Open Source Software and Firm Productivity

59 Pages Posted: 4 Feb 2015 Last revised: 5 Oct 2017

Date Written: October 3, 2017

Abstract

As open source software (OSS) is increasingly used as a key input by firms, understanding its impact on productivity becomes critical. This study measures the firm-level productivity impact of non-pecuniary (free) OSS and finds a positive and significant value-added return for firms that have an ecosystem of complementary capabilities. There is no such impact for firms without this ecosystem of complements. Dynamic panel analysis, instrumental variables, and a variety of robustness checks are used to address measurement error concerns and to add support for a more causal interpretation of the results. For firms with an ecosystem of complements, a 1% increase in the use of non-pecuniary OSS leads to an increase in value-added productivity of between 0.002% and 0.008%. This effect is smaller for larger firms and the results indicate that prior research underestimates the amount of IT firms use.

Keywords: Economics of IT, open source software, firm productivity, digital dark matter

Suggested Citation

Nagle, Frank, Open Source Software and Firm Productivity (October 3, 2017). Harvard Business School Research Paper No. 15-062. Available at SSRN: https://ssrn.com/abstract=2559957 or http://dx.doi.org/10.2139/ssrn.2559957

Frank Nagle (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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