> ## Content Index
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# Openness drives profitability
- URL: https://www.cpj.fyi/radar/openness-drives-profitability/
- Published: 2026-08-17T15:12:52.000Z
- Updated: 2026-08-17T15:12:52.000Z
- Description: A hot one from the "I'm right and you're wrong" beat (sorry for the clickbait headline, but please click
- Author: Clay Parker Jones
- Tags: Radar, Org Design

Here's a fun one!

A [paper](https://arxiv.org/pdf/2608.02398?ref=cpj.fyi) \[PDF\] published on August 13, 2026 indicates that open-source development is associated with higher gross margins. This sample here covers 977 firms: 231 open-source adopters and 746 non-adopters.

This basically means what we had suspected all along is true: Openness and Community Orientation lead to more success, not less, and organizations are able to capture value from production that crosses the employment boundary.

Researchers considered firms to be active if they had pushes, pull requests, review comments, or issue activity within a given year, and then used the log of the number of active projects as an indicator of development intensity. Now, the research does not necessarily capture the firm’s full our development system, and it excludes contributions to projects that the firm does not itself host on GitHub. The study's authors describe the mechanism behind this margin improvement as something like distributed knowledge integration.[\[1\]](#fn1) Having a popular open-source repo leads to the discovery of valuable edge cases, deployment contexts that would otherwise go unseen internally, and other unmet needs.

Open-source projects don't magically just generate value from nothing, though, as they require additional internal work focused on evaluation, integration, architecture, commercialization...all things that you would expect from a normal software project, but now with a much larger contribution base.[\[2\]](#fn2)

The effect became discernible when outside contributions passed 35% of total contributions, with a clearer effect above 51%, but there is more to this than “be more open”. The authors found five high-margin configurations, each combining high open-source activity and high R&D:

1. A large, labor-intensive firm with low outside participation, capital intensity and market share.
2. A large, labor-intensive firm with high outside participation but low capital intensity and market share.
3. A smaller, labor-intensive firm with low outside participation, capital intensity and market share.
4. A large, high-market-share firm with high outside participation but low capital and labor intensity.
5. A large, high-market-share firm with high capital and labor intensity but low outside participation.

Haters will probably flag that this is borderline uncompensated labor, *but* open-source projects (even if they're corporate) are genuine contributions to the field: take [VSCode](https://github.com/microsoft/vscode?ref=cpj.fyi) (Microsoft) or [Chromium](https://chromium.googlesource.com/chromium/src/?ref=cpj.fyi) (Google), or [Posthog](https://github.com/PostHog/posthog?ref=cpj.fyi).[\[3\]](#fn3) And there are plenty of businesses built on other businesses' open source: Microsoft Edge extends Chromium, Vercel's Next.js extends Meta's React, PostHog itself builds upon Yandex's Clickhouse. For more on this topic, I strongly recommend [Yochai Benkler's "Coase's Penguin"](https://yalelawjournal.org/pdf/354%5Ft5aih5i1.pdf?ref=cpj.fyi). It's a thinker, but it's worth it.

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1. Distributed intelligence! Collective wisdom! [↩︎](#fnref1)
2. More on governing open-source projects [here](https://wrap.warwick.ac.uk/id/eprint/87892/?ref=cpj.fyi) [↩︎](#fnref2)
3. My open-source stuff, including streetSim, the art for this site, and Paperdeck, are all [here](https://github.com/cpj-fyi?tab=repositories&ref=cpj.fyi). [↩︎](#fnref3)