Community versus Firm. Increasing Returns to Creative-Adoption and Techno-Institutional Competition in the Software Sector

This paper explores the preperties of a mechanism for wealth and value creation that has been considered as especially powerful in a knowledge and network-based economy: Increasing Returns to Adoption (IRA), which was initially conceptualized by Arthur (1989). The paper argues firstly that because of its relatively passive and individualistic conception of adopter-users, the concept of IRA has limitations for the analysis of the dynamics of technological competition. An expanded concept of IRA ­ Increasing Returns to Creative Adoption ­ is proposed that integrates an active user in the process of innovation and a capacity for collective self-organization under the form of productive communities of userinnovators. The paper then continues to argue that two techno-institutional "models" compete with each other: the "closed technology" of firms and the "open technology" of communities. The two models differ from each other according to the capacity of the former to exploit "simple" IRAs and of the latter to exploit the "richer" mechanism of IRCA. The argument is illustrated by means of a case study of the on-going competition between the socalled "libre-software communities" (Linux-GPL) and Windows-Microsoft in the computer software sector.