IDEAS home Printed from https://ideas.repec.org/a/inm/orisre/v22y2011i1p22-38.html
   My bibliography  Save this article

Firms as Incubators of Open-Source Software

Author

Listed:
  • Amit Mehra

    (Indian School of Business, Hyderabad 500032, India)

  • Rajiv Dewan

    (William E. Simon School of Business Administration, University of Rochester, Rochester, New York 14627)

  • Marshall Freimer

    (William E. Simon School of Business Administration, University of Rochester, Rochester, New York 14627)

Abstract

Many successful open-source projects have been developed by programmers who were employed by firms but worked on open-source projects on the side because of economic incentives like career improvement benefits. Such side work may be a good thing for the employing firms, too, if they get some strategic value from the open-source software and if the productivity of the programmers on these projects improves through learning-by-doing effects. However, the programmers may work more or less on these projects than what is best for the firms. To manage the programmers' efforts, the firms set appropriate employment policies and incentives. These policies and career concerns then together govern the programmers' effort allocation between the open-source and proprietary projects. We examine this relationship using a variant of the principal/agent model. We derive and characterize optimal employment contracts and show that firms either offer a bonus for only one of the two projects or do not offer any bonuses. However, if attractive alternate employment opportunities are available, they change their strategy and may offer bonuses for both projects simultaneously.

Suggested Citation

  • Amit Mehra & Rajiv Dewan & Marshall Freimer, 2011. "Firms as Incubators of Open-Source Software," Information Systems Research, INFORMS, vol. 22(1), pages 22-38, March.
    • Handle: RePEc:inm:orisre:v:22:y:2011:i:1:p:22-38
    DOI: 10.1287/isre.1090.0276
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/isre.1090.0276
    Download Restriction: no
    File URL: https://libkey.io/10.1287/isre.1090.0276?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Josh Lerner & Jean Tirole, 2002. "Some Simple Economics of Open Source," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 197-234, June.
    2. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    3. Wai Fong Boh & Sandra A. Slaughter & J. Alberto Espinosa, 2007. "Learning from Experience in Software Development: A Multilevel Analysis," Management Science, INFORMS, vol. 53(8), pages 1315-1331, August.
    4. Lindbeck, Assar & Snower, Dennis J, 1996. "Reorganization of Firms and Labor-Market Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 315-321, May.
    5. Blaug, Mark, 1976. "The Empirical Status of Human Capital Theory: A Slightly Jaundiced Survey," Journal of Economic Literature, American Economic Association, vol. 14(3), pages 827-855, September.
    6. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 339-376.
    7. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-677, October.
    8. Justin Pappas Johnson, 2002. "Open Source Software: Private Provision of a Public Good," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 637-662, December.
    9. Laurie J. Kirsch, 1996. "The Management of Complex Tasks in Organizations: Controlling the Systems Development Process," Organization Science, INFORMS, vol. 7(1), pages 1-21, February.
    10. Andrew Weiss, 1995. "Human Capital vs. Signalling Explanations of Wages," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 133-154, Fall.
    11. repec:dau:papers:123456789/10093 is not listed on IDEAS
    12. Hertel, Guido & Niedner, Sven & Herrmann, Stefanie, 2003. "Motivation of software developers in Open Source projects: an Internet-based survey of contributors to the Linux kernel," Research Policy, Elsevier, vol. 32(7), pages 1159-1177, July.
    13. von Krogh, Georg & Spaeth, Sebastian & Lakhani, Karim R., 2003. "Community, joining, and specialization in open source software innovation: a case study," Research Policy, Elsevier, vol. 32(7), pages 1217-1241, July.
    14. Ray Reagans & Linda Argote & Daria Brooks, 2005. "Individual Experience and Experience Working Together: Predicting Learning Rates from Knowing Who Knows What and Knowing How to Work Together," Management Science, INFORMS, vol. 51(6), pages 869-881, June.
    15. Gibbons, Robert & Murphy, Kevin J, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 468-505, June.
    16. Tanya Menon & Jeffrey Pfeffer, 2003. "Valuing Internal vs. External Knowledge: Explaining the Preference for Outsiders," Management Science, INFORMS, vol. 49(4), pages 497-513, April.
    17. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    18. Lindbeck, Assar & Snower, Dennis J, 2000. "Multitask Learning and the Reorganization of Work: From Tayloristic to Holistic Organization," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 353-376, July.
    19. Xavier Pautrel, 2004. "A note on multitask learning and the reorganization of work," Economics Bulletin, AccessEcon, vol. 10(5), pages 1-6.
    20. Rajiv Lal & V. Srinivasan, 1993. "Compensation Plans for Single- and Multi-Product Salesforces: An Application of the Holmstrom-Milgrom Model," Management Science, INFORMS, vol. 39(7), pages 777-793, July.
    21. Milbourn, Todd T & Shockley, Richard L & Thakor, Anjan V, 2001. "Managerial Career Concerns and Investments in Information," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 334-351, Summer.
    22. Eve Caroli & John Van Reenen, 2001. "Skill-Biased Organizational Change? Evidence from A Panel of British and French Establishments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1449-1492.
    23. Mark R. Killingsworth, 1982. ""Learning by Doing" and "Investment in Training": A Synthesis of Two "Rival" Models of the Life Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 263-271.
    24. Melissa A. Schilling & Patricia Vidal & Robert E. Ployhart & Alexandre Marangoni, 2003. "Learning by Doing Something Else: Variation, Relatedness, and the Learning Curve," Management Science, INFORMS, vol. 49(1), pages 39-56, January.
    25. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 169-182.
    26. Jeffrey A. Roberts & Il-Horn Hann & Sandra A. Slaughter, 2006. "Understanding the Motivations, Participation, and Performance of Open Source Software Developers: A Longitudinal Study of the Apache Projects," Management Science, INFORMS, vol. 52(7), pages 984-999, July.
    27. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
    28. Lakhani, Karim R. & von Hippel, Eric, 2003. "How open source software works: "free" user-to-user assistance," Research Policy, Elsevier, vol. 32(6), pages 923-943, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Christian Bartelheimer & Philipp Heiden & Hedda Lüttenberg & Daniel Beverungen, 2022. "Systematizing the lexicon of platforms in information systems: a data-driven study," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(1), pages 375-396, March.
    2. Il-Horn Hann & Jeffrey A. Roberts & Sandra A. Slaughter, 2013. "All Are Not Equal: An Examination of the Economic Returns to Different Forms of Participation in Open Source Software Communities," Information Systems Research, INFORMS, vol. 24(3), pages 520-538, September.
    3. Sebastian Spaeth & Georg von Krogh & Fang He, 2015. "Research Note —Perceived Firm Attributes and Intrinsic Motivation in Sponsored Open Source Software Projects," Information Systems Research, INFORMS, vol. 26(1), pages 224-237, March.
    4. Christian Bartelheimer, Philipp zur Heiden, Hedda Lüttenberg, Daniel Beverungen, 2021. "Systematizing the Lexicon of Platforms in Information Systems: A Data-Driven Study," Working Papers Dissertations 79, Paderborn University, Faculty of Business Administration and Economics.
    5. Terrence August & Hyoduk Shin & Tunay I. Tunca, 2018. "Generating Value Through Open Source: Software Service Market Regulation and Licensing Policy," Information Systems Research, INFORMS, vol. 29(1), pages 186-205, March.
    6. Peng Huang & Marco Ceccagnoli & Chris Forman & D.J. Wu, 2022. "IT Knowledge Spillovers, Absorptive Capacity, and Productivity: Evidence from Enterprise Software," Information Systems Research, INFORMS, vol. 33(3), pages 908-934, September.
    7. Ravi Bapna & Nishtha Langer & Amit Mehra & Ram Gopal & Alok Gupta, 2013. "Human Capital Investments and Employee Performance: An Analysis of IT Services Industry," Management Science, INFORMS, vol. 59(3), pages 641-658, November.
    8. Matt Germonprez & Julie E. Kendall & Kenneth E. Kendall & Lars Mathiassen & Brett Young & Brian Warner, 2017. "A Theory of Responsive Design: A Field Study of Corporate Engagement with Open Source Communities," Information Systems Research, INFORMS, vol. 28(1), pages 64-83, March.
    9. Wei Chen & Fujie Jin & Ling Xue, 2022. "Flourish or Perish? The Impact of Technological Acquisitions on Contributions to Open-Source Software," Information Systems Research, INFORMS, vol. 33(3), pages 867-886, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Param Vir Singh & Yong Tan & Nara Youn, 2011. "A Hidden Markov Model of Developer Learning Dynamics in Open Source Software Projects," Information Systems Research, INFORMS, vol. 22(4), pages 790-807, December.
    2. Engelhardt, Sebastian v. & Freytag, Andreas, 2013. "Institutions, culture, and open source," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 90-110.
    3. Il-Horn Hann & Jeffrey A. Roberts & Sandra A. Slaughter, 2013. "All Are Not Equal: An Examination of the Economic Returns to Different Forms of Participation in Open Source Software Communities," Information Systems Research, INFORMS, vol. 24(3), pages 520-538, September.
    4. A. Yalta & A. Yalta, 2010. "Should Economists Use Open Source Software for Doing Research?," Computational Economics, Springer;Society for Computational Economics, vol. 35(4), pages 371-394, April.
    5. Giuri, Paola & Ploner, Matteo & Rullani, Francesco & Torrisi, Salvatore, 2010. "Skills, division of labor and performance in collective inventions: Evidence from open source software," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 54-68, January.
    6. Alger Ingela & Ma Ching-to Albert & Renault Regis, 2012. "Experience Benefits and Firm Organization," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-35, September.
    7. Dahlander, Linus & Wallin, Martin W., 2006. "A man on the inside: Unlocking communities as complementary assets," Research Policy, Elsevier, vol. 35(8), pages 1243-1259, October.
    8. Pankaj Setia & Balaji Rajagopalan & Vallabh Sambamurthy & Roger Calantone, 2012. "How Peripheral Developers Contribute to Open-Source Software Development," Information Systems Research, INFORMS, vol. 23(1), pages 144-163, March.
    9. Sherae Daniel & Ritu Agarwal & Katherine J. Stewart, 2013. "The Effects of Diversity in Global, Distributed Collectives: A Study of Open Source Project Success," Information Systems Research, INFORMS, vol. 24(2), pages 312-333, June.
    10. Maha Shaikh & Emmanuelle Vaast, 2016. "Folding and Unfolding: Balancing Openness and Transparency in Open Source Communities," Information Systems Research, INFORMS, vol. 27(4), pages 813-833, December.
    11. Jeffrey A. Roberts & Il-Horn Hann & Sandra A. Slaughter, 2006. "Understanding the Motivations, Participation, and Performance of Open Source Software Developers: A Longitudinal Study of the Apache Projects," Management Science, INFORMS, vol. 52(7), pages 984-999, July.
    12. Chen Zhang & Jungpil Hahn & Prabuddha De, 2013. "Research Note ---Continued Participation in Online Innovation Communities: Does Community Response Matter Equally for Everyone?," Information Systems Research, INFORMS, vol. 24(4), pages 1112-1130, December.
    13. Sharon Belenzon & Mark Schankerman, 2015. "Motivation and sorting of human capital in open innovation," Strategic Management Journal, Wiley Blackwell, vol. 36(6), pages 795-820, June.
    14. repec:dau:papers:123456789/12408 is not listed on IDEAS
    15. Smirnova, Inna & Reitzig, Markus & Alexy, Oliver, 2022. "What makes the right OSS contributor tick? Treatments to motivate high-skilled developers," Research Policy, Elsevier, vol. 51(1).
    16. Belenzon, Sharon & Schankerman, Mark, 2008. "Motivation and sorting in open source software innovation," LSE Research Online Documents on Economics 51594, London School of Economics and Political Science, LSE Library.
    17. Belenzon, Sharon & Schankerman, Mark, 2015. "Motivation and sorting of human capital in open innovation," LSE Research Online Documents on Economics 58514, London School of Economics and Political Science, LSE Library.
    18. Islam, Mazhar & Miller, Jacob & Park, Haemin Dennis, 2017. "But what will it cost me? How do private costs of participation affect open source software projects?," Research Policy, Elsevier, vol. 46(6), pages 1062-1070.
    19. Anil Arya & Brian Mittendorf, 2007. "The Benefits of Aggregate Performance Metrics in the Presence of Career Concerns," Yale School of Management Working Papers amz2549, Yale School of Management, revised 01 Jan 2009.
    20. Bitzer, Jürgen & Geishecker, Ingo, 2010. "Who contributes voluntarily to OSS? An investigation among German IT employees," Research Policy, Elsevier, vol. 39(1), pages 165-172, February.
    21. Boucekkine, Raouf & Crifo, Patricia, 2008. "Human Capital Accumulation And The Transition From Specialization To Multitasking," Macroeconomic Dynamics, Cambridge University Press, vol. 12(3), pages 320-344, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:orisre:v:22:y:2011:i:1:p:22-38. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.