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We analyze the characteristics of new businesses in the German ICT industry under two institutional regimes: open source software (OSS) versus closed source software (CSS). These two concepts differ with respect to intellectual property rights. The share of start-up firms with an OSS-based business model has considerably increased over the last years. Differences in the level of OSS usage in the various business fields can be explained by the characteristics of the respective start-up firms. OSS-based firms tend to be smaller and experience less shortages of capital although they may have larger problems to convince potential financiers to invest. OSS start-ups tend to be more human capital intensive than their CSS counterparts and have, therefore, more often problems to acquire appropriate personnel. We find no indication that the lower entry barriers for OSS firms are particularly attractive to necessity-motivated entrepreneurs

Who Starts with Open Source? Institutional Choice of Start-Ups in the German ICT Sector