Digital Dark Matter and the Economic Contribution of Apache

Shane  Greenstein; Frank  Nagle

Article | Research Policy | May 2014

Digital Dark Matter and the Economic Contribution of Apache

Abstract

Researchers have long hypothesized that research outputs from government, university, and private company R&D contribute to economic growth, but these contributions may be difficult to measure when they take a non-pecuniary form. The growth of networking devices and the Internet in the 1990s and 2000s magnified these challenges, as illustrated by the deployment of the descendent of the NCSA HTTPd server, otherwise known as Apache. This study asks whether this experience could produce measurement issues in standard productivity analysis, specifically, omission and attribution issues, and, if so, whether the magnitude is large enough to matter. The study develops and analyzes a novel data set consisting of a 1% sample of all outward-facing web servers used in the United States. We find that use of Apache potentially accounts for a mismeasurement of somewhere between $2 billion and $12 billion, which equates to between 1.3% and 8.7% of the stock of prepackaged software in private fixed investment in the United States and a very high rate of return to the original federal investment in the Internet. We argue that these findings point to a large potential undercounting of the rate of return from IT spillovers from the invention of the Internet. The findings also suggest a large potential undercounting of "digital dark matter" in general.

Keywords: open source; Apache; Economic measurement; Digital economics; Measurement and Metrics; Open Source Distribution; Internet; Information Technology; Software; Economic Growth; Research and Development; Web Services Industry; Information Technology Industry; United States;

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Citation:

Greenstein, Shane, and Frank Nagle. "Digital Dark Matter and the Economic Contribution of Apache." Research Policy 43, no. 4 (May 2014): 623–631. (Lead Article.)

Working Paper | HBS Working Paper Series | 2019

Government Technology Policy, Social Value, and National Competitiveness

Frank Nagle

This study seeks to better understand the impact that government technology procurement regulations have on social value and national competitiveness. To do this, it examines the impact of a change in France’s technology procurement policy that required government agencies to favor open source software (OSS) over proprietary software in an attempt to reduce costs creating an unexpected demand shock for OSS. Analysis using the rest of the EU as controls via difference-in-differences and synthetic control frameworks shows that this policy change led to an increase of nearly 600,000 OSS contributions per year from France, creating social value by increasing the availability and quality of free and open source software. Estimates indicate this would have cost paid software developers roughly $20 million per year to replicate. However, the open nature of such goods means that any country can reap the benefits of these efforts. Therefore, additional economic outcomes that enhance France’s competitiveness are also considered. The results show that within France, the regulation led to a 0.6%–5.4% yearly increase in companies that use OSS, a 9%–18% yearly increase in the number of IT-related startups, a 6.6%–14% yearly increase in the number of individuals employed in IT related jobs, and a 5%–16% yearly decrease in software-related patents. All of these outcomes help to increase productivity and competitiveness at the national level. In aggregate, these results show that changes in government technology policy that favor OSS can have a positive impact on both global social value and domestic national competitiveness.

Keywords: social value; competitiveness; Government Administration; Technology; Acquisition; Policy; Value;

Citation:

Nagle, Frank. "Government Technology Policy, Social Value, and National Competitiveness." Harvard Business School Working Paper, No. 19-103, March 2019. View Details

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As open source software (OSS) is increasingly used as a key input by firms, understanding its impact on productivity becomes critical. This study measures the firm-level productivity impact of nonpecuniary (free) OSS and finds a positive and significant value-added return for firms that have an ecosystem of complementary capabilities. There is no such impact for firms without this ecosystem of complements. Dynamic panel analysis, instrumental variables, and a variety of robustness checks are used to address measurement error concerns and to add support for a more causal interpretation of the results. For firms with an ecosystem of complements, a 1% increase in the use of nonpecuniary OSS leads to an increase in value-added productivity of between 0.002% and 0.008%. This effect is smaller for larger firms, and the results indicate that prior research underestimates the amount of IT firms use.

When organizations need input into their innovation or production process, they have traditionally faced the decision to make the input themselves or buy it through the market. However, rapidly decreasing information costs allow firms to harness external communities that are neither employees of the firm hierarchy, nor traditional contracted market participants such as supply chain partners. We introduce the managed ecosystem governance form in which a central organization engages external communities and also manages these communities by maintaining some degree of control over their activities. This model is evident in various organizational approaches including multi-sided platforms, crowdsourcing, and the gig economy. Building upon the knowledge-based view of the firm, we argue that these increasingly common governance models offer a wealth of opportunities but require organizations to adopt a translucent institutional logic that is in-between the traditional closed logic of the firm and the open logic of the market. To successfully employ this model, firms must learn to shepherd communities, leverage them without exploiting them, and share intellectual property rights.

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Digital Dark Matter and the Economic Contribution of Apache

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