When to make proprietary software open source

Software can be distributed closed source (proprietary) or open source (developed collaboratively). While a firm cannot sell open source software, and so loses potential sales revenue, the open source software development process can have a substantial positive impact on the quality of a software, its diffusion, and, consequently, the demand for a complementary product from which the firm does profit. Previous papers have considered the firm's option to release software under a closed or open source license as a simple once and for all binary choice. We extend this research by allowing for the possibility of keeping software proprietary for some optimally determined finite time period before making it open source. Furthermore, we study the impact of switching costs.