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Harvard Business School working paper on Open Source / Mixed Source

Oct 21, 2009, 15:32 (0 Talkback[s])
(Other stories by Ramon Casadesus-Masanell, Gastón Llanes)

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"Proprietary software, on the other hand, results in superior value capture because the intellectual property remains under the control of the original developer. While the straightforward rationale for "mixed source" (a combination of the two) is appealing, what does it mean for a business model? Under what circumstances should a profit-maximizing firm adopt a mixed source business model? How should firms respond to competitors' adoption of mixed source business models? And what are the right pricing structures under mixed source compared with the proprietary business model? In this paper the researchers analyze a model where firms with modular software must decide which modules to open and which to keep proprietary. Findings can be directly applied to the design of optimal business strategies. Key concepts include:

* Firms may become more closed in response to competition from an outside open source (OS) project, and are more likely to use a proprietary business model.

* Firms are more likely to open substitute, rather than complementary, modules to existing OS projects.

* Low-quality firms are generally more prone to opening some of their technologies than firms with high-quality products."

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