How the Internet Became Commercial: Innovation, Privatization, and the Birth of a New Network (The Kauffman Foundation Series on Innovation and Entrepreneurship)

by Shane Greenstein

During the deployment of the commercial Internet, low frictions shaped exploratory activities, and that affected multiple participants simultaneously. A friction refers to two related activities: the nonmonetary cost of designing and setting up procedures to deliver a new service or innovative product, and the nonmonetary cost of executing a set of proscribed processes and procedures for delivering services to users—specifically, the nonmonetary costs of employing personnel to gain technical knowledge and the hassles of addressing and managing delays, lost output, and other events for which no secondary market exists. In other words, low frictions encouraged innovation. Why did low frictions matter? They helped make it cheaper to learn in markets when the most valuable direction of change remained unknown. By experimenting in markets, value creation emerged from novel combinations of demand-fulfillment and operations from multiple vendors combining their complementary services in new ways for mass users.