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When Does a Firm Support Substitute Open Source Programming?

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  • Mikko Mustonen

Abstract

Software firms are observed to support programmers' communities, which develop rival open source programs. A firm selling a copyright program has an incentive to support substitute copyleft programming when support creates compatibility between the programs and programs exhibit network effects. Costly compatibility benefits the firm as its consumers gain access to the community's services but may also hurt the firm because it cannot profit from the valuation difference between incompatible networks. The incentive arises under a weak network effect even when the consumers' benefit is small. Standardization and enlarging the open source programmers' community do not always increase welfare.

Suggested Citation

  • Mikko Mustonen, 2005. "When Does a Firm Support Substitute Open Source Programming?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 121-139, March.
    • Handle: RePEc:bla:jemstr:v:14:y:2005:i:1:p:121-139
    DOI: 10.1111/j.1430-9134.2005.00036.x
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    Cited by:

    1. Nicholas Economides & Evangelos Katsamakas, 2006. "Two-Sided Competition of Proprietary vs. Open Source Technology Platforms and the Implications for the Software Industry," Management Science, INFORMS, vol. 52(7), pages 1057-1071, July.
    2. Alexia Gaudeul, 2008. "Consumer Welfare and Market Structure in a Model of Competition Between Open Source and Proprietary Software," Working Papers 08-31, Centre for Competition Policy, University of East Anglia.
    3. Susan Athey & Glenn Ellison, 2014. "Dynamics of Open Source Movements," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(2), pages 294-316, June.
    4. Kristian Koerselman, 2008. "Can open sourcing lead to inferior standards?," Discussion Papers 27, Aboa Centre for Economics.
    5. Nicholas Economides & Evangelos Katsamakas, 2005. "Linux vs. Windows: A Comparison of Innovation Incentives and a Case Study," Working Papers 05-11, New York University, Leonard N. Stern School of Business, Department of Economics.
    6. Noriaki Matsushima & Susumu Ogawa, 2012. "Profit-Enhancing Know-How Disclosure: A Strategic View," Manchester School, University of Manchester, vol. 80(5), pages 560-579, September.
    7. Comino, Stefano & Manenti, Fabio M., 2011. "Dual licensing in open source software markets," Information Economics and Policy, Elsevier, vol. 23(3), pages 234-242.
    8. Nicholas Economides & Evangelos Katsamakas, 2005. "Linux vs. Windows: A comparison of application and platform innovation incentives for open source and proprietary software platforms," Working Papers 05-07, NET Institute.
    9. Alexia Gaudeul, 2008. "Open Source Licensing in Mixed Markets, or Why Open Source Software Does Not Succeed," Working Papers 08-2, Centre for Competition Policy, University of East Anglia.
    10. Yu Wang & Yu Chen & Bonwoo Koo, 2017. "Open Source and Competition Strategy Under Network Effects," Graz Economics Papers 2017-03, University of Graz, Department of Economics.
    11. Stefano Colombo & Luca Grilli & Cristina Rossi-Lamastra, 2014. "Network Externalities, Incumbent’s Competitive Advantage and the Degree of Openness of Software Start-Ups," Computational Economics, Springer;Society for Computational Economics, vol. 44(2), pages 175-200, August.
    12. Suzanne Scotchmer, 2010. "Openness, Open Source, and the Veil of Ignorance," American Economic Review, American Economic Association, vol. 100(2), pages 165-171, May.
    13. Terrence August & Wei Chen & Kevin Zhu, 2021. "Competition Among Proprietary and Open-Source Software Firms: The Role of Licensing in Strategic Contribution," Management Science, INFORMS, vol. 67(5), pages 3041-3066, May.
    14. Murat Yılmaz, 2022. "Coexistence of proprietary and open‐source firms under product differentiation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 4153-4166, December.
    15. Mikko Leppämäki & Mikko Mustonen, 2009. "Skill Signalling with Product Market Externality," Economic Journal, Royal Economic Society, vol. 119(539), pages 1130-1142, July.
    16. Jürgen Bitzer & Ingo Geishecker & Philipp J. H. Schröder, 2017. "Is there a wage premium for volunteer OSS engagement? – signalling, learning and noise," Applied Economics, Taylor & Francis Journals, vol. 49(14), pages 1379-1394, March.
    17. Alex Gaudeul, 2005. "Public provision of a private good: What is the point of the BSD license?," Industrial Organization 0511002, University Library of Munich, Germany.
    18. Evangelos Katsamakas & Mingdi Xin, 2005. "An economic analysis of enterprise adoption of open source software," Working Papers 05-29, NET Institute, revised Oct 2005.
    19. Georg von Krogh & Eric von Hippel, 2006. "The Promise of Research on Open Source Software," Management Science, INFORMS, vol. 52(7), pages 975-983, July.

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