Open Source and Strategic Management
Posted 1 Oct 2001 at 02:48 UTC by renster
I'm working on my PhD and yes it's about Open Source and a particular
theory of strategic management (the resource-based view). I was hoping
a few of you interested souls would read my short draft introduction
and hopefully make some comments. Unfortunately, being an introduction,
it doesn't get into the heart of the issues raised.
If you want more background on the resource-based view follow my
homepage link to my sourceforge project. My previous confirmation of
candidature document is there and it has a literature review and
reference lists. Also read the relevant parts of this
document for a great review of RBV.
I hope to involve open source projects in my research and would like
to talk about that later.
*****
Chapter 1: Introduction
In a relatively short period of time, the resource-based view (RBV)
has offered a number of new research directions in the area of
strategic management. Any casual observer of the resource-based view
literature would note its inclusion in a large proportion of management
research over the last decade. Importantly, the resource-based view
provides a theoretical framework that allows researchers to link firm
resources (the internal) with the competitive action of markets (the
external). This theoretical link has proven to be a simple, but
valuable keystone for research in a number of fields of management.
Unfortunately, and due in no small part to its broad intuitive appeal,
the resource-based view appears to have been incorporated mainly as a
passing reference in the introductory paragraphs at the publishing end
of the research process. By necessity, this has moved critical focus
away from its theoretical roots toward more cursory, shallow and
mundane observations. This has meant that opportunities for meaningful
theoretical development have been lost.
Despite its wide appeal, is the resource-based view robust? One
avenue for theoretical development of the resource-based view is to
determine if it applies to new phenomena. Robust theory explains a
diverse set of facts and is able to consistently predict new phenomena
that are subsequently observed (Amicus Curiae Brief, 1986). Consistent
with this observation, this thesis applies the resource-based view to a
new phenomenon; software development projects that employ an Open
Source standard. The Open Source standard poses a fundamental
challenge to the resource-based view as it presents a phenomenon where
software is developed, often successfully, as a public good with the
use of private agents acting as volunteers. It is argued that although
a volunteer programmer realises some benefit from the software being
produced they gain nothing (ignoring altruism) from the benefit that
all other consumers realize (Bessen, 2001). This is counter to the
assumptions, held in the theoretical underpinnings of the resource-
based view, that require organizational actors to act rationally -
making decisions and assessing choices that maximise self-interest. As
noted by Katzner (1999), rational behaviour is behaviour that is
designed to achieve an objective determined by self-interest. Clearly,
in the context of an Open Source standard, where social welfare is
placed before self-interest, our understanding of strategic resources
and the role they play in contributing to performance must be
significantly altered.
The movement in focus away from self-interest is echoed in the
development of the Open Source standard as being substantially driven
by the early social history of software programmers. In its current
form the Open Source standard enforces, through socio-cultural and more
recently legal means, the removal of property right claims to software.
This is due to the definition of software as a public good in the face
of a corporate environment overwhelmingly favouring proprietary
ownership of software and enforcement of property rights over
software. Again in contrast to the predominant proprietary modality,
the social structure encouraged through the Open Source standard
facilitates cooperative and altruistic action. This appears to have
the related benefit of increasing allocative efficiency as the social
structure of the Open Source standard largely removes institutional
distortions in the software development marketplace.
In the context of the Open Source standard there are a numerous
implications for the main prescription of the resource-based view that
firms gain sustainable advantage through the application of firm-
specific resources. At a theoretical level, these implications are
fundamental and point directly at the nature of 'doing business'. At
an empirical level, providing some hints of their deeper theoretical
implications, the following three common areas of observation in the
resource-based literature come into question.
1. Performance differences due to resource heterogeneity.
It is not known if variation in resources across projects will explain
performance differences of projects using an open source standard.
Increased emphasis on social welfare may reduce opportunities to retain
project specific resources. Therefore resource heterogeneity observed
in other contexts may not be evident in Open Source software
development. Alternately, substantial removal of barriers to resource
movement across projects (through social and institutional mechanisms)
may cause resource heterogeneity to occur. Projects may use intangible
capital as leverage to secure resources.
2. Characteristics of strategic resources. If resources do
explain performance differences then the type of resources that are
strategically significant(1) have not been identified
through research. Successful Open Source projects may exhibit
substantially different strategic resource portfolios from less
successful projects and from successful projects or firms in other
sectors. An important outcome will be to understand the characteristic
of strategic resources the mark successful projects.
3. Importance of resources in explaining performance. In
following with the previous two areas of observation, do resources in
general, significantly predict firm performance differences beyond
other extraneous factors? This is a general question about the
applicability of the resource-based view across types of Open Source
projects.
We have then, an alternate, competing organizational and social
logic that challenges the robustness of the resource-based view by
bringing into question its main prescriptions. The question begs to be
asked. Does the resource-based view explain 'success' in open source
projects? Alternatively, does a strategic logic, based on a resource-
based view, predict success in the context of the Open Source
phenomenon? This thesis maintains that the resource-based view is
indeed robust despite the requirement that it be re-examined before
application to the Open Source context. It is being argued that the
resource-based view presents a means by which firms may achieve success
while the Open Source standard presents a new method.
Before testing the robustness of the resource-based view a re-
examination of its fundamental roots must be undertaken. This entails
a recasting of the three major elements of the resource-based view with
reference to the context of the Open Source standard (2). This
involves:
1) An examination of the notion of performance as a proxy for
efficiency and economic rent,
2) An examination of the notion of resources with inclusion of
tangible and intangible concerns, and
3) An examination of the logic that ties resources to performance
in the context of competition and cooperation.
Following these examinations, the revised understanding of the resource-
based view must be applied to the Open Source context to allow testing
and further theoretical development.
To reiterate, we begin by introducing the resource-based view
literature and the reasons why the Open Source standard should and must
be used as a foil with which to address its theoretical underpinnings.
The theoretical linkages between the resource-based view and the Open
Source phenomenon are discussed here. This is followed by a more
practical discussion of the application of the resource-based view to
software development projects adopting the Open Source standard. A
methodology, a series of research studies and their analyses are then
detailed. To conclude a summary of findings, their implications and
further research directions are presented.
******
(1) Strategic significance are literally
those resources that significantly contribute to performance.
(2) In so doing, it must be noted that
large sections of background literature, in particular in the area of
economics, will be touched upon but not brought in as major sections of
this thesis. This is an unfortunate outcome resulting from the
overriding requirement to maintain a concise analytical tempo in
addressing the main thesis.
P&H and Kay, posted 1 Oct 2001 at 10:46 UTC by MikeCamel »
(Journeyer)
renster - From my studies, I'm much more aware of core competence-
(Prahalad & Hamel, ?89) and capability-based (Kay, ?) views of strategy,
rather than resource-based. In fact, the main drive of almost all the
work that we've done on strategy has been approaching it from these two
areas,
particularly with reference to competitive models. Could you describe
the differences of these approaches wrt resource-based models?
Prepare for sweeping generalisations and not much more clarity :). I
would say there are no fundamental differences just changes in
emphasis - different lenses on the same camera. The author's and areas
you mention fall within a resource-based perspective (the camera).
Prahalad's lens tends to be focussed on the area of knowledge applied
to discontinuous change, say in the presence of globalisation (mainly
in earlier writings). The underlying assumptions or worded differently -
the theory of the firm, is essentially no different, apart from some
definitional argument. Indeed, I say resources as a more inclusive term
to saying competence or capabilities.
I prefer to use the term "resource-based view" because it links back
more closely to earlier work that ties in economic theory. With respect
to open source I think the real meat of the argument is in
understanding some of the fundamental assumptions on which strategic
theories of the firm are based. Open source does challenge assumptions
of a resource-based (strategic) view of the firm. Many of these
assumptions are based on economic theories as my introduction begins to
present. If you like, the area I am concerned with initially is with
higher order 'theory' while competencies and capabilities in terms of
the management literature is lower order (in that issues of say HRM or
prescriptive approaches are introduced). They are not separate, just a
different focus. At the lower order more practical concerns about
developing the strategic logic of the firm arise. At the higher order
there are more fundamental (wishy washy) concerns about why do firms
exist.
I would say it has been too easy to apply the term 'resource-based
view'. A vague reference to a general world-view. In order to develop a
coherent argument i need to move from the higher order concerns (the
more fundamental issues) to the lower order (what are strategic assets
in the world of open source).
Now that I've written this I don't think I've clarified anything for
you :)
I've read your comment, and then reread the original post, and it does
seem to make sense. I wonder what other resources could be identified
as similar to add weight to your thesis, or for comparison? How, for
instance, might you compare work-based (or sponsored) training or social
events - they may not add to the economic rent in an obvious way, but,
like Open Source (maybe), they help people in different ways (obvious
applicability of Maslow's need hierarchy here, I guess). I'm trying to
think of more comparable resources, but failing, which suggests to me
(assuming that I've understood your aims) that you've got a good
starting point here.
I'm going to take a huge liberty here, and rephrase and simplify to try
to check that I've understood what you're looking at. Please correct me
if I'm wrong, or elaborate if I'm on the right track:
"Strategic resources are usually things from which you can easily see
the link between their use/existence and economic rent. For Open
Source, the link is less obvious, but seems still to exist. If it does,
does this mean that we need to re-evaluate what we call strategic
resources?"
Fair, or not?
always willing to make tangential comments that, with little
consideration, appear not to have any relevance.
stragetic resource number 1: intelligence. the more intelligence
accumulated, the more likely results are to be achieved.
strategic resource number 2: evolution, through the numbers game, and
natural selection. after all, evolution produced the spider - a
creature that, if ever it had been designed, would have the engineers on
the project gasping at their own ability to produce such magificent
efficiency.
open source is _supposed_ to help with respect to strategy number 2:
increased number of eyes. this assumes that the number of eyes _is_
bigger, and also that max_of(intelligence behind eyes) is higher.
for really large projects (300k loc and above) this starts to get a bit
dubious, especially when the number of years of experience required to
actually understand what "eyes" are seeing is really quite unacceptably
high (3 or more for SMB, CIFS and DCE/RPC).
for tiny projects (< 10,000 loc), well, fine! the numbers game works
absolutely fine. 10,000 loc is small enough for people to even consider
rolling their own, at home, in a few months. you can hold 10,000 loc in
your head. review? _no_ problem.
so, i'd say it's a matter of maxof(intelligences) / LOC or something
like that...
>"Strategic resources are usually things from which you can easily see
>the link between their use/existence and economic rent. For Open
>Source, the link is less obvious, but seems still to exist. If it
>does, does this mean that we need to re-evaluate what we call
>strategic resources?"
Yes, exactly, although I would never say that the links are easy to
see:) As you'd expect almost all research has been on traditional firms
in well researched industries with performance measures based on
financials. For example, the more recent knowledge management and
intellectual capital research tried to broaden the focus to include
resource areas such as social and human capital as well as
organizational capital.
So, yes we need to broaden our understanding of what strategic
resources are with respect to Open Source. Not so much in terms of the
possible range of resources. Even earlier works (e.g Penrose, Nelson &
Winter, Wernerfelt, Schumpeter, Chamberlin) pointed to elements of
Human and Social Capital as being important. I suspect that with Open
Source projects we might not find a huge number of new or unusual
strategic resources but instead there will be a different pattern of
important resources to what we are used to finding in other sectors or
business models. I could be very wrong there though and maybe find an
unusual strategic resource. I want to get a decent sized pool of
experts to discuss their understanding of what strategic assets are
open source software development projects.
More importantly we need to get a better understanding of how (and if)
the resource-based view works in the context of Open Source. First we
need to understand what performance is. Traditionally, performance has
been assessed using reference points that are external to organisations
and composed of key financial and economic indicators. Somewhere along
the line management researchers became hung up on using these types of
performance measures for every type of organisation. Clearly, they
don't apply to Open Source (or they might to a limited extent) and we
need to understand that there are other intangible 'performance'
measures (reputation and learning outcomes??). I discuss this more in
my confirmation document that I am totally rewriting at the moment.
We need to understand how Open Source projects looks using our RBV
camera. Using the RBV camera I want to really ask, why do some projects
succeed and others do not? Is there good cause to believe that
resources heterogeniety exists and is a main reason why some projects
fail? ...
Sorry..running out of time, have to go to a meeting. I'd like to
elaborate some more. I think a lot more discussion is needed to ferret
out some of the more fundamental issues here. As a public good being
produced in the context of competition *and* cooperation it has some
ramifications for RBV but I don't think they are insurmountable. Before
we can really compare Open Source to other models management
researchers really need to understand Open Source a whole lot more.
You state in your introduction:
"...Open Source standard enforces, through socio-cultural and more
recently legal means, the removal of property right claims to software..."
My understanding of the GNU license is that it does not remove property
right claims, but changes the acceptable use of property protected with
the license. So, the author does not give up ownership of the software,
but allows others to use it more fully than most private ownership
claims would allow.
Just my two cents,
superant