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The Impact of Open Source Software on the Strategic Choices of Firms Developing Proprietary Software

Authors:

Jeevan Jaisingh,

Kar TamAuthors Info & Claims

Journal of Management Information Systems, Volume 25, Issue 3

Pages 241 - 276

https://doi.org/10.2753/MIS0742-1222250307

Published: 01 December 2008 Publication History

Abstract

Open source software (OSS) is now posing significant competition to proprietary or closed source software (CSS) in several software markets. In this paper, we characterize the response of a firm developing CSS (where the CSS is a revenue earner) to the presence of an OSS in its market. In particular, we look at the firm's choice of resource investments to improve quality and the firm's pricing decisions. We are primarily motivated by the following questions: Would a firm producing CSS produce higher-quality software when it faces competition from an OSS than when there is no OSS in its market? Would there be a change in the firm's response if the CSS faced competition from another CSS in addition to competition from the OSS? We show that the firm produces lower-quality CSS when it faces competition from an OSS than when it does not. Also, the quality of the CSS decreases as the quality of the OSS increases. This result holds true even if we consider network effects. When we consider competition from another CSS, in addition to competition from the OSS, then the quality of the CSS could increase or decrease as the quality of the OSS increases. The change in quality depends on how closely substitutable the two CSS are. We also extend our base model to consider (1) competition for resources, (2) uncertainty in resources available to the OSS, and (3) uncertainty about the software development process.

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Cited By

Eiras FPetrov AVidgen BDe Witt CPizzati FElkins KMukhopadhyay SBibi ACsaba BSteibel FBarez FSmith GGuadagni GChun JCabot JImperial JNolazco-Flores JLanday LJackson MRöttger PTorr PDarrell TLee YFoerster JSalakhutdinov RKolter ZHeller KWeller AOliver NScarlett JBerkenkamp F(2024)PositionProceedings of the 41st International Conference on Machine Learning10.5555/3692070.3692561(12348-12370)Online publication date: 21-Jul-2024
https://dl.acm.org/doi/10.5555/3692070.3692561
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The Impact of Open Source Software on the Strategic Choices of Firms Developing Proprietary Software
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Published In

cover image Journal of Management Information Systems

Journal of Management Information Systems Volume 25, Issue 3

Number 3 / Winter 2008-9

371 pages

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Publisher

M. E. Sharpe, Inc.

United States

Publication History

Published: 01 December 2008

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Cited By

Eiras FPetrov AVidgen BDe Witt CPizzati FElkins KMukhopadhyay SBibi ACsaba BSteibel FBarez FSmith GGuadagni GChun JCabot JImperial JNolazco-Flores JLanday LJackson MRöttger PTorr PDarrell TLee YFoerster JSalakhutdinov RKolter ZHeller KWeller AOliver NScarlett JBerkenkamp F(2024)PositionProceedings of the 41st International Conference on Machine Learning10.5555/3692070.3692561(12348-12370)Online publication date: 21-Jul-2024
https://dl.acm.org/doi/10.5555/3692070.3692561
August TChen WZhu K(2021)Competition Among Proprietary and Open-Source Software FirmsManagement Science10.1287/mnsc.2020.367467:5(3041-3066)Online publication date: 1-May-2021
https://dl.acm.org/doi/10.1287/mnsc.2020.3674
Gao X(2020)Open Source or Closed Source? A Competitive Analysis with Software SecurityDecision Analysis10.1287/deca.2019.039017:1(56-73)Online publication date: 1-Mar-2020
https://dl.acm.org/doi/10.1287/deca.2019.0390
Olson DJohansson BDe Carvalho R(2018)Open source ERP business model frameworkRobotics and Computer-Integrated Manufacturing10.1016/j.rcim.2015.09.00750:C(30-36)Online publication date: 1-Apr-2018
https://dl.acm.org/doi/10.1016/j.rcim.2015.09.007
Carillo KHuff SChawner B(2017)What makes a good contributor? Understanding contributor behavior within large Free/Open Source Software projects A socialization perspectiveThe Journal of Strategic Information Systems10.1016/j.jsis.2017.03.00126:4(322-359)Online publication date: 1-Dec-2017
https://dl.acm.org/doi/10.1016/j.jsis.2017.03.001
Santos CKuk GKon FPearson J(2013)The attraction of contributors in free and open source software projectsThe Journal of Strategic Information Systems10.1016/j.jsis.2012.07.00422:1(26-45)Online publication date: 1-Mar-2013
https://dl.acm.org/doi/10.1016/j.jsis.2012.07.004
Meissonierm RBourdon IAmabile SBoudrandi S(2012)Toward an Enacted Approach to Understanding OSS Developer's MotivationsInternational Journal of Technology and Human Interaction10.4018/jthi.20120101038:1(38-54)Online publication date: 1-Jan-2012
https://dl.acm.org/doi/10.4018/jthi.2012010103
Tang QGu BWhinston A(2012)Content Contribution for Revenue Sharing and Reputation in Social MediaJournal of Management Information Systems10.2753/MIS0742-122229020329:2(41-76)Online publication date: 1-Oct-2012
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Temizkan OKumar RPark SSubramaniam C(2012)Patch Release Behaviors of Software Vendors in Response to VulnerabilitiesJournal of Management Information Systems10.2753/MIS0742-122228041128:4(305-338)Online publication date: 1-Apr-2012
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Cheng HLiu YTang Q(2011)The Impact of Network Externalities on the Competition Between Open Source and Proprietary SoftwareJournal of Management Information Systems10.2753/MIS0742-122227040727:4(201-230)Online publication date: 1-Apr-2011
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