Hidden Software and Veiled Value Creation: Illustrations from Server Software Usage
How do you measure the value of a commodity that transacts at a price of zero from an economic standpoint? This study examines the potential for and extent of omission and misattribution in standard approaches to economic accounting with regards to open source software, an unpriced commodity in the digital economy. The study is the first to follow usage and upgrading of unpriced software over a long period of time. It finds evidence that software updates mislead analyses of sources of firm productivity and identifies several mechanisms that create issues for mismeasurement. To illustrate these mechanisms, this study closely examines one asset that plays a critical role in the digital economic activity, web server software. We analyze the largest dataset ever compiled on web server use in the United States and link it to disaggregated information on over 200,000 medium to large organizations in the United States between 2001 and 2018. In our sample, we find that the omission of economic value created by web server software is substantial and that this omission indicates there is over $4.5 billion dollars of mismeasurement of server software across organizations in the United States. This mismeasurement varies by organization age, geography, industry and size. We also find that dynamic behavior, such as improvements of server technology and entry of new products, further exacerbates economic mismeasurement.
We are grateful to Kenji Nagahashi and Mark Graham from The Internet Archive. We also thank Frank Nagle for providing the data used in Nagle (2019). We thank Audrey Tiew for comments and Alicia Shems for editorial comments. Funding for this research was provided by Harvard Business School, Ewing Marion Kauffman Foundation, the B.F. Haley and E.S. Shaw Fellowship for Economics through a grant to the Stanford Institute for Economic Policy Research, NSF SciSIP Award #1932689, and NSF Education and Human Resources DGE Award #1761008. The authors are pleased to acknowledge that the computational work reported on in this paper was performed on the Shared Computing Cluster which is administered by Boston University’s Research Computing Services. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Murciano-Goroff, Raviv & Zhuo, Ran & Greenstein, Shane, 2021. "Hidden software and veiled value creation: Illustrations from server software usage," Research Policy, Elsevier, vol. 50(9). citation courtesy of