Technology Commercialization Theory
" Open source business models continue to be a source of great puzzlement, yet the situation is not so different from monetizing Natural Resources. With Natural Resources such as minerals, oil, wildlife, and water, the primary asset is some Natural Resource, which, historically, has and continues to be viewed as free. Similarly, open source software assets are generally and freely available.
To help in understanding open source business models, we appeal to a technology commercialization theory by David Teece. Teece's theory has several dimensions, and the dimension we wish to apply here is called Complementary Assets. In the development of his theory, Teece observed that it is very rare that a technological innovation (the primary asset) can be commercialized without the support of other assets known as complementary assets. Examples of complementary assets include marketing, sales, human resource management, office space, information technology, transportation, manufacturing, and sales channels. Teece further observed that the role and importance of these complementary assets may be of considerable importance in the commercialization of the primary asset. This is particularly true when the provider of some necessary complementary asset has a monopoly.
To return to our parallel with Natural Resources, with the fish off the Grand Banks of Newfoundland and Labrador viewed as a free asset, competition intensified around such necessary complementary assets as large factory ships that could spend months at sea harvesting and packaging fish.
And this is generally the case: when the primary asset is a commodity, competition intensifies around the necessary complementary assets.
Open source software turns a previously privileged primary asset into a commodity and instantly creates a commodity out of a new-to-the-world primary asset. The important insight surrounding turning a primary asset into a commodity is that the firms purchasing these primary assets do not typically experience savings. Rather, competitive pressures are such that the expenditures of these firms simply shift towards other competitive distinguishers. And commonly, some of these new expenditures are on complementary assets such as training, books and customizations that become affordable as a consequence of the primary asset being priced as a commodity. Also noteworthy is that such complementary assets may, or may not, be a competitive advantage of the purveyor of the primary asset.
In sum, the key to comprehending most open source business models is to distinguish between (i) the primary asset and (ii) the complementary assets that are necessary to support the commercialization and use of the primary asset. And to recognize that when the primary asset is a commodity, competitive pressures will likely increase spending on the complementary assets." (http://www.osbr.ca/archive.php?issue=7§ion=Ar#A7)
Recommended Reading: Teece, D. J., 1986. Profiting from Technological Innovation: Implications for Integration, Collaborations, Licensing and Public Policy. Research Policy. Research Policy, Vol.15, Issue 6, pp. 285-305.