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Technology, property rights and organizational diversity in the software industry

  • Landini, Fabio

Why do open- and closed-source productions co-exist? To address this question, the paper studies the viability of distinct systems for software development. The model shows that: (a) for low design costs of modularity, both open- and closed-source productions are viable systems; (b) closed-source production is more likely to be adopted the greater the expected rents on software; and (c) production efficiency is not a necessary condition for the stochastic stability of a system to obtain. These three results can shed light on the emergence of organizational diversity in the software industry. The paper adds to the literature in three ways: first, it considers property rights and technology as endogenous variables in the process of system design; second it argues that in producing software multiple equilibrium designs may exist; and third, it shows that, in because of high rents and low design costs of modularity, production inefficiency can be persistent.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 23 (2012)
Issue (Month): 2 ()
Pages: 137-150

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Handle: RePEc:eee:streco:v:23:y:2012:i:2:p:137-150
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/525148

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  18. Ugo Pagano, 2010. "Interlocking Complementarities and Institutional Change," Department of Economics University of Siena 598, Department of Economics, University of Siena.
  19. Carliss Y. Baldwin & Kim B. Clark, 2006. "The Architecture of Participation: Does Code Architecture Mitigate Free Riding in the Open Source Development Model?," Management Science, INFORMS, vol. 52(7), pages 1116-1127, July.
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  23. Paul David & Joseph Shapiro, 2008. "Community-Based Production of Open Source Software: What Do We Know About the Developers Who Participate?," Discussion Papers 08-003, Stanford Institute for Economic Policy Research.
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