Why companies don’t always freeride on open source projects

I presented on open source foundations earlier this week to economist friends at TU Munich. I naturally got the question about freeriding: Why does anyone contribute to open source projects, if they could do something else with their time? The cinch: This time we are talking about companies, not invididual people, so the arguments about altruism and signaling don’t apply. So, why do companies contribute and don’t just freeride? I don’t think this question has been answered well yet in economics, and I’m not sure established theory has a ready answer.

To make it short: I believe the most direct reason why companies contribute to open source projects is to lower their cost of consumption of that very project. Specifically, contributing to a project builds competence in that project, and employing committers builds additional foresight and influence. General compentence makes the company use the software more effectively, avoiding costly bugs and rework. Foresight and influence helps the company avoid misalignment of their products with the evolving open source software they depend on. Such misalignment can also lead to costly rework and missed market opportunities.

I’m not aware of any RoI model that helps an engineering manager determine how much to contribute to achieve how much lower consumption costs and risks. Because of the step function from contributor to committer status for the involved employees, the investment return is not a linear function, that much we can say. The rest remains imperfect science for now.

References

Alexy, O., George, G., & Salter, A. J. (2013). Cui bono? The selective revealing of knowledge and its implications for innovative activity. Academy of Management Review, 38(2), 270-291.

Dahlander, L. (2007). Penguin in a new suit: a tale of how de novo entrants emerged to harness free and open source software communities. Industrial and corporate change, 16(5), 913-943.

Gruber, M., & Henkel, J. (2006). New ventures based on open innovation–an empirical analysis of start-up firms in embedded Linux. International Journal of Technology Management, 33(4), 356-372.

Henkel, J. (2006). Selective revealing in open innovation processes: The case of embedded Linux. Research policy, 35(7), 953-969.

Henkel, J. (2008). Champions of revealing—the role of open source developers in commercial firms. Industrial and Corporate Change, 18(3), 435-471.

Henkel, J., Schöberl, S., & Alexy, O. (2014). The emergence of openness: How and why firms adopt selective revealing in open innovation. Research Policy, 43(5), 879-890.

One thought on “Why companies don’t always freeride on open source projects”

  1. Agree that cost is the main driver here. I see in practice that configuration management plays a role as well: By contributing a feature (or bug fix) to the public source ensures that further changes (done by other people) won’t break that contribution, and that it will be present in future releases of the open source software.

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