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The Jukebox Mode of Innovation - A Model of Commercial Open Source Development

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  • Henkel, Joachim

Abstract

In this Paper, I explore the circumstances under which innovation processes without secrecy or intellectual property protection are viable, and where free revealing of innovations is a profit-maximizing strategy. Motivated by an empirical study of embedded Linux, I develop a duopoly model of quality competition. Firms require two complementary technologies as inputs, but differ with respect to the relative importance of these technologies. I find that a regime with compulsory revealing can lead to higher product qualities and higher profits than a proprietary regime. When the decision to reveal is endogenized, equilibria with voluntary revealing arise, again superior to the proprietary outcome.

Suggested Citation

  • Henkel, Joachim, 2004. "The Jukebox Mode of Innovation - A Model of Commercial Open Source Development," CEPR Discussion Papers 4507, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4507
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    Cited by:

    1. Engelhardt, Sebastian v. & Freytag, Andreas, 2013. "Institutions, culture, and open source," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 90-110.
    2. Robert M. Sauer, 2007. "Why develop open-source software? The role of non-pecuniary benefits, monetary rewards, and open-source licence type," Oxford Review of Economic Policy, Oxford University Press, vol. 23(4), pages 605-619, Winter.
    3. Massimo D'Antoni & Maria Alessandra Rossi, 2014. "Appropriability and Incentives with Complementary Innovations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 103-124, March.
    4. Stephen M. Maurer & Suzanne Scotchmer, 2006. "Open Source Software: The New Intellectual Property Paradigm," NBER Working Papers 12148, National Bureau of Economic Research, Inc.
    5. Reisinger, Markus & Ressner, Ludwig & Schmidtke, Richard & Thomes, Tim Paul, 2014. "Crowding-in of complementary contributions to public goods: Firm investment into open source software," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 78-94.
    6. Ramon Casadesus-Masanell & Gastón Llanes, 2011. "Mixed Source," Management Science, INFORMS, vol. 57(7), pages 1212-1230, July.
    7. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, Elsevier.
    8. Llanes, Gastón & de Elejalde, Ramiro, 2013. "Industry equilibrium with open-source and proprietary firms," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 36-49.
    9. Nicolas Jullien & Jean-Benoît Zimmermann, 2011. "FLOSS in an industrial economics perspective," Revue d'économie industrielle, De Boeck Université, vol. 0(4), pages 39-64.
    10. Nicolas Jullien & Jean-Benoît Zimmermann, 2011. "Floss firms, users and communities: a viable match?," Journal of Innovation Economics, De Boeck Université, vol. 0(1), pages 31-53.
    11. Sebastian von Engelhardt, 2010. "Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models," Jena Economic Research Papers 2010-034, Friedrich-Schiller-University Jena.
    12. Henkel, Joachim, 2006. "Selective revealing in open innovation processes: The case of embedded Linux," Research Policy, Elsevier, vol. 35(7), pages 953-969, September.

    More about this item

    Keywords

    development collaboration; embedded linux; innovation; open source software;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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