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Organization Studies
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Neither Market nor Hierarchy nor Network: The Emergence of Bazaar Governance

Benoît Demil

UFR Mathématiques, Economie et Gestion–Université de Lille 3, BP 149, 59653 Villeneuve d'Ascq Cedex, France; benoit.demil{at}wanadoo.fr

Xavier Lecocq

IAE de Lille, 104 Avenue du Peuple Belge, 59043 Lille Cedex, France; xavier.lecocq{at}iae.univ-lille1.fr

A growing body of literature describes the open source phenomenon in the software industry. Drawing on transaction cost economics, we propose that open source projects illustrate a new generic governance structure — which we label bazaar governance — based on a specific legal contract: the open licence. We characterize this structure in terms of its strengths and weaknesses and compare it to market, firm and network forms. Low levels of control and weak incentives intensity are distinctive features of bazaar, lending a high uncertainty to governed transactions. However, bazaar governance promotes the openness of open source communities, which can generate strong positive network externalities and subsequent efficiency in cumulative transactions. Our theoretical developments offer a potential basis for future research.

Key Words: bazaar governance • governance structure • open source • transaction cost economics

This version was published on October 1, 2006

Organization Studies, Vol. 27, No. 10, 1447-1466 (2006)
DOI: 10.1177/0170840606067250
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