Title: The Economic Dynamics of Software: Three Competing Business Models Exemplified through Microsoft, Netscape and Linux Short Running Title: The Economic Dynamics of Software Author:

This article proposes three ideal business models to analyze innovation in knowledge-intensive goods and services. The three models are 1) Firm-based control, 2) Hybrid, and 3) Network-based. Each is defined in relation to the two sides of innovation, e.g. creation of novelty and of economic value. Defining the models this way leads to a discussion of the advantages and disadvantages of each model for organizing the development of different types of software and for appropriating economic benefits. Each business model is also exemplified through the economic history of one example. The examples are, respectively, Microsoft, Netscape and Linux. The concluding section relates software development to the broader forms of economic dynamics in knowledgeintensive sectors.