R&D incentives of energy-saving proprietary software vendor when open source software emerges

The problem of open source is a hot topic in the software industry. However, the studies on how open source software (OSS) affects software competition are rare. Through extending Hotelling model, this paper analyzes the product innovation strategies of energy-saving proprietary software (PS) vendor in the presence of open source software. It finds that: (i) the compatibility degree between open source and proprietary software influences the R&D incentives of proprietary software vendor; (ii) the R&D efforts of energy-saving proprietary software vendor increase as the learning (maintenance or development) costs of open source software increase; (iii) how the network externalities and user's software development capability influence the R&D efforts of energy-saving proprietary software vendor depends on the compatibility degree between open source and proprietary software. © Sila Science.