Industry Equilibrium with Open Source and Proprietary Firms

Gastón Llanes () and Ramiro de Elejalde

No 09-149, Harvard Business School Working Papers from Harvard Business School

Abstract: We present a model of industry equilibrium to study the coexistence of Open Source (OS) and Proprietary (P) firms. Two novel aspects of the model are: (1) participation in OS arises as the optimal decision of profit-maximizing firms, and (2) OS and P firms may (or may not) coexist in equilibrium. Firms decide their type and investment in R&D, and sell packages composed of a primary good (like software) and a complementary private good. The only difference between both kinds of firms is that OS share their technological advances on the primary good, while P keep their innovations private. The main contribution of the paper is to determine conditions under which OS and P coexist in equilibrium. Interestingly, this equilibrium is characterized by an asymmetric market structure, with a few large P firms and many small OS firms.

Keywords: Industry Equilibrium; Open Source; Innovation; Complementarity; Technology Sharing; Cooperation in R&D (search for similar items in EconPapers)
JEL-codes: D43 L17 O31 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2009-06
New Economics Papers: this item is included in nep-com, nep-cse, nep-ino, nep-ipr, nep-pr~, nep-mic, nep-sbm and nep-tid
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Citations: View citations in EconPapers (12)

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Journal Article: Industry equilibrium with open-source and proprietary firms (2013)
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