Technology and the Market

Technology and the Market

Demand, Users and Innovation

Edited by Rod Coombs, Ken Green, Albert Richards and Vivien Walsh

The interplay between demand from the market, the role of users in shaping that demand, and the way in which these factors influence the innovation process has always been a complex one. This forward thinking book examines this interplay from a technological change perspective. The contributors explore the potential for rapprochement between economics, sociological and other social science disciplines in considering the allocation of resources and the making of decisions about technological change. The papers within this book represent a judicious blend of theory and empirical research and look at a broad range of innovations, markets and technologies in medicine, agricultural and food production, services and IT. Technology and the Market raises the question of the many ‘visible hands’ that are involved in linking technology and the market together.

Chapter 9: Internet entrepreneurship: why Linux might beat Microsoft

Maureen McKelvey

Subjects: innovation and technology, innovation policy


Maureen McKelvey INTRODUCTION The purpose of this chapter1 is to ask, when and why does freeware software gain enough momentum to challenge dominant commercial software? Software development is not seen as a unique phenomenon but instead as an early leader case for identifying trends in knowledge-intensive sectors. Software is examined because it has a high degree of knowledge-intensity in its development and sometimes in its use. Users may play significant roles as developers. Moreover, what is interesting about software development is that over time, there are alternative ways of creating novelty and creating economic value. Freeware, shareware, open source software, and so on compete with commercial, packaged software for users. These different ways sometimes develop in parallel but at other times, they converge or branch off. For this reason, software development appears to be a very interesting case of evolutionary competition which is highly relevant to theoretical developments in evolutionary economics (Metcalfe, 1997). McKelvey (forthcoming 2000) develops three ideal business models. Further review of the theoretical argument can be found there, as well as in McKelvey (forthcoming). The three models were developed based on software examples, but they are argued to be relevant for other knowledge-intensive sectors. The three models are: 1. Firm-based control of knowledge and of the economic returns. This would be a firm selling software as a standardized, closed, mass market product at a given time, albeit a product whose boundaries may expand over time into new uses and services. Software is a product, requiring strategies...

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