Under review at Organization Science
Dependence Reconfiguration: Open-Source Governance as a Response to Geopolitical Restrictions on Critical Technologies
When access to an upstream technology is restricted, how do firms organize innovation downstream? After the October 2022 U.S. export controls on advanced AI chips, Chinese AI firms released more open-source code under permissive licenses (about 7% more) and became 15.7 percentage points more likely to have outside developers hold most write access, which brought more forks and more outside pull requests. Licensing widens who can take part, and gatekeeping deepens how much outsiders can shape the project. AI firms in India and Japan, which the controls did not cover, show no such change. The firms moved from concentrated supply-side dependence on a few players to distributed demand-side dependence.
Abstract
Firms in the Global South often depend on a small set of Global North incumbents for critical upstream technologies. How can they sustain innovation when access to these inputs is restricted not by any single partner, but by an across-the-board supply constraint? We develop the concept of dependence reconfiguration, arguing that constrained firms can redirect exchange relationships away from concentrated upstream suppliers toward distributed downstream users and developers. Open source software provides governance mechanisms that enable this shift: permissive licensing broadens downstream adoption, while open gatekeeping structures deepen external developer participation. We test this argument using a matched sample of Chinese software firms, comparing AI-related firms with non-AI firms before and after the October 2022 U.S. export controls on advanced computing hardware. We find that, after the shock, AI firms increased their release of permissively licensed open source projects and granted more external developers gatekeeping authority. These governance changes, in turn, increased community adoption and external contribution. The findings extend resource dependence theory by showing how firms manage upstream constraints through the cultivation of downstream relationships. We further identify open source innovation as a strategic pathway through which Global South firms sustain innovation under technological restrictions.