As crowd sourced digital goods become more widely available and more frequently used as key inputs by firms, understanding the impact they have on productivity becomes of critical importance. This study measures the firm-level productivity impact of one such good, non-pecuniary (free) open source software (OSS). The results show a positive and significant return to the usage of non-pecuniary OSS that has gone unmeasured in prior studies of the economics of IT. The study addresses the endogeneity issues inherent in productivity studies by using inverse probability weighting, an instrumental variable approach, and firm fixed effects to add support for a causal interpretation.
Across firms, a 1% increase in the amount of non-pecuniary OSS used by a firm leads to a .073% increase in productivity. This translates to a $1.38 million increase in value-added production for the average firm in the sample. This effect is greater for larger firms and for firms in the services industry. These findings suggest that firms willing to take on the risks associated with non-pecuniary OSS reap benefits from collective intelligence and labour spill overs. Further, the results indicate that existing studies underestimate the amount of IT used at the firm.