This study examines the role that institutions play in the non-diffusion of both free and commercial user innovation. It does so via the water lily industry, a niche of the horticultural sector in which most innovation comes from users. Water lilies should be of interest in the context of diffusion of user innovation because they have qualities in common with other user-influenced industries in which diffusion is complex, notably software and digital media. The study uses a mix of qualitative methods to explore the role that institutions play in the diffusion of new water lily cultivars, primarily a series of interviews conducted with amateur hybridizers (users) and grower-distributors (producers). The results suggest that those institutions most prescribed to remedy the innovation problem, namely patent-related ones, were inoperable due to small market size. In their place was an institutional dynamic that was perceived by users as unfair, which led some of them to withhold novelties from other users because of inequity aversion. The study contributes primarily to the part of the innovation management literature that deals with questions related to the diffusion of user-generated technology and ideas, extending work done by von Hippel et al. (2014), Dejong et al. (2015) and Gallus (2022) in this area.
