The Economics of Technology Sharing: Open Source and Beyond

T he open source process of production and innovation seems very unlike what most economists expect. Private firms usually pay their workers, direct and manage their efforts, and control the output and intellectual property thus created. In an open source project, however, a body of original material is made publicly available for others to use, under certain conditions. In many cases, anyone who makes use of the material must agree to make all enhancements to the original material available under these same conditions. This rule distinguishes open source production from, say, material in the public domain and “shareware.” Many of the contributors to open source projects are unpaid. Indeed, contributions are made under licenses that often restrict the ability of contributors to make money on their own contributions. Open source projects are often loosely structured, with contributors free to pursue whatever area they feel most interesting. Despite these unusual features, recent years have seen a rise of major corporate investments into open source projects; for instance, IBM is reported to have spent over $1 billion in 2001 alone on such projects. The most prominent example of open source production is software, which involves developers at many different locations and organizations sharing code to