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Open Source Software and the Private-Collective Model of Innovation

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Having written the paper on the open source software development as an example of private-collective innovation model Eric von Hippel and Georg von Krogh opened the door to a new area of study for organisation scientists. The paper has achieved widespread recognition amongst fellow theorists and has been used as a basis for further investigation of and expanding the topic. Additionally, it has prompted practical perspectives. However, some limitations deserve attention to be paid, in particular the issues of applicability in other fields. Hence, the aim of the essay is to examine key concepts introduced in the paper, analyse consequence of the findings as well as other theorists’ contribution to the subject. Subsequently, emphasising companies’ motivational concerns for implementing the model will be explored, later highlighting some limitations of the pater. Finally, in the conclusion the essay will endeavour to identify the position of the paper in terms of current innovation issues.


Having analysed the paper, I would argue that it has completed several objectives set by the authors. Firstly, they outlined the nature of the open source software development described by the authors as a “major cultural economic phenomenon” [Von Hippel and Von Krogh, 2003]; new model of innovation as opposite to the existing conformist models, which in perspective might change the way in which the innovations are shaped. Proving their belief the authors have provided two specific empirical examples of ex isting open source projects such as Apache Server Software1 and Fetchmail2, which, I believe, are well selected and, when developed, clearly illustrate the theoretical concept.

Apache Server Software – is used on Web server computers that host Web pages and provide appropriate content as requested by Internet browsers. Such computers are the backbone of the Internet-based World Wide Web infrastructure. The server software evolved into Apache in the space of four years and after many modiïŹcations and improvements contributed by many users. Apache has become the most popular Web server software on the Internet, garnering many industry awards for excellence.

Fetchmail – An Internet E-mail Utility Program. Fetchmail is an Internet e-mail utility program that “fetches” your e-mail from central servers to your local computer. The open source project to develop, maintain, and improve this program was led by Eric Raymond.

Secondly, the above facts were summarised to exemplify the private -collective model of innovation as a combination of two earlier existed models: private investment and collective action model. According to the theorists, private investment model implies innovations as a process of knowledge production through exchanging the private investments to appropriation of private returns. The access of general public to knowledge represents a threat to such returns and therefore is prevented through intellectual property law mechanisms. While, subsequent contributors’ motivation is no doubts beneficial for innovation, the undermining point is that society suffers from underdevelopment as the innovations are privately manipulated [Von Hippel and Von Krogh, 2003].

The collective action model of innovations, in contrary is based on the principals of nonexcludability and nonrivalrausness of knowledge [Stiglitz, 2009]. It entails the provision of knowledge as a public good through revealing and “unconditional supplying it to a common pool” [Von Hippel and Von Krogh, 2003]. Free accessibility of knowledge excludes social loss. However, as everyone can use the knowledge produced by a handful of contributors the risk of choosing free-riding instead of contributing is high. This causes some motivational issues, e.g. creating special incentives for contributors. Thirdly, private-collective model has been introduced as that combining “the best of both worlds”.

The most distinctive feature of this combination is that although in this model’s users are the actual producers of the innovations and thus the investment and subsequent returns are private rather that collective, the principles of nonrivalrousness and nonexcloudability are preserved, allowing free access to the innovations for everyone. Therefore, such problems as free-riding, social loss and high cost of diffusion and protection of knowledge are successfully eliminated, while the benefits happily sustained. Lastly, the writers offered a number of questions of interest about the private-collective model, regarded as those being worth further investigation, leaving the topic open for further research. Amongst them the issues of social integration and leadership as well as participants’ motivation and incentives, particularly those of companies as opposite to private individuals, were accentuated.

In this part I will attempt to summarise the consequence of the paper from my point of view and expand some points, which were left underdeveloped. Evidently, the authors were the first to introduce a novel private-collective model of innovation justified by the real-world phenomenon of open source software (OSS) production. Written by the joint effort of two outstanding scientists each r epresenting the leading scholars3 of today, the paper gained recognition and indeed triggered the line of further academic research. Large portion of questions raised by von Hippel and von Krogh were later examined and actual papers were produced, digging dipper into the field of private-collective model and the OSS development industry.

The following complements to the paper by fellow theorists I found particularly interesting. Stuermer, M. et al. (2009) effectively summarised benefits of the private-collective model: “the cost of controlling knowledge, learning, reputation gains, and fast and widespread diffusion of innovations, as well as lower cost of innovation and manufacturing.” Moreover, the above authors produced a case-study, illustrating the application of the model in a real life scenario4. Margit Osterloh and Sandra Rota, analysing OSS through prism of social dilemmas outlined peculiarity of OOS from other private collective innovations. According to them, OSS model “survives the emergence of a dominant design”, presenting a model for innovation, which goes beyond traditional markets and hierarchies [ Osterloh, M. and Rota, S. 2007] In other words, wiliness to contribute remains even when the innovation passes commercial phase. This led us to the question posed by von Hippel.

Answering this question, I would rely on a paper by George von Krogh (2003) called “Community, joining, and specialization in open source software innovation, a case study” . The attention-grabbing feature of this paper is that von Krogh et al have developed the system of notions, defining and explaining each stage of the integration into the community.

Prof. von Hippel (MIT) & Prof. von Krogh (Uni St.Gallen), representatives of schools leading in the fields of technology & management science. Prof. von Krogh was an Visiting Professor at MIT’s Sloan School of Management in 2003.

The case study explores the development of the Nokia Internet Tablet, which builds on both proprietary and open source software development, and that involves both Nokia developers and volunteers who are not employed by the company. Seven beneïŹts for Nokia are identiïŹed, as are ïŹve hidden costs.

As a result such terms as ‘joiners‘ and ‘new-commers’ were articulated as well as general behavioural patterns were outlines. Much of this might be understood even better through analysing motivation of participants.

As for individuals contributing to such projects the motivation mix often p reserves the main components such as intrinsic motives5 [Bitzer,J., Schrettl,W. and Schröder P.J.E., 2007; Lakhani, K. R. and R. G. Wolf, 2005], job/salary perspectives6 [Henkel, 2009] and quest for peer recognition [Raimond, 1999; Osterloh, M. and Rota, S., 2003; von Krogh et al, 2003]. However, in this last question posed by Van Hippel and Van Krohg, I found firms’ incentives for using OSS production model, as opposite to those of individuals, particularly puzzling and therefore, the next chapter of the essay will focus on it more in details.


Currently private-collective model of innovation nevertheless has been widely adopted in OSS development and within artists’ communities such as open source music, literature and art, is not limited to the individuals’ dome. At present the world of knowledge and information is getting more and more complicated. Universities, being considered happy representatives of ‘collective model of innovations’ [Stuermer, M. et al., 2009] are now actively patenting their inventions, while for private companies nowadays it is not uncommon to be involved in the OSS development projects, adopting its codes within the companies’ normal software production [Spinellis, D. and Giannikas, V., 2012]. Moreover, Enjoyment-based motivation, namely how creative a person feels when working on the project, is the strongest and most pervasive driver. The subject of intrinsic motivation has been well studied in psychology (for reviews see: Deci and Ryan (1999), Deci, Koestner, and Ryan and Lindenberg (Lindenberg 2001).

The perspectives of being noticed and appraised by the prospective employer and as a result getting a better -paid job. This is possible because, the mailing lists and track-records of achievements are open through the system of communication and therefore can influence th e employers decisions.

Even established corporations including Nokia and Philips are dipping their feet into the pool of opportunities, provided by OSS [Engelfriet, 2006; Jaaksi, 2006]. As Arnoud Engelfriet, European patent attorney at Philips says: “Avoiding open source in no longer an option”. Yet, predominantly, the managerial decision of using OSS model is “pragmatic” and is driven by network network effects [Spinellis, D. and Giannikas, V., 2012]. One would argue that OSS licences are tricky; once the code is revealed, it automatically belongs to everyone [Open Initiative, 2012] with no room for future commercialisation and, thus, the choice in favour OSS is diminishing for the company’s profits. In fact, why companies should choose between open source and proprietary software if they can choose both? “A company can use open source for certain features and use closed, in-house developed or commercially licensed software for other features if the above-mentioned license implications are properly managed” – Engelfriet continues. Indeed, the benefits of this approach are abundant.

The empirical examples of such ‘combination’ include but not limited to Nokia’s Tablet development project [Stuermer, M. et al., 2009], the internet search giant Google, who uses Linux7 for most of its servers [IBM, 2012]. In fact, studies show that companies choose to use OSS mainly because of its lower cost [Voth 2003, Proctor et al. 2003, Fitzgerald and Kenny 2004, Rossi et al. 2 005, Matthews et al. 2008], software features [Matthews et al. 2008], lower total cost of ownership [Gupta et al. 2008], quick deployment [Searls 2003], portability across platforms [ Voth 2003], avoidance of formal procurement and commercial license management [Voth 2003], and customizability [Proctor et al. 2003]. Among other known reasons are flexibility [Spinellis, D. and Giannikas, V., 2012], testing and creating the market for new product as well as boosting company’s recognition and reputation [Stuermer, M. et al., 2009].

Linux – an operational system, which is a bright example open source software. Google uses version, modified to cater its own needs.


As everything on the level of concept, the model has its limitations. In particular, the paper predominantly highlights the benefits of the model, while very little is said about costs, particularly ‘hidden costs’ the companies may experience while adopting the OSS principles, such as difïŹculty to differentiate, protecting corporate secrets, decreasing community entry barriers, giving up control, and organizational inertia [Stuermer, M. et al., 2009].

Additionally, the claimed private benefits achieved by contributors such as enjoinment and learning are all intrinsic motives [Bitzer,J., Schrettl,W. and Schröder P.J.E., 2007] while, other than non-monetary incentives, which are do exist in some cases [Lakhani, K. R. and R. G. Wolf, 2005] are not covered in the paper thus being somewhat inevident. Moreover, individuals or firms, who reveal their knowledge freely, normally do not pursue financial gains, while some of them do so purely due to the absence of alternatives, e.g. when knowledge is not patentable or the cost of legal protection will not out -weight the benefits [von Hippel, E. and von Krogh, G., 2006]. Thus, those, seeing OSS as a basis of highly profitable business model, will receive a jolt, because gaining ïŹnancial success on something freely available and that big companies treat as ‘a low priced commodity’ is very unlikely [Spinellis, D. and Giannikas, V., 2012].

Yet, I would argue, the heaviest limitation of this theory is its applicability to the limited number of fields almost exclusively in viral and information products; in other words nonuniversality. The reason lies in the nature of knowledge as a public good assumed by private-collective model of innovation which must incorporate principles of nonexcludability and nonrivalrausness. The model fails in the industries of tacit knowledge or in those, where high-cost special equipment or centralised manufacturing of goods is required [Von Hippel and Von Krogh, 2003]. Hence, unfortunately, OSS being the most prominent example of private-collective model, arguably at present is the only instance, which would perfectly incorporate all features of the model. Even though similar endeavours do exist, my firm belief is that they do not replicate the model to the same extend as it does OSS development.

This essay focuses on the paper written by von Hippel and von Krogh as a starting point in the process of discovering the phenomenon of OSS with its relation to the private -collective model of innovation. In fact, Von Hippel and Von Krogh have successfully ou tlined the main features of both new and existing models in order to emphasise the links between them. All at once, conceiving the advance and uniqueness of the novel model the contrast with two previously known models was highlighted. Having nailed the core characteristics of the model, they provided food for thought for other theorists. Thus, the theory of privatecollective model was complimented by other theorists’ papers, some of which comfortably answering the questions posed in the first paper.

Like everything, which is pioneering new path for the science, the paper however being a breakthrough has left some points underdeveloped. For the purpose of this essay I have concentrated my attention on some of them, particularly emphasising arguably the most intriguing one: the reasons for companies to use OSS innovation model. One might notice that despite common expectations, the main reason for the companies to be involved in the OSS production is still low cost and not enthusiasm about the openness. Moreover, the limitations of the theory make it even harder for the theory to disrupt existing way of industrial order. However, even considering all obstacles on the way, ‘private collective’ model of innovation, particularly in OSS, has stamped its name into the modern theory of knowledge appropriation, by “bridging the gap between innovation and product”.


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Engelfriet, A. (2006), Open innovations and open source. Article. Available at: http://nordic.idc.com/downloads/events/linuxworld07/9%20-Arnoud%20Engelfriet.pdf Accessed on: 14/12/12
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Gupta, A., Hatter, J., Pinnoju, S., 2008. E*trade ïŹnancial services. Journal of Business Case Studies 4.
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Lakhani, K. R. and R. G. Wolf (2005), ‘Why hackers do what they do: Understanding motivation and effort in free/open source software projects,’ in J. Feller, B. Fitzgerald, S. Hissam and K. R. Lakhani (eds), Perspectives on Free and Open Source Software. MIT Press: Cambridge, MA.

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Osterloh, M. and Rota, S. (2007), Open source software development—Just another case of collective invention? Research Policy 36 (2007) 157–171. Proctor, P., Deusen, P.C., Heath, L.S., Gove, J.H., 2003. The open-source movement: An introduction for forestry professionals, in: 5th Annual Forest Inventory and Analysis Symposium, pp. 203–208.

Raymond, E. S. (1999), The Cathedral and the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary. O’Reilly: Sebastopol, CA.
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von Hippel, E. and von Krogh, G. (2003), Open source software and the ‘‘private-collective’’ innovation model: issues for organization science. Organization Science, 14, 2, 209–223. von Hippel, E. and von Krogh, G. (2006), Free revealing and the private-collective model for innovation incentives. R&D Management, 36, 3, 295–306.

von Hippel, E., 2001. Innovation by user communities: Learning from open source software. Sloan Management Review 42, 82–86.
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