Some Economic & Legal Aspects of Open Source Software

The emergence of open source software as a viable economic model has risen to the forefront in the debate on the future of the information technology industry. However, at first glance, the open source software development model is strikingly enigmatic and counterintuitive. To help better understand this phenomenon, this paper, through market data and economic theory, proceeds to ask and answer three related questions. First, what is the economic relationship between open source software development communities and proprietary software firms? Second, what are the resulting effects on market innovation and innovation incentives? And third, what legal mechanisms allow for the sustainability of open source software and should they be expanded or reduced? This paper concludes that open source activity appears to be generating four economic effects, whose net effect on innovation in the software market is ambiguous.