|Title:||Open source software: Free provision of complex public goods|
|Citation:||Bessen, J. E. (2005). Open source software: Free provision of complex public goods. Boston University. Available at SSRN 588763.|
|Link(s):||Definitive , Open Access|
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|About the Data|
|Data Description:||Empirical analysis of a case study (partially based on Aghion and Tirole's 1994 model of innovation). No original data used.|
|Secondary Data Sources:|
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|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:|
"Open source software, developed by volunteers, appears counter to the conventional wisdom that private provision of public goods is socially more efficient. But complexity makes a difference. Under standard models, development contracts for specialized software may be difficult to write and ownership rights do not necessarily elicit socially optimal effort. I consider three mechanisms that improve the likelihood that firms can obtain the software they need: pre-packaged software, Application Program Interfaces (APIs) and Free/Open Source software (FOSS). I show that with complex software, some firms will choose to participate in FOSS over both "make or buy" and this increases social welfare. In general, FOSS complements proprietary provision, rather than replacing it. Pre-packaged software can coexist in the marketplace with FOSS: pre-packaged software addresses common uses with limited feature sets, while firms with specialized, more complex needs use FOSS."
Main Results of the Study
This analysis may help dispel two myths about F/OSS (Free/Open Source Software):* First, it is not a “communistic,” “property destroying” alternative to proprietary software. It is better viewed as a complement to proprietary provision, recognizing that proprietary provision fails to effectively meet the needs of many customers in markets where customers have highly disparate needs and products are complex.* Second, it is a mistake to assume that F/OSS is somehow less robust because it is based on voluntary contributions rather than driven by the profit incentive. In fact, the firms that participate in F/OSS are driven by the profit incentive – F/OSS is just the most socially efficient means for many of them to obtain the software they need in their profit-making activities.Managers need to view F/OSS as an alternative to simple “make-or-buy.” This alternative will make the most sense for firms with specialized and complex needs. And it may beespecially important in emerging technologies where markets are initially small.
Policy Implications as Stated By Author
Managers need to view F/OSS as an alternative to simple “make-or-buy.” This alternative will make the most sense for firms with specialized and complex needs. And it may be especially important in emerging technologies where markets are initially small.
Coverage of Study