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Hidden Software and Veiled Value Creation: Illustrations from Server Software Usage

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  • Raviv Murciano-Goroff
  • Ran Zhuo
  • Shane Greenstein

Abstract

How do you measure the value of a commodity that transacts at a price of zero from an economic standpoint? This study examines the potential for and extent of omission and misattribution in standard approaches to economic accounting with regards to open source software, an unpriced commodity in the digital economy. The study is the first to follow usage and upgrading of unpriced software over a long period of time. It finds evidence that software updates mislead analyses of sources of firm productivity and identifies several mechanisms that create issues for mismeasurement. To illustrate these mechanisms, this study closely examines one asset that plays a critical role in the digital economic activity, web server software. We analyze the largest dataset ever compiled on web server use in the United States and link it to disaggregated information on over 200,000 medium to large organizations in the United States between 2001 and 2018. In our sample, we find that the omission of economic value created by web server software is substantial and that this omission indicates there is over $4.5 billion dollars of mismeasurement of server software across organizations in the United States. This mismeasurement varies by organization age, geography, industry and size. We also find that dynamic behavior, such as improvements of server technology and entry of new products, further exacerbates economic mismeasurement.

Suggested Citation

  • Raviv Murciano-Goroff & Ran Zhuo & Shane Greenstein, 2021. "Hidden Software and Veiled Value Creation: Illustrations from Server Software Usage," NBER Working Papers 28738, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28738
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    References listed on IDEAS

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    Cited by:

    1. Martin Fleming, 2023. "Enterprise Information and Communications Technology – Software Pricing and Developer Productivity Measurement," Working Papers 037, The Productivity Institute.
    2. Christian Peukert & Margaritha Windisch, 2023. "The Economics of Copyright in the Digital Age," CESifo Working Paper Series 10687, CESifo.

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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