Firms in Open Source Software Development

In the software market, the recent trend seems to be moving toward the development, use, and adoption of open source software (OSS). Various venture capital (VC) deals and acquisitions of OSS firms by large software vendors document the increasing prevalence of OSS in business (Von Kortzfleisch et al. 2010), such as the acquisition of JBoss by RedHat in April 2006 for approximately $ 350 million, the acquisition of Sleepycat by Oracle in February 2006 or the $ 1 billion acquisition of MySQL by Sun in January 2008. In addition, IBM's investment in Linux (Iansiti & Richards 2006), Google's initiation of the Android platform, which has already reached second place in the mobile operating systems market, or the recently announced alliance between Nokia and Intel for the development of their own OSS operating system for mobile phones named MeGoo show, that even software user firms – and not software vendors only – invest in the OSS development approach.

As discussed in the introductory chapter, this dissertation aims to explore the role of firms and their employed developers within OSS communities. I further argued that the business model a firm is applying in order to benefit from OSS adoption, development, or distribution, is equally important to understand the phenomenon. However, since software development in general may be viewed as a form of innovative activity (Buxmann, Diefenbach & Hess 2008), being able to classify possible results of this dissertation against existing knowledge on innovation management requires a full understanding of how innovation emerges within and outside the research and development (R&D) boundaries of the firm. As current management thinking is predominantly influenced by the resource-based view of the firm (RBV; e.g., Barney 1991, Makadok 2001, Peteraf & Barney 2003) and new institutional economics, which is an economic perspective on social and legal norms that determine the choice of integrating external resources or not (e.g., Frese 2000, Samuels 1998, Valcárcel 2002), I will start with a discussion about firm boundaries in the light of new institutional economics, RBV, and appropriability regimes.

This chapter captures a boundary spanning position between Chapter 2, which was intended to outline the challenges firms are confronted with by opening their boundaries, and Chapters 4 and 5. To fulfill its designated function, the phenomenon of firm participation in the development of OSS will first be presented against the background of managing innovation beyond firm boundaries. Second, to deepen the understanding of firm participation, the role of business models and their underlying basic economic principles will be highlighted. Third, building upon a distinctive understanding of value creation and value capture, specific characteristics of OSS will be expanded to a systematization of OSS business models. However, the commercialization of existing OSSDPs is likely to disrupt natural governance structures of OSS communities (O’Mahony & Ferraro 2007).

It is generally assumed that in times of high competition, the ability to innovate is of high importance to corporate R&D. Moreover, a growing body of management research takes as its central assumption, that opening the boundaries of the firm potentially increases its innovative performance (Chesbrough 2003b, Laursen & Salter 2006, Lichtenthaler 2010a, Enkel, Gassmann & Chesbrough 2009). In addition to the general trend of opening R&D processes to external participants (Chesbrough 2006), which is currently discussed under the term open innovation, a further notable (but not necessarily new) trend is that firms increasingly make use of R&D alliances and consortia (Garringa, Von Krogh & Spaeth 2011).

As discussed throughout the dissertation, firms are able to profit from technological developments without having ownership. However, as with any public good, the absence of ownership of the invention means the innovating firm has limited options of protecting what they do not own against unintended use by legal means. Admittedly, they might obtain control over the project by assigning their own developers to work for an OSSDP. In turn, developers working in an OSSDP who earn salaries from the firm are also simultaneously embedded in organizational settings of the firm for which they work (Henkel 2009). By inserting their norms and beliefs, which partly reflect the employing firm's interest, into the OSSDP, these employees allow firms to (indirectly) influence the project’s trajectory – depending on the number of programmers assigned and their role on the project. Dahlander & O’Mahony (2011) consequently note that firms do not necessarily need to gain control over a project as long as they control individuals working on that project. This was the basis for the introduction of CBL and RDBC as means to supervise a project’s development.

The increasing prevalence of OSS as a format to manage innovation beyond firm boundaries with potentially reduced costs and increased access to external resources demands a better understanding of the options firms have to control what happens outside their walls.