Mixed Source

Ramon Casadesus-Masanell () and Gastón Llanes ()
Additional contact information
Ramon Casadesus-Masanell: Harvard Business School, Harvard University, http://www.casadesus-masanell.com/

No 09-06, Working Papers from NET Institute

Abstract: We study competitive interaction between profit-maximizing firms that sell software and complementary goods or services. In addition to tactical price competition, we allow firms to compete through business model reconfigurations. We consider three business models: the proprietary model (where all software modules offered by the firm are proprietary), the open source model (where all modules are open source), and the mixed source model (where a few modules are open). When a firm opens one of its modules, users can access and improve the source code. At the same time, however, opening a module sets up an open source (free) competitor. This hampers the firm's ability to capture value. We analyze three competitive situations: monopoly, commercial firm vs. non-profit open source project, and duopoly. We show that: (i) firms may become "more closed" in response to competition from an outside open source project; (ii) firms are more likely to open substitute, rather than complementary, modules to existing open source projects; (iii) when the products of two competing firms are similar in quality, firms differentiate through choosing different business models; and (iv) low-quality firms are generally more prone to opening some of their technologies than firms with high-quality products.

Keywords: Open Source; User Innovation; Business Models; Complementarity; Vertical Differentiation; Value Creation; Value Capture (search for similar items in EconPapers)
JEL-codes: D43 L17 O31 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2009-09, Revised 2009-09
New Economics Papers: this item is included in nep-com, nep-ipr, nep-pr~, nep-mic and nep-tid
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Related works:
Journal Article: Mixed Source (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:net:wpaper:0906

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