Selective Revealing in Open Innovation Processes: The Case of ...

Written by Joachim Henkel
Presented by Esra Karakaş
10.12.2009

Introduction
Literature Review
Research Questions
Hypotheses
Research Design and Data
Results and Discussion
Selective Revealing Example
Conclusion

In open innovation processes, technology is
treated as a tradable good to be bought and
sold on the market (Arora, 2001)
Under suitable circumstances, firms may
make their technology available to the
public in order to elicit development
collaboration, but without any contractual
guarantees of obtaining it.

In this paper, if and under what conditions
openness leads to open innovation are
investigated.
Embedded Linux is chosen since it
◦ Is nearly exclusively developed by commercial
firms
◦ Comes under an OSS license
◦ Is of highest relevance for manufacturers of
embedded devices

Analyzed by von Hippel (1987), Schrader
(1991), Dahl and Peterson (2004).
Despite the lack of formal contractual
agreements, the information provider expects
her counterpart to reciprocate.
Similar to revealing OSS code in terms of
gatekeeper position of individual developers
◦ The difference is that in trading, info is given to one
recepient which makes easier to understand a lack of
reciprocation.

Focused on free revealing by firms or individuals
that expect to benefit from use rather than sale of
innovations.
Motivated to do so by expectations of benefit from
development support by a user community and/or
building reputation among peers
However, it is not the case.
◦ Firms developing embedded Linux are not users of the
software, but manufacturers (or suppliers to those) of
goods containing embedded software.

Collective invention differs from OSS development in
terms of R&D since the firms did not allocate resources to
invention
◦ Corresponds to user-development of OSS
In collective invention, all firms follow the same goal as in
the case of iron furnaces (Allen, 1983) and pumping
engines (Nuvolari, 2001)
Thus idea is related but distinct from collective invention.
◦ Software development is a part of R&D
◦ Heterogenity of needs supports the collaboration

Setting a standard and
enabling compatibility
Increasing demand for
complementary goods and
services
Benefiting from external
development support
Signalling technical
excellence or good OSS
citizenship
Software that is freely
available to anyone can no
longer be sold
Software revealed as OSS
can be used also by
competitors
The firm originated the
software might lose control
over its further
development
Benefits
Downsides

To minimize the downsides of public OSS
development
◦ Choose “non-copyleft” OSS licences or use an
OSS and a proprietary licence in parallel
(Behlendorf 1999, Hecker 1999, Raymond 1999)
◦ Use of “standard” means of protection - legal
mechanisms, secrecy, lead time, complementary
assets (Dahlander and Magnusson, 2005)

The results leave an important gap
◦ In the case of software development based on existing OSS
under the GPL, the protection mechanisms become
unavailable
◦ No study exists for the decision to reveal code or not on the
level of individual code contributions
◦ No empirical quantative study that relates a firm’s revealing
behaviour to its characteristics exists

What latitude do firms have with respect to revealing or protecting
the code they develeop for embedded Linux? What means of
protection do they use and how often ?
What share of the code for embedded Linux that these firms
develop is made public?
What type of code is typically revealed? What code is typically
protected?
What are the reasons for firms to make their OSS code voluntarily
public?
How is the degree of openness determined by firm characteristics?

The share of code developed for embedded Linux that a
firm reveals to the public is larger...
◦ H1: ... the smaller the firm.
◦ H2: ...if there is a firm policy in place that encourages
revealing.
◦ H3: ... if there is no firm policy restrictive to revealing in place.
◦ H4: ... if there are proprietary complementray assets
available.
◦ H5: ... the longer the firms has been developing embedded Linux.
◦ H6: ... the more important, as a reason to reveal, considerations
are regarding...
a) development support, b) marketing, c) reputation, d) the GPL.

The case of embedded Linux demonsrates a
repartioning of innovative activity into an open
and protected part
Web-based questionnaire
◦ 268 valid responses
◦ No indication of non-response bias
◦ Type of organizations:
Software company specializing on embedded Linux
Device manufacturer
Manufacturer of components like chips and boards
Hobbyist
University or other non-profit research organization

A firm can reveal code “sometimes” or only to
its customers
A firm can delay and restrict diffusion by
providing the source code on demand only, and
without active support
A firm can actively reveal code, but only after a
certain delay
A firm can make drivers available only as
loadable binary modules, not as source code

* This means of protection applies to software vendors only. Observations with missing
data or with a reply “don’t know” are not included in the calculation of percentages.

Focuses on those embedded Linux developments
that are potentially useful for others.
The code is actively made public, be it for
downloading on a website, as a posting on a mailing
list, or as a submission to the maintainer
It is found that code sharing by commercial firms in
the field of embedded Linux seems on the way to
becoming mainstream behaviour, not a left-over
from the hype that surrounded OSS in 1999 and
2000.

The highest agreement is “generic”
◦ Since revealing generic code should not harm the competitive
position of the company.
The positive net agreement on “for our competitive
position” and “to differentiate our product”
◦ This may be the case when revealing signals the firms’
competencies or when it creates demand for related services or
proprietary software
The logic of complementary assets as a protection
mechanism applies when the code is specific to some
hardware or software application

This is done for
hardware
manufacturers
For software
manufacturers,
marketing rank
much higher
◦ ranks 3 and 6, in
contrast to ranks 6
and 10 for
hardware

Firm size
◦ Open sourse software allows small enterprises to afford
innovation (H1 confirmed)
Firm policies
◦ Encouraging policy does not exhibit the expected
positive effect (H2 not confirmed)
◦ Restrictive policy exhibits negative effect for some
items (H3 partly supported)

Complementary assets
◦ Device manufacturers reveal but significantly less than
software firms (H4 not fully confirmed)
Familiarity with embedded Linux
◦ Capturing a firm’s experience in developing embedded
Linux carries positive coefficient (H5 confirmed)
Company age when it started embedded Linux
◦ Positive and significant in all specifications

Reasons to reveal
◦ Those related to marketing shows no significant
effect (H6b not confirmed)
◦ Those related to the GPL shows no significant effect
(H6d not confirmed)
◦ Those related with development support and
reputation carry positive coefficients in all
specifications (H6a and H6c confirmed)

Open source software from Turkcell
Technology – Isola Framework
Available on the website - http://
labs.turkcellteknoloji.com.tr/
The code provided is generic and Turkcell
expects technical benefits from the open
source development process

Firms have chance to practice “selective
revealing”
Firms reveal, on average, about half of the code
they have developes for embedded Linux, while
protecting the other half.
The private-collective model of innovations is
found to work even in this mainly commercial
environment.
Further research could be done regarding the role
played by employed programmer