SUMMARY

OPEN SOURCE SOFTWARE AND THE “PRIVATE-COLLECTIVE”

INNOVATION MODEL: ISSUE OF ORGANIZATIONAL SCIENCE

ERIC VON HIPPLE – GEORG VON KROGH

The main focus of the reading is how open source software led to a “private-
collective” innovation model that combined aspects from the two prevailing
models of innovation in organizational science (businesses), that of “private
investment” and “collective action” innovation models.

As described the “private investment model assumes returns to the

innovator result from private goods and efficient regimes of intellectual
property protection”, whilst the “collective action model assumes that under
conditions of market failure, innovators collaborate in order to produce a
public good.”

Open Source software has said to be a growing phenomenon over the last
15 years, where mainly users of programs freely collaborate to solve their
own, as well as technical problems. Some of the well know examples of
Open Source software having many users include GNU/Linux Operating
System, Apache Server Software and Perl Programming Language.

Open Source Software arises from the behavior of individuals in a

community that work to modify and build upon software code. This software
code is usually made freely accessible to the community. Usually the term
coined “hacker” is put upon those that are very talented and dedicated to
programming of software (this is the positive “hacker” term). Nowadays,
more than ever do you find either small groups, or individuals seeking to
bring up new codes to share and for other people to work on. The open
source way of free informational access promotes continual improvement to
software.

One major issue has been that of intellectual property. If the “Private
Investment” model restricts access (copyright), on the other hand you have
“Collective Action” model which protects rights through copyleft1. This
ensured that the software could be continually developed and made freely
to every user, whilst commercial software restated access due leverage
private gains.

Open Source hence offers the possibility for research opportunities and
continual improvement. What are the incentives to innovating through open
source mechanisms and how does this fit into the “Private-Collective”
innovation model?

1
The opposite of copyright, as explained by Richard Stallman “Where copyright
protects a creator's right to control copies and changes to a work, copyleft protects
a user's right to copy and change a work and keep it continuously free.”
(www.netc.org/openoptions/appendices/glossary.html)
The Private-Collective model takes the form similar to of a Public Good (non-
rivalry and non-excludability) and combines characteristics of the other
innovation models (see below). This is said to be evidently present in open
source software, where “participants in open source software projects use
their own resources to privately invest in creating novel software code. In
principle, these innovators could then claim propriety rights over their code,
but instead chose to freely reveal it as a public good. Clearly, the nest result
of this behavior appears to offer society the best of both worlds – new
knowledge is created by private funding and then offered freely to all.”
These benefits are futher enchanced by the internet where innovation can
be leveraged at a distance (people being apart from each other) and not
restricted to time constraints of a business organization.

Hence, the question remains, where do the incentives lie? The motivation to
participate is that there are private (hidden) rewards. Participants practice
their programming knowledge and get to feel part of a community that
seeks similar objectives and shares similar interests. The private gains (as
previously stated) are said to be greater than the private losses (for not
copyrighting the source code), it is in these situations where the Private
Collection Innovation model takes action. “Independent of any potential
private gain from free revealing of an innovation, any private losses
associated with this action will typically be quite low” and when “some
holders of a given innovation face low rivalry conditions and so are likely to
freely reveal, it does not benefit any holder of that same information to keep
it private”. These are the areas where balances between the other two
innovation models are stricken.

However, finally there are issues regarding free-riders (common to public

goods), and even these are seen to be overcome by the fact that those
users that use the source code (and don’t further develop it) can in turn
detect bugs and in addition raise awareness and recognition levels by
increasing the source code use. In addition, some participants in the
community might free-ride some software’s but be actively participating in
the development of other open source codes, but the impending private
reward is still considered to be greater than the free-riding option,
constituting a situation similar to the that of “prisoners dilemma”, where
collaboration presents greater payoffs.

On a latter note, the authors also point out that this has also led to changing
leadership roles throughout the development of open source software and
how this affects the structure of any organization, of people or business.

Despite depicting a better understating of innovation amongst “distributed

users who derive utility from freely revealing their information-based
innovation to produce a collective good”, the authors don’t present any
numerical evidence in support of most of their arguments.