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When Does a Firm Support Substitute Open Source Programming?
Author(s) -
Mustonen Mikko
Publication year - 2005
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.2005.00036.x
Subject(s) - standardization , incentive , incentive compatibility , compatibility (geochemistry) , network effect , open source , business , valuation (finance) , profit (economics) , welfare , microeconomics , industrial organization , software , computer science , economics , finance , operating system , market economy , geochemistry , geology
Software firms are observed to support programmers' communities, which develop rival open source programs. A firm selling a copyright program has an incentive to support substitute copyleft programming when support creates compatibility between the programs and programs exhibit network effects. Costly compatibility benefits the firm as its consumers gain access to the community's services but may also hurt the firm because it cannot profit from the valuation difference between incompatible networks. The incentive arises under a weak network effect even when the consumers' benefit is small. Standardization and enlarging the open source programmers' community do not always increase welfare.