on innovation that builds on first movers. With characteristic clarity and care, two of the world's leading scholars of innovation and competition show how to navigate these trade-offs and what policymakers should do about them. This book is essential reading for anyone interested in the interplay between cooperation, innovation, and competition in the twenty-first century.”—Fiona Scott Morton, Yale University
