Computer Mediated Transactions

Every now and then a set of technologies becomes available that sets off a period of “combinatorial innovation.” Think of standardized mechanical parts in the 1800s, the gasoline engine in the early 1900s, electronics in the 1920s, integrated circuits in the 1970s, and the internet in the last decade or so. The component parts of these technologies can be combined and recombined by innovators to create new devices and applications. Since these innovators are working in parallel with similar components, it is common to see simultaneous invention. There are many well-known examples, such as the electric light, the airplane, the automobile, and the telephone. Many scholars have described such periods of innovation, using terms such as “recombinant growth,” “general purpose technologies,” “cumulative synthesis” and “clusters of innovation.” The internet and the web are wonderful examples of combinatorial innovation. In the last 15 years we have seen a huge proliferation of web applications, all built from a basic set of component technologies. The internet itself was a rather unlikely innovation; I like to describe it as a “lab experiment that got loose.” Since the internet arose from the research community rather than the private sector, it had no obvious business model. Other public computer networks, such as AOL, CompuServe, and Minitel, generally used a subscription models, but were centrally controlled and offered little scope for innovation at the user level. The internet won out over these alternatives, precisely because it offered a flexible set of component technologies which encouraged combinatorial innovation.