Abstract
Open Source Software (OSS), forecasted as one of the most promising technologies, has become an under-budget alternative in addition to costly proprietary software. Extant literature of OSS focuses on community functions, developers’ motivation, economic effects, and recent implementation cases. This thesis is among the first to examine the competition dynamics between OSS and proprietary software by proposing a Generalized Bass Model-based diffusion model. In addition to the traditional innovation and imitation coefficients in marketing, this model integrates software ownership cost and software quality into it. Moreover, this research applies the model to empirically examine the web server software market where Apache and Microsoft IIS compete with each other. Under the competitive circumstance of software, this research finds that both software quality and ownership cost have no significant impact on users’ choices toward OSS. These users do not feel excited about getting exposed to external marketing factors because the diffusion of OSS is mostly through word-of-mouth effect. Hence this research suggests that OSS promotes the cooperation and competition among OSS communities. Well functioned OSS communities will naturally edge out the unqualified ones and produce decent programs to be widely adopted. This research also shows that proprietary software heavily relies on mass media to impress potential customers. Meanwhile, proprietary software firms suffer negative influence from both word-of-mouth effect and ownership cost. The managerial implication is that proprietary software has to set a reasonable license price and provide overall satisfied products; otherwise, customers’ severe criticism would be widely spread through word-of-mouth effect and discourages potential customers from adoption.