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Oliver Alexy looks at the impact of open source on a company's shares:

But does giving ideas away help -- or hurt -- the company's stock price? Will investors reward openness by driving up the company's shares -- or punish it by knocking the stock down?

Looking for News

To find out, I analyzed companies' stock performance before and after they announced that they were making proprietary software open-source.

First, I searched through news releases from January 1999, shortly after the start of the open-source movement, to April 2007, looking for announcements that fit the bill. I then weeded out a number of companies, mostly because their announcements contained other news that might affect the stock price. That left 38 announcements from 30 companies.

Next, I analyzed the companies' stock performance for 125 days prior to the announcement -- to get a baseline for performance -- and then watched the stock activity the day before the announcement and the day of the announcement. (I looked at the day before in case the markets had anticipated the news.)

Make It Clear

The results? Companies saw their stock price rise if they met one crucial condition: explaining how they expected their open strategy to bring in short-term revenue. Companies that clearly communicated a short-term revenue model saw an average stock-price increase of 1.6%. Companies that didn't saw an average decline of 1.6%.

That's interesting though I'm a little uneasy about the robustness of that survey. It would be interesting to see if there could be more research done on a broader scale.

Posted by edelfenbein at May 13, 2008 11:02 AM