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Open Source Software and Firm Productivity

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  • Frank Nagle

    (Marshall School of Business, University of Southern California, Los Angeles, California 90089)

Abstract

As open source software (OSS) is increasingly used as a key input by firms, understanding its impact on productivity becomes critical. This study measures the firm-level productivity impact of nonpecuniary (free) OSS and finds a positive and significant value-added return for firms that have an ecosystem of complementary capabilities. There is no such impact for firms without this ecosystem of complements. Dynamic panel analysis, instrumental variables, and a variety of robustness checks are used to address measurement error concerns and to add support for a more causal interpretation of the results. For firms with an ecosystem of complements, a 1% increase in the use of nonpecuniary OSS leads to an increase in value-added productivity of between 0.002% and 0.008%. This effect is smaller for larger firms, and the results indicate that prior research underestimates the amount of IT firms use.

Suggested Citation

  • Frank Nagle, 2019. "Open Source Software and Firm Productivity," Management Science, INFORMS, vol. 65(3), pages 1191-1215, March.
    • Handle: RePEc:inm:ormnsc:v:65:y:2019:i:3:p:1191-1215
    DOI: 10.1287/mnsc.2017.2977
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