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Linux vs. Windows A Comparison of Application and Platform Innovation Incentives for Open S.pdf

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Linux vs. Windows A Comparison of Application and Platform Innovation Incentives for Open S

The Economics of Open Source Software Development Jiirgen Bitzer and Philipp J. H. Srhroder (Editurs) O 2006 Published by Elsevier B.V. Linux vs. Windows: A Comparison of Application and Platform Innovation Incentives for Open Source and Proprietary Software Platforms Nicholas Economides and Evangelos Katsamakas ABSTRACT The chapter analyzes and compares the investment incentives of platform and application developers for Linux and Windows. We find that the level of investment in applications is larger when the operating system is open source rather than proprietary. The comparison of the levels of investment in the operating systems depends, among others, on reputation effects and the number of developers. The chapter also develops a short case study comparing Windows and Linux and identifies new directions for open source software research. Keywords: Open Source Software, operating systems, technology platforms, Linux, innovation incentives. JEL Classification: L 10, L86, L3 1. 10.1 INTRODUCTION Open source software is an emerging type of software that may fundamentally affect the business and economic features of the software industry. Linux, an open source operating system, has been the prominent example of the potential of the open source movement, competing against Microsoft Windows, the incumbent operating system. 208 Nicholas Economides and Evangelos Katsamkas This chapter analyzes the incentives to invest in application software and an operating system under two different software ecosystems: one based on an open source operating system, such as Linux, and the other based on a proprietary operating system, such as Microsoft Windows. We build a model extending Economides and Katsamakas (2005) to compare the innovation incentives of application developers and operating system developers for Linux and Windows. In our model, firms and developers invest to improve the quality of the platform or the application and expand the dem