Opening up IP Strategy: Implications for Open Source Software Entry by Start-Up Firms

Abstract

We examine whether a firm’s IP strategy in support of the open source software (OSS) community stimulates new OSS product entry by start-up software firms. In particular, we analyze the impact of strategic decisions taken by IBM around the mid-2000s, such as its announcement that it will not assert its patents against the OSS community and its creation of a patent commons. These decisions formed a coherent IP strategy in support of OSS. We find that IBM’s actions stimulated new OSS product introductions by entrepreneurial firms, and that their impact is increasing in the cumulativeness of innovation in the market and the extent to which patent ownership in the market is concentrated.

Keywords: IP strategy, open source, open source software (OSS), OSS entry, patent commons, patent pledge, patent thicket, start-ups’ OSS innovation, cumulative innovation, concentrated patent ownership

JEL Classification: L86, O34