The Emergence of an Organizational Field: The Case of Open Source Software

Abstract

Institutional theory offers a very powerful lens to understand and explain societal phenomena. In the context of innovation and technology, this perspective provides insights that complement the understandings derived from a focus on just technology or economics. Adopting this standpoint, this paper examines the emergence of the organizational field of open source software as a response to the norms of propriety software that were unacceptable to many passionate software researchers and programmers. The context of software product development has some unique characteristics that separates it from other industries. First, software products are information goods. In general, information goods have very high fixed costs of development and low marginal costs of reproduction which often leads to market inefficiencies. Second, IP protection has the potential to exaggerate the problem of market inefficiencies. Third, software is an input and also an output of the production function and IP protection has the potential to make the cost of software products prohibitively high. Fourth, the Internet has created the potential for the larger society to participate in the production process. These features of the software industry influence the dynamics among software professionals and orgnizations creating a distinctive context which can be better understood through the lens of institutional theory. According to institution theory, organizations seek to obtain legitimacy, which goes beyond technological or economic performance, by conforming to institutional requirements in a context. There are three forms of legitimacy. Pragmatic legitimacy, based on regulative requirements, is acquired by complying with the legal and regulative rules in the organizational field. Moral legitimacy, based on normative requirements, is obtained by ensuring that the activities of an organization promote societal good or welfare. Finally, cognitive legitimacy is derived from the extent to which the activities of an organization mesh with the taken-for-granted norms in the larger context. While institutions are normally sustained for long, they do experience change. Institutional change is driven by institutional entrepreneurs who create, maintain, and disrupt the practices that are considered legitimate, and challenge the boundaries that demarcate one field from another. The findings of this study capture the intricate dynamics and interactions among institutional requirements, software professionals and organizations that led to the norms of the institution of propriety software being challenged. It suggests that the process of institutional change can lead to the creation of a new alternate organizational field leaving the original field largely untouched. This paper contributes to the understanding of the software industry and suggests implications for other industries that produce information goods.