Clay Shirky* links to an interesting paper by Eric von Hippel from last year describing a model for diffusion of innovations that doesn't rely on businesses. The open source software movement is his primary example of an arena in which innovations are developed, ideas are shared, and products are freely distributed, all at the user level. I then came across MIT's User Innovation website which links to a whole pile of fascinating-looking papers on all this Lead User kind of stuff.
* I must try and find more things that Clay hasn't already found!