When to make proprietary software open source

We show that in case of high in-house R&D costs, the firm always makes the software open source at some point (unless switching itself is too expensive). The timing, however, depends on the initial software quality. On the other hand, when R&D is inexpensive, the firm opens the source code only when the initial level of software quality is low. For intermediate R&D costs, the firm might have the choice between opening the code immediately, opening it at some subsequent and optimally determined time, or keeping it closed forever. Finally we find that whereas high switching costs might prevent firms from adopting an open source business model, low switching costs mainly affect the timing of the opening of the source code.