Coase's Penguin, or, Linux and "The Nature of the Firm"

For decades our common understanding of the organization of economic production has been that individuals order their productive activities in one of two ways: either as employees in firms, following the directions of managers, or as individuals in markets, following price signals. This dichotomy was first identified in the early work of Ronald Coase and was developed most explicitly in the work of institutional economist Oliver Williamson. Recently, public attention has focused on a fifteen-year-old phenomenon called free software or open source software. This phenomenon involves thousands, or even tens of thousands, of computer programmers who collaborate on large- and small-scale projects without traditional firm-based or market-based ownership of the resulting product. This Article explains why free software is only one example of a much broader social-economic phenomenon emerging in the digitally networked environment, a third mode of production that the author calls "commons-based peer production."