THE JUKEBOX MODE OF INNOVATION - A MODEL OF COMMERCIAL OPEN SOURCE DEVELOPMENT
Joachim Henkel · RePEc: Research Papers in Economics · 2004
In this Paper, I explore the circumstances under which innovation processes without secrecy or intellectual property protection are viable, and where free revealing of innovations is a profit-maximizing strategy. Motivated by an empirical study of embedded Linux, I develop a duopoly model of quality competition. Firms require two complementary technologies as inputs, but differ with respect to the relative importance of these technologies. I find that a regime with compulsory revealing can lead to higher product qualities and higher profits than a proprietary regime. When the decision to reveal is endogenized, equilibria with voluntary revealing arise, again superior to the proprietary outcome.