Entry Strategies Under Competing Standards: Hybrid Business Models in the Open Source Software Industry

Abstract

The paper analyzes the strategies of software firms that have entered the open source (OS) field. The notion of the OS business model is discussed in the light of a substantial body of theoretical literature concerning strategic management and the economics of innovation, as well as specialized literature on OS. Empirical evidence based on a survey of 146 Italian software firms shows that firms have adapted to an environment dominated by incumbent standards by combining the offering of proprietary and OS software under different licensing schemes, thus choosing a hybrid business model. The paper examines the determinants of the degree of openness toward OS and discusses the stability of hybrid models in the evolution of the industry.open source, software industry, hybrid business models, switching costs, network externalities

Adoption of Open Source in the Software Industry

“…However, Lundell et al observed that companies with more than 250 employees seemed more conservative towards OSS adoption [12], Bonaccorsi et al found that size does not favor OSS adoption [1], and Ghosh et al found variations in the adoption of OSS over company size, countries, and sectors [6]. The relation between size and OSS adoption needs to be investigated in future research.…”

“…Without being able to provide any numbers representative for the whole population, an Italian study found that software companies using OSS commonly adapt or build on top of these OSS products [1].…”

Opening up design science: The challenge of designing for reuse and joint development

“…Yet, an increasing number of managers and designers in firms see great promise in OS-related IT artifacts developed by global communities, and have started to adapt these to internal needs, contribute to their collective development, and build relationships with the communities (Bonaccorsi et al, 2006;Henkel, 2006;Dahlander and Wallin, 2006). Additionally, a design science approach to IS research needs to answer the question of how best to relate to the community to jointly build new and effective IT artifacts.…”

“…A study of new entrants in the Italian software industry (Bonaccorsi et al, 2006) finds that entrepreneurship emerges on the fringes of OS software development, giving rise to new markets for products and services. Here, users design business models that involve community support, packaging, combining, selling artifacts, or providing services to other OS software users (see, for example, Fitzgerald 2006).…”

“…The emerging literature on reuse of external IT artifacts considers search and adaptation efforts (Bonaccorsi et al, 2006;Majchrzak et al, 2006;West, 2003), whereas the literature on community relations emphasizes evaluation and sharing of IT artifacts (Henkel, 2006;Dahlander and Wallin, 2007;Dahlander, 2007;Stuermer et al, 2009). These design activities, while effective in tackling the challenge of dealing with external artifacts, partially ignore the systematic context difference between the external developers and the designers and users within the adopting organization.…”