Benkler points out that the open-source approach to software building continues to play one of the essential roles in information production that was theoretically possible by any economic model at the turn of the millennium. In pointing this out, he assists the academic and industry players to understand the magnitude to which the open-source approach is continuously transforming the technological world. According to Benkler (2012, pg 265), open-source innovation techniques and models offer the technology and other industries the opportunity to higher returns from their innovative and the resulting intellectual property. He further continues to argue that this approach emphasizes the importance of utilizing a broader range of firm’s innovation activities, including customers, rivals, academics, and other unrelated industries, while leveraging other creative methods to use a company’s Intellectual Property.
Furthermore, the use of external resources in the technology field is not a new phenomenon. Currently, the most successful firms have deviated from the traditional vertically oriented structure to open innovation. Case in point Benkler (2012, pg 264) argues that an economist who would have predicted the rise of open source innovation in beating the dominant traditional firm approach would have been thought of incompetent. However, over the last ten years, Apache, an open-source and peer production company, has beat Microsoft in software development and innovation. According to Benkler (2012, pg 264), open-source innovation and peer production are leveraging on the inefficiencies of traditional firm bureaucracy to drive change. Open-source innovation is redefining internet strategy; thus, Benkler proposes a reevaluation of the conventional underpinning assumptions of innovation and production. This paper is going to discuss how open source and peer production is a revolutionary taking center stage in the production of innovative software and technology.
Open Source Innovation and Product Development
Conventionally open source innovation has been defined through being contrasted with the vertical integration model, in which a company’s Research and Development lead to a product whose copyrights belong to the company. Bogers and West (2014 pg 67) define Open source innovation as a system which encourages the collaboration of both internal and external resource to explore opportunities for innovation. This definition encompasses the integration of firms, suppliers, and other external capabilities that exploit opportunities through multiple channels. Therefore, according to Benkler (2012, pg 265), open-source innovation super cedes the externalization of research and development in product development. It is a paradigm shift of how technology firms are continuousl to leverage both internal and external resources and talent to transform and manage their Intellectual Property. That is open source innovation includes the collaboration of companies, distributers, customers and manufacturers of a related product to pool their R & D to produce a shared technology. Additionally, open source Intellectual Property policies dictate that the shared technology is available at little or no cost. For instance, an increasingly used and a popular open source software is the Linux Operating System.
In line with Benkler’s (2012, pg 265) argument it is noteworthy to point out the underlying assumptions that continue to question the existence of traditional technology firms. Firstly, open source innovation places intrinsic and social motivation, rather than material gains at the heart of innovation. Secondly, Benkler points out that it questions the conventional centrality of property, in the quest for innovation. That is opposed to the interaction of property and commons for sustained growth and innovation. Lastly, it continues to question and dampen the centrality of firms to the innovation process. According to the Classical theories, currently and going into the future firms are continuously under pressure from exponentially reducing transactional costs. Additionally, this position is worsened by the increasing strategic importance of in contractible aspects innovation and problem solving. According to Benkler (2012, pg 270) traditional technology firms appear to be destined to narrowed to play niche roles where there is only a concentration requirements of intensive capital and that cannot be replaced by networks. He adds that the survival of traditional innovation techniques can only be guaranteed by the salient nature of obtaining government grants of extraction opportunities. Otherwise, to thrive under this new dispensation firms have to reorient themselves to assure persistent and knowledge based advantages.
According to Bogers and West (2014 pg 63) they point out that peer production leverages on three organizational frameworks as a comparative advantage to the conventional firm foundation. That is, Free and Open Source Software has a decentralized conception and execution of problems and solutions. Secondly, the cooperation of individuals harnesses and utilizes their different motivations. Thirdly, it separates governance and management of property and contract. Furthermore, conventional firm bureaucracies that extensively affect innovation are negated in the open source framework. Individuals through leveraging on their skills and motivations are able to cooperate better and more efficiently. Open source and peer production according to Benkler (2012, pg 264) is set to be at the heart of scientific innovation going into the future. Moreover, in the technology scene in aspects that require little resource allocation are to be taken over by peer production. Additionally, the two later organizational elements of open source innovation challenge wisdom received in economics. Peer production in broader terms is set to offer very minimal choices to traditional firms as they manage their relations to those choices. It relies on transaction costs and implication of tacit knowledge to expound on the centrality of firms in the innovation sphere, particularly centrality of monetary motivation and intellectual property.
Fenton and Bieman (2014, pg 23) point out that historical and economic analysis of peer production presumed it to solely focus on software development. However, Free and Open Source innovation has been understood from the start as an aspect of online cooperation. In either case the relevance of is the focus given on the comparative advantage of both innovation models. They both encompass techniques and models of bringing individuals together in collaborative innovation and information sharing to bear on diverse problems, un cumbered by property and managerial constraints. According to Fenton and Bieman (2014 pg 24), the basic transaction costs theory points out the most simplified analysis on the rise of peer production and open source innovation. That is when technology lowered the costs of communication and collaboration it allowed individuals to share designs and pool knowledge and resources together. However, Benkler (2012, pg 265) points out that transaction theory alone cannot justify the rise of Mturk and Uber. He continues to point out that analysis on the growth of such software requires a theory of knowledge and learning as well. That is innovation is not an individual process but a collective process of learning which essentially depends on communication. These attributes of peer production and open source innovation continue to dampen the position of firms in the technology industry and are redefining the concept on innovation.
Incorporating External Innovations
Fenton and Bieman (2014 pg 30) argues that firms can tap into the potential of external knowledge. They have identified four source of knowledge which are consistent with Benkler’s analysis. That is suppliers and customers, government and other private entities, competitions and other nations. Fenton and Bieman (2014 pg 31) argue that even though their exists numerous models that illustrate how firms can exploit external knowledge imitating competitors offers the simplest methods to utilize. For instance, free riding on a competitor’s product on the market. Additionally, consulting with customers and other external players can offer information and knowledge on developing and refining innovations. Furthermore, historically public spending has been a great source of Research and Development. Case in point approximately 50 years ago public spending was the single most significant stimulus of research and development (Fenton and Bieman, 2014 pg 32). However, they also points out the drawbacks with institutional dependency on external source of information and knowledge. The most significant being the ability to identify and integrate the external sources. They argue this point by illustrating how there exists significant trade-offs between innovation speed, development and competitive advantage while relying on internal sources of information and knowledge.
Furthermore, Battistella and Nonino (2012, pg 560) point out that open online collaborative models are least dependent on transaction costs. They only reflect changes in the industry that encompass the dynamic nature of in theories of knowledge and production. Hence, companies can leverage these practices in complex products and innovation rich markets. Thus, the company chooses the level of control through either choosing it to be a substitute or complement to the production and innovation stages. For instance, a firm tackling a complex software development challenge can contract suppliers or competitors as part of its collaborative model (Battistella and Nonino, 2012 pg 561). Additionally, a firm can opt to developing a software and manage its use through a Github or Sourceforge repository. However, Battistella and Nonino (2012 pg 565) points out a significant backdrop to this approach. As the model does not include separation of ownership and governance their lies significant overlaps in terms of intellectual property policies. Furthermore, as the development does not recognize the monetary gains of the developed product, it excludes individuals and companies that seek returns to their investments (Battistella and Nonino, 2012 pg 560). Most importantly firms are able to keep pace with emerging technology and play a significant role in integrating peer and open source innovation in their business strategy.
Bogers and West (2014 pg 70) point out that it is worthwhile to discuss the negative implications of the open source innovation trend. The most essential being able to mitigate spill-overs in the development and distribution of developed products. According to Bogers and West (2014 pg 70), it is obvious that if firms cannot realize returns on investment in their innovative ventures they will under invest. In that case they provides two strategies to continuously generate incentives for continued investment in the presence of spill-overs- the individual and the organization (Bogers and West, 2014 pg 71). At the basic level he argues that incentives can be used to financially reward innovators. However, they also points out that motivating through financial incentives of innovators in the open innovation approach is a challenging management problem. For organization, they argue that financial incentives can be complemented with no loss from sharing the product. For instance, Intel’s investment arm grows an ecosystem around its microprocessors, even though a significant amount of investment accrues to AMD.
Open Source innovation resulted from the attempts of customers to reduce their reliance on proprietary software vendors. The open source community focused on establishing principles that will enable the development and sharing of software perpetual user rights. Hence, open source innovation is redefining the place of technology firms in the technology sphere. As pointed out in the introduction, conventional firms currently and going into the future will operate in niches that cannot be permeated by open source innovators. That is in development of capital intensive and sensitive products. However, for firms to ensure their continued existence in the face of highly innovative talent in the open source community, they have to reevaluate their strategy to ensure they contribute and integrate this community in their operations.
Battistella, C. and Nonino, F., 2012. Open innovation web-based platforms: The impact of different forms of motivation on collaboration. Innovation, 14(4), pp.557-575.
Benkler, Y., 2017. Peer production, the commons, and the future of the firm. Strategic Organization, 15(2), pp.264-274.
Bogers, M. and West, J., 2012. Managing distributed innovation: Strategic utilization of open and user innovation. Creativity and innovation management, 21(1), pp.61-75.
Fenton, N. and Bieman, J., 2014. Software metrics: a rigorous and practical approach. CRC press.
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