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The Economic Dynamics Of Software: Three Competing Business Models Exemplified Through Microsoft, Netscape And Linux


  • Maureen Mckelvey


This article proposes three ideal business models to analyze innovation in knowledge-intensive goods and services. The three models are 1) Firm-based control. 2) Hybrid, and 3) Network-based. Each is defined in relation to the two sides of innovation, e.g. creation of novelty and of economic value. Defining the models this way leads to a discussion of the advantages and disadvantages of each model for organizing the development of different types of software and for appropriating economic benefits. Each business model is .also exemplified through the economic history of one example. The examples are, respectively. Microsoft, Netscape and Linux. The concluding section relates software development to the broader forms of economic dynamics in knowledge-intensive sectors.

Suggested Citation

  • Maureen Mckelvey, 2001. "The Economic Dynamics Of Software: Three Competing Business Models Exemplified Through Microsoft, Netscape And Linux," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 10(2-3), pages 199-236.
  • Handle: RePEc:taf:ecinnt:v:10:y:2001:i:2-3:p:199-236 DOI: 10.1080/10438590100000009

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    References listed on IDEAS

    1. Nadiri, M Ishaq & Rosen, Sherwin, 1969. "Interrelated Factor Demand Functions," American Economic Review, American Economic Association, vol. 59(4), pages 457-471, Part I Se.
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    3. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
    4. Brouwer, Erik & Kleinknecht, Alfred & Reijnen, Jeroen O N, 1993. "Employment Growth and Innovation at the Firm Level," Journal of Evolutionary Economics, Springer, vol. 3(2), pages 153-159, May.
    5. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
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    7. Diewert, W E, 1971. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 481-507, May-June.
    8. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
    9. Julian R. Betts, 1997. "The Skill Bias Of Technological Change In Canadian Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 146-150, February.
    10. Daniel S. Hamermesh, 1993. "Labor Demand and the Source of Adjustment Costs," NBER Working Papers 4394, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Harison, Elad & Koski, Heli, 2010. "Applying open innovation in business strategies: Evidence from Finnish software firms," Research Policy, Elsevier, vol. 39(3), pages 351-359, April.
    2. Harison, Elad & Koski, Heli, 2006. "Innovative Software Business Strategies: Evidence from Finnish Firms," Discussion Papers 1042, The Research Institute of the Finnish Economy.

    More about this item


    Innovation; Evolutionary Economics; Micmsoft; Netscape; Linux; Software; IEL CIassification L86; 031; 032; 033;

    JEL classification:

    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software


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