Mustonen (2005)

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1. Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare 2. Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)? 3. Harmony of interest assumption between authors and publishers (creators and producers/investors) 4. Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption) 5. Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)

A. Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right) B. Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction) C. Mass digitisation/orphan works (non-use; extended collective licensing) D. Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability) E. Fair remuneration (levies; copyright contracts) F. Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Source Details

Mustonen (2005)
Title: When Does a Firm Support Substitute Open Source Programming?
Author(s): Mikko Mustonen
Year: 2005
Citation: Mustonen, Mikko. When does a firm support substitute open source programming?. Journal of Economics & Management Strategy 14.1 (2005): 121-139.
Link(s): Definitive , Open Access
Key Related Studies:
Discipline:
Linked by:
About the Data
Data Description: This study uses previous studies from 1996 to 2005 to compare two different models of software development: one of open collaboration and one of closed development and examine the incentives for each. The authors then analyse the contribution of each to social welfare.
Data Type: Secondary data
Secondary Data Sources:
Data Collection Methods:
Data Analysis Methods:
Industry(ies):
Country(ies):
Cross Country Study?: Yes
Comparative Study?: Yes
Literature review?: Yes
Government or policy study?: No
Time Period(s) of Collection:
  • 1996-2005
Funder(s):
  • The Finnish Academy

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.

Main Results of the Study

Firms seem willing to expend substantial resources to support a copyleft community even if the copyleft program will compete with the firm’s program. Support of copyleft development facilitates compatibility between the programs. Consumers’ willingness to pay for the firm’s program is increased with the introduction of a common network and a benefit from the user innovation of the copyleft programmers’ community. On the other hand, support is costly. More importantly, if the cost is low, compatibility removes the advantage in network valuations that the firm enjoys under incompatibility. We determined the conditions for the firm to prefer support and thus compatibility instead of targeting to incompatibility. The welfare analysis showed that standardization or society’s support of copyleft development might have adverse welfare implications in contrast to received views.

Policy Implications as Stated By Author

  • Open source communities, such as the Copyleft movement, may create goods that have a large enough 'network effect' to make it beneficial for the firm to use or acquire open source products
  • This leads to a break in the monopoly hold of a firm and increases social welfare
  • The level of increase in social welfare, or whether it exists at all, depends on the amount of benefit to the open source community
  • Piracy can increase the network effect of a good and benefit the firm producing the legitimate good

Coverage of Study

Coverage of Fundamental Issues
Issue Included within Study
Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare
Green-tick.png
Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)?
Harmony of interest assumption between authors and publishers (creators and producers/investors)
Green-tick.png
Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption)
Green-tick.png
Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)
Coverage of Evidence Based Policies
Issue Included within Study
Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right)
Green-tick.png
Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction)
Mass digitisation/orphan works (non-use; extended collective licensing)
Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability)
Green-tick.png
Fair remuneration (levies; copyright contracts)
Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Datasets

Sample size: 2
Level of aggregation: Open and closed development models
Period of material under study: 1986-2005