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While there are number of similarities between Von Hippel's and Seybold's approaches, the former is concerned more with innovation, while the latter signals a more fundamental shift in the company/consumer relationship. Earlier work in this area by Prahalad and Ramaswamy [10] concentrate on an organizing principle for co-design: the “Experience Network.” Conceptually an extension of the “Value Net(work)” discussed in Brandenburger and Nalebuff [1], the Experience Network is especially relevant to open source, since successful projects build an ecosystem containing a diverse (and often vast) amount of experience around the problem domain. Companies that can find ways to make such Experience Networks an extension of their own will reap the benefit of a much larger network. Naturally, there are transaction costs in doing so but carefully orchestrated initiatives yield returns above these costs, as documented in the case studies in the source cited above.

Concentrating on the software side, the picture has been less clear in the literature. Goldman and Gabriel's [8] work has been widely touted in the general open source community, but the implications are far from clear. First, they have failed to make a case for innovation directly in open source itself. In particular, Kooths, Langenfurth and Kalwey [9] have presented compelling arguments predicting that open source by its very nature will not foster innovation because open source represents a non-market system. As a non-market system, open source lacks incentive mechanisms (such as prices) to foster innovation and drive optimized resource allocations. Thus, beyond the hype of open source advocates, it seems that open source will not deliver innovative software (whether the open source process and culture delivers innovation is a separate question). In a discussion at EclipseCon 2007, with others looking at this type of problem, I found that there are some potential ways to address this issue. Solutions here probably will be realized only in the long term, if ever, because:

• The problem is complex and not widely recognized/accepted by the open source community.
• Potential solutions require very different ways of understanding fundamental economic structures, such as markets, and are therefore very difficult to obtain.
• Inertia in the open source community, especially those segments associated with commercial interests, is likely to resist such fundamental changes.

This should be good news for companies: open source can serve as a breeding ground for innovation, but is unlikely to deliver on that innovation itself. The privilege/burden of delivering innovation appears to fall to commercial (market-based, to be precise) organizations for the foreseeable future.

Finally, the lessons of open source are likely to be far broader and deeper than simply free software. As the work by Chesbrough [2], [3] argues, the notion of “open source” can be generalized to open business models, where innovation and, more generally, Intellectual Property (IP) is supplied by a wider network than traditionally accepted. Such moves require careful consideration about how best to foster and protect IP within organizations, and Chesbrough's studies are a great place to start thinking about these emerging trends. From an organizational standpoint, open source hints at a shift toward the “individualized corporation” of Ghoshal and Bartlett [7], with all the benefits (such as more efficient and thorough use of employee potential) that it promises.

References
[1] Adam M. Brandenburger and Barry J. Nalebuff. Co-Opetition : A Revolution Mindset That Combines Competition and Cooperation : The Game Theory Strategy That's Changing the Game of Business. Currency, 1997.

[2] Henry Chesbrough. Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business School Press, 2003.

[3] Henry Chesbrough. Open Business Models: How to Thrive in the New Innovation Landscape. Harvard Business School Press, 2006.

[4] David S. Evans and Richard Schmalensee. Catalyst Code: The Strategies Behind the World's Most Dynamic Companies. Harvard Business School Press, 2007.

[5] David S. Evans, Andrei Hagiu and Richard Schmalensee. Invisible Engines: How Software Platforms Drive Innovation and Transform Industries. MIT Press, 2006.

[6] Anabelle Gawer and Michael A. Cusumano. Platform Leadership: How Intel, Microsoft and Cisco Drive Industry Innovation. Harvard Business School Press, 2002.

[7] Sumantra Ghoshal and Christopher A. Bartlett. The Individualized Corporation: A Fundamentally New Approoach to Management. HarperBusiness, 1997.

[8] Ron Goldman and Richard P. Gabriel . Innovation Happens Elsewhere: Open Source as a Business Strategy. Morgan Kaufmann, 2005.

[9] Stefan Kooths, Markus Langenfurth and Nadine Kalwey. Open Source Software: An Economic Assessment. Muenster Institute for Computational Economics, University of Muenster<, 2003.

[10] C.K. Prahalad and Venkat Ramaswamy. The Future of Competition: Co-Creating Unique Value with Cusomters. Harvard Business School Press, 2004.

[11] Jean-Charles Rochet and Jean Tirole. “Platform Competition in Two-Sided Markets.” Journal of the European Economics Association 1, no. 4 (2003): 990-1209.

[12] Patrica B. Seybold. Outside Innovation: How Your Customers Will Co-Design Your Company's Future. Harper Collins, 2006.

[13] Eric Von Hippel. Democratizing Innovation. MIT Press, 2005.

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