Open source as a signalling device : an economic analysis

  • Open source projects produce goods or standards that do not allow for the appropriation of private returns by those who contribute to their production. In this paper we analyze why programmers will nevertheless invest their time and effort to code open source software. We argue that the particular way in which open source projects are managed and especially how contributions are attributed to individual agents, allows the best programmers to create a signal that more mediocre programmers cannot achieve. Through setting themselves apart they can turn this signal into monetary rewards that correspond to their superior capabilities. With this incentive they will forgo the immediate rewards they could earn in software companies producing proprietary software by restricting the access to the source code of their product. Whenever institutional arrangements are in place that enable the acquisition of such a signal and the subsequent substitution into monetary rewards, the contribution to open source projects and the resulting public good is a feasible outcome that can be explained by standard economic theory.

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Author:Samuel Lee, Nina Moisa, Marco Weiss
Parent Title (English):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 102
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (102)
Publisher:Univ., Fachbereich Wirtschaftswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2003
Year of first Publication:2003
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/10/07
Tag:career concerns; economics of organization; open source software; signalling
GND Keyword:Open Source
Issue:This version: March, 21st 2003
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht