Crowdsourced Digital Goods and Firm Productivity: Evidence from Open Source Software

As firms increasingly rely on crowdsourced digital goods, understanding their impact on productivity becomes critical. This study measures the firm-level productivity impact of one such good, non-pecuniary (free) open source software (OSS). The results show a previously unmeasured positive and significant return to the usage of non-pecuniary OSS that is not solely due to cost savings. Inverse probability weighting, instrumental variables, firm fixed effects, and management quality data add support for a causal interpretation. Across firms, a 1% increase in non-pecuniary OSS leads to a .073% increase in productivity or a $1.35 million increase in value-added production for the average firm in the sample. This effect is greater for larger firms and for firms in the services industry. These findings indicate that existing studies underestimate the amount of IT firms use and suggest that firms assuming the risks associated with nonpecuniary OSS gain benefits from collective intelligence and labor spillovers. 1 [email protected]. The author is grateful for helpful comments from Shane Greenstein, Carliss Baldwin, Yochai Benkler, Raj Choudhury, Anil Doshi, Marco Iansiti, Ohchan Kwon, Karim Lakhani, Kristina McElheran, Hart Posen, Scott Stern, Neil Thompson, Mike Toffel, Joel West, and Feng Zhu. Additional helpful comments were received from participants at ACAC 2014, AEA 2015, AOM 2014, AOM 2014 BPS Dissertation Consortium, CCC 2014, Charles River Conference 2014, DRUID 2014, HBS TOM DBA Seminar 2014, HBS TOM Alumni Conference 2014, NYU Engelberg Center Conference on Knowledge Commons 2014, OUI 2014, SMS 2014, and ZEW ICT Conference 2014. Helpful comments were also received from seminar participants at Bocconi University, Boston College, Carnegie Mellon University, Columbia Business School, Harvard Business School, IESE Business School, McGill University, Temple University, University College London, University of Maryland, University of Pennsylvania, and University of Southern California. All mistakes remain the author’s own. Nagle -­‐ Crowdsourced Digital Goods and Firm Productivity