Resource allocation beyond firm boundaries: A multi-level model for open source innovation

Successful technological innovation depends upon marshalling sufficient knowledge resources to support continuous discovery, knowledge creation and technical development. Current perspectives emphasize innovation occurring either within firm boundaries or in the public arena. Open Source [OS] software development represents a third mode, where privately funded efforts contribute to the creation of a public good, which may presage future models of innovation. The authors develop a four-level management model of increasing private resource allocation based on a detailed discussion of how and why software and IT firms engage in OS development where, paradoxically, increased ‘public’ investment can lead to greater ‘private’ benefits. But each level implies greater outlay of private resources and increased dependency upon publicly available knowledge assets, so managers will need to select their firm's appropriate level of engagement carefully. Successful development of such knowledge entails understanding the nature of OS innovation and the distinction between freely available explicit knowledge and firms’ privately retained tacit knowledge, participating in the dynamic cumulative process of gift exchange inherent in acceptance as a relevant player in an OS community, and optimising firm-specific engagement over the four levels of investment and involvement to establish the conditions for knowledge creation and appropriation.