For decades our understanding of economic production has been that
individuals order their productive activities in one of two ways:
either as employees in firms, following the directions of managers, or
as individuals in markets, following price signals. This dichotomy was
first identified in the early work of Nobel laureate Ronald Coase, and
was developed most explicitly in the work of neo-institutional
economist Oliver Williamson. In the past three or four years, public
attention has focused on a fifteen-year-old social-economic phenomenon
in the software development world. This phenomenon, called free
software or open source software, involves thousands or even tens of
thousands of programmers contributing to large and small scale project,
where the central organizing principle is that the software remains
free of most constraints on copying and use common to proprietary
materials. No one "owns" the software in the traditional sense of being
able to command how it is used or developed, or to control its
disposition. The result is the emergence of a vibrant, innovative and
productive collaboration, whose participants are not organized in firms
and do not choose their projects in response to price signals.