Release Timing for Sequential Innovation with Co-Creation: Evidence from Open Source Software

Abstract

Sequential innovation has been gaining grounds in a broad class of industries. Meanwhile, the release timing decision in sequential innovation was understudied and lacks empirical examination. In this paper, we empirically study the release timing decision in sequential innovation. Specifically, we formalize and estimate a dynamic structural model to examine how open-source software projects make their release timing decisions in sequential innovation when the core team co-creates the new product with the community. Our results show that a new release could deliver quality enhancements to users, and lead to a better product performance. In addition, optimal release timing depends on the state of the project and should be considered in a forward-looking manner. We also find having user co-creation is associated with higher product performance and lower release costs. Furthermore, our results provide insights and practical guidance for product development with sequential innovation. For example, when the project is in the early stage and the installed base is small, fast release could be more beneficial. And the benefit of implementing co-creation could even compensate the negative effect of high release cost. These results may have important implications for managing technology-enabled, crowd-based new product co-creation beyond open-source software development and adoption.

Keywords: Release Timing, Sequential Innovation, Co-Creation, Open Source Software, Structural Model, Community Contribution