Putting a value on openness: The effect of product source code releases on the market value of firms

This study examines the effect of opening up the innovation process on the market value of firms. Using the example of firms releasing proprietary software as open source in a sample of 30 software companies in the time span from 1999 to 2007, I find that market valuation is strongly influenced by the business model firms choose to generate and appropriate value. The non-existence of an explicit revenue model is punished by the capital market while firms whose efforts include an explicit revenue model achieve a premium on their stock price, confirming the potential for value-creation of open innovation efforts.