Informational Hold-Up, Disclosure Policy, and Career Concerns ontheExample of Open Source Software Development
We consider software developers who can either work on an open sourceproject or on a closed source project. The former provides a publiclyavailable signal about their talent, whereas the latter provides asignal only observed by their employer. We show that a talented employeemay initially prefer a less paying job as an open source developer tocommercial closed source projects, because a publicly available signalgives him a better bargaining position when renegotiating wages with hisemployer after the signal has been revealed. Also, we derive conditionsunder which two effects suggested by standard intuition are reversed: a'pooling equilibrium' (with both talented and untalented workers doingclosed source) is less likely if differences in talent are large; ahighly visible open source job leads to more effort in a career concernssetup. The former effect is because a higher productivity of talentedworkers raises not only the value but also the cost of signaling; thelatter stems from more effort and the choice of a high visibility jobbeing substitutes for the purpose of signaling. Results naturally applyto other industries with high and low visibility jobs, e.g. academicrather than commercial research, consulting rather than management.
Year of publication: |
2008
|
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Authors: | Blatter, Marc ; Niedermayer, Andras |
Institutions: | University of Bern ; Northwestern University |
Subject: | Open source software | signaling |
Saved in:
freely available
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