The effect of competition from open source software on the quality of proprietary software in the presence of network externalities
Abstract: A growing number of
open source software emerges in many segments of the software market. In
addition, software products usually exhibit network externalities. The purpose of
this paper is to study the impact of open source software on the quality
choices of proprietary software vendors when the market presents positive
network externalities.
Design/methodology: To analyze how open source software affects the
optimal quality of proprietary software, this paper constructs two vertical
differentiation models: the basic model considers proprietary software
monopolizing the market, and its extended one considers proprietary software
competing with open source substitute.
Findings: This paper mainly finds that the presence of open source
software does not necessarily lead to the quality of proprietary software
decreases (or increases). The network externalities and compatibility between
open source and proprietary software may change the impact of open source
software on the quality of proprietary software and may affect the quality
choices of proprietary software vendors.
Originality/value: The main contribution of this paper is to examine the
effect of open source software on the quality choices for proprietary software
vendors in software markets exhibiting positive network externalities.
Keywords: quality, open source
software, proprietary software, functional quality, software usability, network
externality, compatibility
Author: Mingqing Xing
Journal Code: jptindustrigg150051
