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

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Author Info
Sebastian von Engelhardt
Sushmita Swaminathan

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Abstract

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.

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Publisher Info
Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 799.

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Length: III, 25 p.
Date of creation: 2008
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Handle: RePEc:diw:diwwpp:dp799

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Related research
Keywords: Intellectual Property rights; software; open source; spillovers; co-existence; innovative growth;

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Find related papers by JEL classification:
L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. James Bessen & Robert M. Hunt, 2007. "An Empirical Look at Software Patents," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 16(1), pages 157-189, 03. [Downloadable!] (restricted)
    Other versions:
  2. Robert Hunt & James Bessen, 2004. "The software patent experiment," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 22-32. [Downloadable!]
  3. Danny Quah, 2003. "Digital Goods and the New Economy," CEP Discussion Papers dp0563, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  4. Frederick R. Warren-Boulton & Kenneth C. Baseman & Glenn A. Woroch, 1994. "The Economics of Intellectual Property Protection for Software: The Proper Role for Copyright," Industrial Organization 9411004, EconWPA. [Downloadable!]
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    Other versions:
  6. Jeffrey Church & Ian King, 1993. "Bilingualism and Network Externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 337-45, May. [Downloadable!] (restricted)
  7. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. James Bessen, 2006. "A Comment on “Do Patents Facilitate Financing in the Software Industry?”," Working Papers 0601, Research on Innovation. [Downloadable!]
  9. Nancy Gallini and Suzanne Scotchmer., 2001. "Intellectual Property: When Is It the Best Incentive System?," Economics Working Papers E01-303, University of California at Berkeley. [Downloadable!]
    Other versions:
  10. James Bessen, 2004. "Patent Thickets: Strategic Patenting of Complex Technologies," Working Papers 0401, Research on Innovation. [Downloadable!]
  11. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc. [Downloadable!]
  12. Justin Pappas Johnson, 2002. "Open Source Software: Private Provision of a Public Good," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 11(4), pages 637-662, December. [Downloadable!] (restricted)
  13. Crampes, Claude & Langinier, Corinne, 2005. "Are Intellectual Property Rights Detrimental to Innovation?," Staff General Research Papers 12267, Iowa State University, Department of Economics. [Downloadable!]
  14. Arundel, Anthony, 2001. "The relative effectiveness of patents and secrecy for appropriation," Research Policy, Elsevier, vol. 30(4), pages 611-624, April. [Downloadable!] (restricted)
  15. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science. [Downloadable!]
    Other versions:
  16. Noel, Michael D. & Schankerman, Mark, 2006. "Strategic Patenting and Software Innovation," CEPR Discussion Papers 5701, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  17. Michael Noel & Mark Schankerman, 2006. "Strategic Patenting and Software Innovation," STICERD - Economics of Industry Papers 43, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
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  19. James J. Anton & Dennis A. Yao, 2004. "Little Patents and Big Secrets: Managing Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 1-22, Spring.
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alexia Gaudeul, 2008. "Consumer Welfare and Market Structure in a Model of Competition Between Open Source and Proprietary Software," Working Papers 08-31, Centre for Competition Policy, University of East Anglia. [Downloadable!]
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