Empirical research finds that tens of millions of citizens spend tens of billions of dollars annually developing and modifying consumer products to better serve their own needs (von Hippel et al., 2011). Driven by the ever-increasing quality of freely available design and communication tools, single and collaborative user innovation is expected to become even more prominent in the future (Baldwin and von Hippel, 2011). The social welfare benefits of single and collaborative user innovation by citizens will be considerably enhanced if citizendeveloped innovations of general value diffuse to others who can benefit from them. However, from microeconomic theory, there is reason to hypothesize thatfree, peer-to-peer diffusion of user innovation will be inefficiently low from a social welfare perspective. As von Hippel et al. (2014) have argued, when innovation diffusion involves free revealing rather than market transactions, innova tors will find the benefits that accrue to adopters to be partially or entirely an externality from their point of view. As a result, user innovators can be expected to invest less than might be socially desirable to inform or assist others to adopt, even when their innovations would be highly valuable to others – a market failure. In the specific circumstances focused upon here, we say that a market failure exists if user innovators and adopters, taken together, would have higher net benefits from the user innovation if the user innovator invested more in diffusion. This type of market failure is novel in the innovation literature. In this paper, we empirically explore the market failure hypothesis just described via a sample of 176 innovations developed for personal use by individual consumers in Finland. In overview, we found that 85% of the consumer developers report that what they had developed highly satisfied their own needs. Moreover, drawing on multiple questions, we concluded that, in our respondents’ view, 61% of their innovations are deemed useful to some or many others. Still, actual commercial and/or peer-to-peer diffusion only occurred for 19% of the innovations.