Open source software (OSS) is no longer just a tool for hobbyists or software enthusiasts鈥攊t has become a strategic asset driving the growth of global startups. In their paper, “,” , Assistant Professor of Business at Columbia Business School; , Assistant Professor of Business Administration at HBS and a faculty affiliate in ; and , Martin Marshall Professor of Business Administration at HBS, explore the role OSS plays in startup growth.
The authors used PitchBook to identify over 60,000 global software firms founded from 2000-2016. They then linked these firms to GitHub鈥檚 OSS activity from 2017-2022 to research startup performance results. Overall, they found 鈥渁 robustly positive relationship between OSS contributions and entrepreneurial growth鈥� during that time, mainly in the areas of Direction (shaping the frontier of code), Signaling (demonstrating value), and Attracting Users (reaching users and paying clients).
Key Insight: OSS Drives Funding and Valuation Growth
“A 1 percent increase in GitHub participation鈥攊.e., code contributions labeled as ‘commits’鈥攊s associated with a 0.3 percent increase in total funding and valuations.” [1]
Startups that contribute to OSS platforms like GitHub experience notable growth in funding and valuation. This trend is particularly strong in firms that strategically use OSS to lead in software development or position themselves in innovative spaces like artificial intelligence (AI). By leveraging OSS, startups can develop cutting-edge products faster and with lower costs, which, in turn, enhances their market value and attracts potential investors. For instance, GitHub’s role in enabling collaboration on AI projects through repositories like TensorFlow and PyTorch has led to an increase in AI startups, further highlighting the connection between OSS activity and entrepreneurial growth.
Key Insight: OSS Facilitates Market Leadership
“OSS enables firms to shape the frontier of code, signal to potential acquirers, and attract clients.” [2]
Although participating in OSS might suggest that startup growth would benefit from related learning and lower costs, the study did not find consistent evidence that these factors influence startup performance. Instead, growth comes from contributing heavily to certain projects, which enables companies to assert themselves as leaders in specific areas of software development, particularly in new and emerging technologies. For startups, especially those seeking venture funding or acquisition, OSS participation serves as a strong signal of quality and innovation. Contributing to OSS can provide a distribution channel for startups to reach potential users and clients.
Why This Matters
For business professionals, particularly C-suite executives, understanding the strategic role of OSS is crucial for fostering innovation and growth. The findings from Wright, Nagle, and Greenstein show that contributing to OSS is not merely a technical decision but a strategic one that can lead to tangible financial outcomes such as increased funding and valuations. By encouraging and investing in OSS contributions, firms can leverage the global community of developers, reduce costs, and position themselves as leaders in their industries. Even beyond the startup stage, more mature companies can benefit from OSS by continuing to influence the direction of code and attracting acquirers and clients.
References
[1] Nataliya Langburd Wright, Frank Nagle, and Shane Greenstein, 鈥淐ontributing to Growth? The Role of Open Source Software for Global Startups鈥�, Working Paper 24-040 (性视界 Business School), (August 2024): 1-48, 4.
[2] Wright, Nagle, and Greenstein, 鈥淐ontributing to Growth? The Role of Open Source Software for Global Startups鈥�, 5.
Meet the Authors
is an Assistant Professor in the Management Division of Columbia Business School. Her research focuses on entrepreneurial strategy, particularly the strategic and technological drivers of global entrepreneurial growth. It is published in the Strategic Management Journal and Research Policy and earned awards from the Academy of Management, PTC, the Columbia Business School Digital Future Initiative, and the Strategic Management Society.
is an Assistant Professor in the Strategy Unit at 性视界 Business School, a faculty affiliate of the Digital, Data and Design (D^3) Institute at 性视界, the Managing the Future of Work Project, and LISH. He studies how competitors can collaborate on the creation of core technologies, while still competing on the products and services built on top of them. His research falls into the broader categories of the future of work, the economics of IT, and digital transformation and considers how technology is weakening firm boundaries.
is the Martin Marshall Professor of Business Administration. He teaches in the Technology, Operations and Management Unit. Encompassing a wide array of questions about computing, communication, and Internet markets, Professor Greenstein鈥檚 research extends from economic measurement and analysis to broader issues. His most recent book focuses on the development of the commercial Internet in the United States. He also publishes commentary on his blog, , and his work has been covered by media outlets ranging from The New York Times and The Wall Street Journal to Fast Company and PC World.