Who Starts with Open Source? Institutional Choice of Start-Ups in the German ICT Sector

We analyze the characteristics of new businesses in the German ICT industry, distinguishing them based on their choice between two IPR regimes: open source software (OSS) or closed source software (CSS). The share of new firms with an OSS-based business model has increased considerably over the last several years. OSS-based firms tend to be smaller (in terms of staff and capital) and experience less shortages of capital. Only older cohorts of OSS-intensive start-ups had more difficulty than their CSS counterparts in convincing potential financiers of their viability, indicating that OSS business models are now well established. We find no evidence that the lower entry barriers for OSS firms are particularly attractive to start-ups with low human capital endowment or to necessity-motivated entrepreneurs.New business formation, institutions, open source, intellectual property rights, software industry

Open Source Software, Closed Source Software or Both: Impacts on Industry Growth and the Role of Intellectual Property Rights

There is considerable debate regarding the use of intellectual property rights (IPR) to spur innovation in the software industry. In this paper we focus on the choice of intellectual property right regimes and industry growth. We begin by developing a growth optimal mixture of open source and closed source software. This optimal scenario is then used as a basis to examine the co-existence of open and closed source software within various institutional frameworks ranging from no protection, copyright to patent protection. Such an analysis is beneficial as it enables an objective comparison of the three scenarios under the assumption that both copyrights and patents serve the purpose for which they were designed. Our analysis, based on the existence or absence of spillovers, confirms that a co-existence is growth optimal for the industry. Further, we find that the move from no protection to copyright protection increases the maximum growth rate. However, despite assuming properly functioning patents, the benefits of moving from copyright to patent protection are less clear.Intellectual Property rights, software, open source, spillovers, co-existence, innovative growth

The economic properties of software

Software is a good with very special economic characteristics. Taking a general definition of software as its starting-point, this article systematically elaborates the central qualities of the commodity which have implications for its production and cost structure, the demand, the contestability of software-markets, and the allocative efficiency. In this context it appears to be reasonable to subsume the various characteristics under the following generic terms: software as a means of data-processing, software as a system of commands or instructions, software as a recombinant system, software as a good which can only be used in discrete units, software as a complex system, and software as an intangible good. Evidently, software is characterized by a considerable number of economically relevant qualitiesranging from network effects to a subadditive cost function to nonrivalry. Particularly to emphasise is the fact that software fundamentally differs from other information goods: First, from a consumer’s perspective the readability and other aspects concerning how the information is presented, is irrelevant. Second, the average consumer/user is interested only in the funtionality of the algorithms but not in the underlying information

On the Geographic Allocation of Open Source Software Activities

Open source software (OSS) is marked by free access to the software and its source code. OSS is developed by a 'community' consisting of thousands of contributors from all over the world. Some research was undertaken in order to analyze how global the OSS community actually is, i.e. analyze the geographic origin of OSS developers. But as members of the OSS community differ in their activity levels, information about the allocation of activities are of importance. Our paper contributes to this as we analyze not only the geographic origin of (active) developers but also the geographic allocation of OSS activities. The paper is based on data from the SourceForge research Data Archive, referring to 2006. We exploit information about the developers' IP address, email address and indicated time-zone. This enables us to properly assign 1.3 million OSS developers from SourceForge to their countries, that are 94% of all registered ones in 2006. In addition we have information about the number of posted messages which is a good proxy for activity of each developer. Thus we can provide a detailed picture of the world-wide allocation of open source activities. Such country data about the supply-side of OSS is a valuable stock for both, cross-country studies on OSS, as well as country-specific research and policy advice.Open Source Software, Geographical Location, Open Source Activities

Coexisting Intellectual Property Right Regimes: the Case of Open and Closed Source Software

Die Dissertation beschäftigt sich theoretisch und empirisch mit der Koexistenz von Open Source und Closed Source Prinzipien am Beispiel Software. Es werden kulturelle und rechtliche Einflussfaktoren auf Open Source Software (OSS) untersucht und die Koexistenz von OSS mit Closed Source Software (CSS) theoretisch begründet. Ein Schwerpunkt liegt auf OSS- und CSS-basierten Geschäftsmodellen: Strategische Aspekte und die Marktgleichgewichte mit OSS und CSS Firmen werden untersucht und darauf aufbauend wirtschaftspolitische Maßnahmen analysiert. Abschließend richtet sich der Fokus auf Gründungen im IT-Sektor. Die Arbeit vertieft das Verständnis von OSS und CSS als wirtschaftliches Phänomen. Es zeigt sich, dass die Koexistenz vorteilhaft ist, und z.B. eine einseitige staatliche Förderung von OSS-Firmen durch Subventionen oder die Beschaffungspolitik abzulehnen ist

Die ökonomischen Eigenschaften von Software

Software ist ein Gut, welches besondere ökonomische Eigenschaften aufweist. In diesem Artikel werden - ausgehend von einer allgemeinen Definition des Gutes Software - systematisch zentrale ökonomische Eigenschaften herausgearbeitet, welche Implikationen für die Produktion und Kostenstruktur, die Nachfrage, der Bestreitbarkeit von Softwaremärkten und der Allokationseffizienz haben. Dabei hat es sich als sinnvoll erwiesen, die einzelnen Eigenschaften unter folgende Oberbegriffe zu subsummieren: Software als System zur Datenverarbeitung, Software als System von Befehlen bzw. Anweisungen, Software als rekombinierbares System, Software als ein nur in diskreten Einheiten nutzbares Gut, Software als komplexes System und Software als ein immaterielles Gut. Es zeigt sich, dass Software eine Fülle von ökonomisch relevanten Eignschaften aufweist, die von Netzwerkeffekten über subadditiver Nutzenfunktion bis hin zur Nichtrivalität reichen. Besonders hervorzuheben ist, dass Software sich von anderen Informationsgütern fundamental unterscheidet: Zum Einen fehlt ein aus Kundensicht relevanter additiver Nutzen, zum Anderen ist der durchschnittliche Nutzer/Konsument lediglich an dem Funktionieren der Algorithmen interessiert, nicht aber an der zugrundeliegenden Information.additiver Nutzen, binäre Nachfrage, digitale Güter, Erfahrungsgut, Humankapital, Informationgut, Kompatibilität, Komplexität, Netzwerkeffekte, Nichtrivalität im Konsum, Open Source, Rekombinierbarkeit, Software, subadditive Kostenfunktion, Wissen

Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models

In the ICT sector, product-software is an important factor for the quality of the products (e.g. cell phones). In this context, open source software enables firms to avoid quality competition as they can cooperate on quality without an explicit contract. The economics of open source (OS) versus closed source (CS) business models are analyzed in a general two- stage model that combines aspects of non-cooperative R&D with the theory of differentiated oligopolies: In stage one, firms develop software, either as OS or CS, or as a an OS-CS-mix if the license allows. In stage two, firms bundle this with complementary products and compete à la Cournot. The model allows for horizontal product differentiation in stage two. The finding are: 1.) While CS-decisions are always strategic substitutes, OS-decisions can be strategic complements. Furthermore, CS is a strategic substitute to OS and vice versa. 2.) The type of OS-license plays a crucial role: only if the license prohibits a direct OS-CS code mix (like the GPL), then Nash-equilibria with firms producing OS code exist for all parameters. 3.) In the equilibrium of a mixed industry with restricted licenses, OS-firms offer lower quality than their CS-rivals.open source, commercial open source, Cournot, R&D

Industry Self-Governance and National Security: On the Private Control of Dual Use Technologies

Private sector firms frequently sell dual use products that can be used to develop either civilian goods or weapons of mass destruction. The global character of these markets makes traditional regulation and treaty solutions difficult. Some existing initiatives by manufacturers have established private regulations that are stronger than official US policy. This paper explores the economic conditions that make such strong, industry-wide agreements stable. We assume two risks due to the dual use nature. First, upstream firms face legal liability if their products lead to a disaster. Second, a disaster may produce regulatory backlash, i.e. excessive government regulation that make downstream production prohibitive costly. We find that regulatory backlash is never an adequate substitute for perfect (i.e. full) liability and even makes the situation worse. Second, industry regulation enforced by downstream firms and optimal regulation converge when the downstream firms have strong market power. Next, we analyze when and why large downstream firms are able to force their preference for high levels of regulation on upstream suppliers. Finally we show that upstream incumbents may be able to deter entry in adopting a high regulatory standard

Institutions, culture, and open source

The paper analyzes the impact of institutional and cultural factors on a remarkable economic activity: the production of so-called open source software (OSS). OSS is marked by free access to the software and its source code. Copyright-based OSS licenses permit users to use, change, improve and redistribute the software, which is designed and developed in a public, collaborative manner. OSS seems to be an example of a 'private provision of a public good'. While the supply-side microeconomics of OSS (individual characteristics of OSS developers, role of firms etc.) are well explored, it is not known which institutional and cultural factors explain different OSS activities across countries. For this reason, we perform a cross-country study analyzing how the number of OSS developers per inhabitants and the level of OSS activity of a country depend on institutional and cultural factors. Our findings are that a culture characterized by individualism/self-determination, abundance of social capital interpreted as interpersonal trust, an optimistic view of scientific progress, a low degree of regulation as well as good protection of intellectual property rights is favoring OSS activities. Our study thus contributes to the understanding of the role of cultural and institutional factors in general as well as in particular with respect to OSS. Additionally, it improves the understanding of the supply-side of OSS

Who starts with open source? Institutional choice of start-ups in the German ICT sector

We analyze the characteristics of new businesses in the German ICT industry, distinguishing them based on their choice between two IPR regimes: open source software (OSS) or closed source software (CSS). The share of new firms with an OSS-based business model has increased considerably over the last several years. OSS-based firms tend to be smaller (in terms of staff and capital) and experience less shortages of capital. Only older cohorts of OSS-intensive start-ups had more difficulty than their CSS counterparts in convincing potential financiers of their viability, indicating that OSS business models are now well established. We find no evidence that the lower entry barriers for OSS firms are particularly attractive to start-ups with low human capital endowment or to necessity-motivated entrepreneurs