|Title:||When Does a Firm Support Substitute Open Source Programming?|
|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:|
|About the Data|
|Data Type:||Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||Yes|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
"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
- The study finds that even when a copyleft will compete with a firm’s program, the firm appears to be willing to invest large resources in order to support a copyleft community.
- Supporting copyleft development facilitates compatibility between the programs although support is costly.
- Supporting copyleft communities depends on two parameters: the consumers’ beneﬁt from the copyleft community and the strength of the network effect. If the consumer’s benefit is above a critical boundary value, then the firm prefers compatibility (will support the copyleft community). However, if the consumers’ benefit is below the boundary value, the firm prefers incompatibility (will not support the copyleft community).
- The author notes that the introduction of a common network and a benefit from the user innovation of the copyleft programmers’ community increase the consumers ’willingness to pay for the firm’s program.
Policy Implications as Stated By Author
Society can impose compatibility for example through an industry standard, by subsidizing and supporting developers or by legal or administrative means. The welfare analysis carried out in this study shows that, contrary to received view, standardization or society’s support of copyleft development might have adverse welfare implications.
Coverage of Study
|Level of aggregation:||Open and closed development models|
|Period of material under study:||1986-2005|