Oliver Alexy Free Revealing GABLER EDITION WISSENSCHAFT Innovation und Entrepreneurship Herausgegeben von Professor Dr. Nikolaus Franke, Wirtschaftsuniversität Wien, Professor Dietmar Harhoff, Ph.D., Universität München, und Professor Dr. Joachim Henkel, Technische Universität München Innovative Konzepte und unternehmerische Leistungen sind für Wohl- stand und Fortschritt von entscheidender Bedeutung. Diese Schriften- reihe vereint wissenschaftliche Arbeiten zu diesem Themenbereich. Sie beschreiben substanzielle Erkenntnisse auf hohem methodischen Niveau. Oliver Alexy Free Revealing How Firms Can Profit From Being Open With a foreword by Prof. Dr. Joachim Henkel GABLER EDITION WISSENSCHAFT Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de. Dissertation Technische Universität München, 2008 1st Edition 2009 All rights reserved © Gabler | GWVFachverlage GmbH, Wiesbaden 2009 Editorial Office: Frauke Schindler / Jutta Hinrichsen Gabler is part of the specialist publishing group Springer Science+Business Media. www.gabler.de No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photo- copying, recording, or otherwise, without the prior written permission of the copyright holder. Registered and/or industrial names, trade names, trade descriptions etc. cited in this publica- tion are part of the law for trade-mark protection and may not be used free in any form or by any means even if this is not specifically marked. Cover design: Regine Zimmer, Dipl.-Designerin, Frankfurt/Main Printed on acid-free paper Printed in Germany ISBN 978-3-8349-1475-0 V Foreword Over the last decade, the commercial world has more and more embraced open source software such as the Linux operating system. What started out as an ideological movement for “Free Software” and as a hobbyists’ thing has largely turned into a main- stream part of the IT industry. By 2008, even the long-time open source critic Microsoft has created two open source licenses, and it comes as little surprise when Google re- leases the complete mobile operating system stack of its Android phone as open source. Yet, how exactly open source software and in particular the open source style of software development are integrated into commercial enterprises is far from being un- derstood. Research into open source software and open innovation more broadly only just starts to address these issues. But these questions are of obvious importance for firms considering to launch or extend their open source engagement, and of academic interest to scholars studying open innovation processes. With this book, Oliver Alexy makes a significant contribution. Based on thorough empirical work and a deep understanding of the field, he addresses a number of key questions. How do firms decide if to launch an open source activity? Does the capital market reward or penalize open source engagements? How does opening up the soft- ware development process affect the various job functions involved, and how do indi- viduals react to these changes? Finally, when mustering support by outside developers, would offering monetary rewards crowd out their intrinsic motivation? This book is Oliver Alexy’s doctoral thesis at Technische Universität München, and it marks the starting point of a promising academic career. With its insights being valu- able for firms as well as for research, I strongly recommend it to practitioners and aca- demics alike. Munich, October 2008 Prof. Dr. Joachim Henkel VII Preface I would like to take this opportunity to thank all those who have assisted me in creating this dissertation and, even more importantly, to get it done. First of all, I would especially like to thank Prof. Dr. Joachim Henkel, my thesis ad- visor, who has created a unique environment at his chair, enabling his team to conduct exciting, cutting-edge, interdisciplinary research in an international setting, and who has provided more support than I could have asked for. I am also indebted to him for co- authoring the paper that is underlying a large portion of the forth chapter of this thesis. I would further like to warmly thank my fellow PhD students, in particular Jörn Block and Simone Käs, for valuable input, thoughtful discussions, and encouraging comments which greatly helped me to stay focused and determined, and to move forward. For input from the “real world” of business, I would like to all my official and off- the-record interview partners. For giving me the wonderful opportunity of spending three months at the Massachusetts Institute of Technology and Harvard Business School, and for helping me become a better researcher, I would like to thank Professors Eric von Hippel and Karim Lakhani. For support in generating this thesis I would further like to thank Robert Simm, Jo- sef Waltl, and Martin Leitner whose Diplom and Master’s Theses provided valuable input to parts of this thesis. In addition, I would like to thank all those who assisted me in improving this thesis, or parts of it, for example seminar participants of the TIME colloquium, participants of the 5th International Workshop on User Innovation, as well as all the others who have been such a great help. Finally, I want to thank my wife Margit, for all her support, and, sometimes, le- nience. This thesis is dedicated to you. —Oliver Alexy 22 October 2008 London, United Kingdom IX Table of Contents FOREWORD ...................................................................................................... V PREFACE ........................................................................................................ VII TABLE OF CONTENTS ................................................................................... IX DETAILED TABLE OF CONTENTS ................................................................ XI LIST OF FIGURES .......................................................................................... XV LIST OF TABLES .......................................................................................... XVII LIST OF EQUATIONS .................................................................................... XIX LIST OF ABBREVIATIONS............................................................................ XXI ZUSAMMENFASSUNG ................................................................................ XXIII ABSTRACT ...................................................................................................XXV 1 INTRODUCTION: COMMERCIAL OPEN SOURCE SOFTWARE .............. 1 2 OPEN SOURCE SOFTWARE: SOURCE OF INNOVATION? .................... 9 3 TOP-DOWN ADOPTION OF OSS ............................................................ 53 4 BOTTOM-UP ADOPTION OF OSS ........................................................... 92 5 MANAGING OSS-RELATED PROCESSES ........................................... 142 6 MOTIVATION AND INCENTIVIZING OF OSS DEVELOPERS .............. 162 7 SUMMARY AND OUTLOOK: OSS IN THE 21ST CENTURY .................. 191 BIBLIOGRAPHY ............................................................................................ 195 XI Detailed Table of Contents ZUSAMMENFASSUNG ................................................................................ XXIII ABSTRACT ...................................................................................................XXV 1 INTRODUCTION: COMMERCIAL OPEN SOURCE SOFTWARE .............. 1 1.1 Development of the Open Source Phenomenon ............................................................................. 1 1.2 Motivation ......................................................................................................................................... 3 1.3 Research Questions ........................................................................................................................... 4 1.4 Research Context .............................................................................................................................. 5 1.5 Structural Outline ............................................................................................................................. 7 2 OPEN SOURCE SOFTWARE: SOURCE OF INNOVATION? .................... 9 2.1 Definition and History of OSS ......................................................................................................... 9 2.1.1 Definition .................................................................................................................................. 9 2.1.2 OSS Licenses .......................................................................................................................... 11 2.1.3 Some Core Principles of Open Source Software ..................................................................... 13 2.1.4 Summary ................................................................................................................................. 15 2.2 OSS as a Source of Innovation....................................................................................................... 16 2.2.1 Open Innovation ...................................................................................................................... 16 2.2.2 Collective Invention ................................................................................................................ 17 2.2.3 User Innovation ....................................................................................................................... 19 2.2.4 Private-collective Innovation .................................................................................................. 21 2.2.5 Summary ................................................................................................................................. 24 2.3 Advantages and Disadvantages for Commercial Firms .............................................................. 24 2.3.1 Advantages of Using OSS ....................................................................................................... 26 2.3.2 Disadvantages of Using OSS .................................................................................................. 29 2.3.3 From Using to Revealing ........................................................................................................ 31 2.3.4 Advantages of Contributing to Existing OSS Projects ............................................................ 33 2.3.5 Advantages of Releasing Proprietary Software as OSS .......................................................... 35 2.3.6 Disadvantages of Contributing and Releasing ........................................................................ 37 2.3.7 Means of Protecting IP When Releasing Software ................................................................. 39 2.4 Business Models around OSS ........................................................................................................ 41 2.4.1 Business Transformation ......................................................................................................... 42 2.4.2 Cost and Risk Reduction ......................................................................................................... 44 2.4.3 Dual Licensing ........................................................................................................................ 45 2.4.4 Sale of Complementary Services ............................................................................................ 46 2.4.5 Sale of Complementary Goods ............................................................................................... 48 2.5 Implications for the Corporation and its Employees ................................................................... 50 XII 3 TOP-DOWN ADOPTION OF OSS ............................................................ 53 3.1 Specifying the Potential of OSS Use for the Organization .......................................................... 53 3.1.1 Sample ..................................................................................................................................... 55 3.1.2 Variables ................................................................................................................................. 55 3.1.3 Interview Results ..................................................................................................................... 57 3.1.4 Survey Results ......................................................................................................................... 58 3.1.5 Further Aspects ....................................................................................................................... 60 3.1.6 Conclusion .............................................................................................................................. 63 3.2 Capital Market Evaluation of Releasing Source Code ................................................................ 64 3.2.1 Hypotheses .............................................................................................................................. 66 3.2.2 Method and Data ..................................................................................................................... 73 3.2.3 Results ..................................................................................................................................... 80 3.2.4 Discussion and Implications.................................................................................................... 83 3.3 Conclusions ..................................................................................................................................... 90 4 BOTTOM-UP ADOPTION OF OSS ........................................................... 92 4.1 OSS vs. PCSS Development ........................................................................................................... 93 4.2 Research Design .............................................................................................................................. 95 4.3 Effects of Cooperate OSS Adoption on Employees ...................................................................... 98 4.3.1 Software Architects, Developers, and Testers ......................................................................... 99 4.3.2 Managers and Project Managers ........................................................................................... 101 4.3.3 Hypotheses ............................................................................................................................ 102 4.4 Data and Methods ......................................................................................................................... 103 4.4.1 Data Collection ..................................................................................................................... 103 4.4.2 Sample ................................................................................................................................... 104 4.4.3 Dependent Variables ............................................................................................................. 104 4.4.4 Main Independent Variables ................................................................................................. 105 4.4.5 Control Variables .................................................................................................................. 105 4.5 Results ............................................................................................................................................ 110 4.5.1 Job Functions—Descriptive Analysis ................................................................................... 110 4.5.2 Job Functions—Multivariate Analysis .................................................................................. 114 4.5.3 Control Variables .................................................................................................................. 118 4.5.4 Further Results ...................................................................................................................... 120 4.6 Discussion and Implications ......................................................................................................... 123 4.6.1 Job Functions and OSS Adoption ......................................................................................... 124 4.6.2 Limitations and Possible Extensions ..................................................................................... 127 4.7 Exploratory Cluster Analysis ...................................................................................................... 127 4.7.1 Clustering Variables .............................................................................................................. 128 4.7.2 Method and Results ............................................................................................................... 130 4.7.3 Interpretation ......................................................................................................................... 131 4.7.4 Implications ........................................................................................................................... 134 4.8 Conclusions ................................................................................................................................... 134 4.8.1 Introduction of OSS to the Corporation ................................................................................ 135 4.8.2 Corporate Source ................................................................................................................... 136 4.8.3 Need for Change Agents ....................................................................................................... 138 4.9 Summary: Top-down or Bottom-up ........................................................................................... 140 XIII 5 MANAGING OSS-RELATED PROCESSES ........................................... 142 5.1 Benchmark Study ......................................................................................................................... 142 5.1.1 Using Open Source Software ................................................................................................ 143 5.1.2 Contributing to Existing OSS Projects .................................................................................. 145 5.1.3 Releasing Proprietary Software as OSS ................................................................................ 146 5.2 Developing a Model Process for Releasing Source Code ........................................................... 148 5.2.1 General Preparations ............................................................................................................. 148 5.2.2 Business Preparations............................................................................................................ 149 5.2.3 Software Preparations ........................................................................................................... 152 5.3 Managing Company-Owned OSS Projects ................................................................................ 156 5.3.1 Getting Third Parties to Support the Project ......................................................................... 156 5.3.2 Governance ........................................................................................................................... 157 5.3.3 Source Code Management and Release Policy ..................................................................... 157 5.3.4 Documentation ...................................................................................................................... 158 5.3.5 Accepting Contributions ....................................................................................................... 159 5.3.6 Measuring Success ................................................................................................................ 159 5.4 Conclusion ..................................................................................................................................... 160 6 MOTIVATION AND INCENTIVIZING OF OSS DEVELOPERS .............. 162 6.1 Introduction .................................................................................................................................. 162 6.2 Theory and Hypotheses ................................................................................................................ 164 6.2.1 Intrinsic and Extrinsic Motivation ......................................................................................... 164 6.2.2 Crowding In and Crowding Out ............................................................................................ 165 6.2.3 Payment Norms ..................................................................................................................... 166 6.2.4 Developers’ Motivation ........................................................................................................ 167 6.2.5 Hypotheses ............................................................................................................................ 168 6.3 Data and Method .......................................................................................................................... 171 6.3.1 Method .................................................................................................................................. 171 6.3.2 Sample ................................................................................................................................... 172 6.3.3 Dependent and Control Variables ......................................................................................... 174 6.4 Results ............................................................................................................................................ 179 6.5 Discussion and Implications ......................................................................................................... 183 6.5.1 Effects of Payment and Norms on Intrinsic Motivation ........................................................ 183 6.5.2 Effects of Payment and Norms on Total Motivation ............................................................. 187 6.5.3 Limitations ............................................................................................................................ 187 6.5.4 Implications for Theory and Practice .................................................................................... 189 6.6 Summary: Managing Corporate OSS Efforts ............................................................................ 190 7 SUMMARY AND OUTLOOK: OSS IN THE 21ST CENTURY .................. 191 7.1 Suggestions for Further Research ............................................................................................... 192 7.2 The Future of Commercial OSS .................................................................................................. 194 BIBLIOGRAPHY ............................................................................................ 195