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• Article | Organization Science | July–August 2018

  Learning by Contributing: Gaining Competitive Advantage Through Contribution to Crowdsourced Public Goods

  Frank Nagle

  As the economy becomes more information based, firms are increasingly using crowdsourced public goods as inputs for innovation and production. Counterintuitively, some firms pay their employees to contribute to the creation of these goods, which can be used freely by their competitors. This study argues that such firms learn by contributing as they receive feedback from the crowd of more experienced users and are therefore able to better capture value from using the goods. Data on firm contributions to open source software (OSS), an important crowdsourced public good, is used to test the theoretical predictions. Using matching and panel data methods to help address endogeneity concerns, this study shows that contributing firms capture up to 100% more productive value from usage of OSS than their free-riding peers. Furthermore, this paper examines what types of contributions are most beneficial and in what technological environments such learning can best be applied.

  Keywords: Open Source Distribution; Software; Competitive Strategy; Learning; Competitive Advantage;

  Citation:

  Nagle, Frank. "Learning by Contributing: Gaining Competitive Advantage Through Contribution to Crowdsourced Public Goods." Organization Science 29, no. 4 (July–August 2018): 569–587.  View Details

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• Chapter | The Oxford Handbook of Creativity, Innovation, and Entrepreneurship | 2015

  Innovating without Information Constraints: Organization, Communities, and Innovation when Information Costs Approach Zero

  Elizabeth J. Altman, Frank Nagle and Michael Tushman

  Innovation has traditionally taken place within an organization's boundaries and/or with selected partners. This Chandlerian approach to innovation has been rooted in transaction costs, organizational boundaries, and information processing challenges associated with distant search. Information processing, storage, and communication costs have long been an important constraint on innovation and a reason for innovative activities to take place inside the boundaries of an organization. However, exponential technological progress has led to a dramatic decrease in information constraints. In a range of contexts, information costs approach zero. In this chapter, we discuss how sharply reduced information costs enable organizations to engage with communities of developers, professionals, and users for core innovative activities, frequently through platform-based businesses and ecosystems and by incorporating user innovation. We then examine how this ease of external engagement impacts the organization and its strategic activities. Specifically, we consider how this shift in information processing costs affects organization boundaries, business models, interdependence, leadership, identity, search, and intellectual property. We suggest that much of the received wisdom in these areas of organization theory requires revisiting. We then discuss the implications for an organization's management of innovation and conclude with research opportunities.

  Keywords: Knowledge Sharing; Cost; Innovation and Management; Collaborative Innovation and Invention;

  Citation:

  Altman, Elizabeth J., Frank Nagle, and Michael Tushman. "Innovating without Information Constraints: Organization, Communities, and Innovation when Information Costs Approach Zero." In The Oxford Handbook of Creativity, Innovation, and Entrepreneurship, edited by Christina E. Shalley, Michael A. Hitt, and Jing Zhou, 353–379. Oxford University Press, 2015.  View Details

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• Working Paper | HBS Working Paper Series | 2015

  Crowdsourced Digital Goods and Firm Productivity: Evidence from Open Source Software

  As firms increasingly rely on crowdsourced digital goods, understanding their impact on productivity becomes critical. This study measures the firm-level productivity impact of one such good, non-pecuniary (free) open source software (OSS). The results show a previously unmeasured positive and significant return to the usage of non-pecuniary OSS that is not solely due to cost savings. Inverse probability weighting, instrumental variables, firm fixed effects, and management quality data add support for a causal interpretation. Across firms, a 1% increase in non-pecuniary OSS leads to a .073% increase in productivity or a $1.35 million increase in value-added production for the average firm in the sample. This effect is greater for larger firms and for firms in the services industry. These findings indicate that existing studies underestimate the amount of IT firms use and suggest that firms assuming the risks associated with non-pecuniary OSS gain benefits from collective intelligence and labor spillovers.

  Keywords: Open Source Distribution; Performance Productivity; Software;

  Citation:

  Nagle, Frank. "Crowdsourced Digital Goods and Firm Productivity: Evidence from Open Source Software." Harvard Business School Working Paper, No. 15-062, January 2015. (Revised June 2015.)  View Details

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