Economics of Innovation and New Technology, Vol. 16, No. 6, pg. 451, 2007
This paper compares innovation when firms use open source or traditional software.
Open source software (OSS) development can displace other types of software development. This might reduce innovation overall.
OSS lets users change the code to suit their own needs and is often developed by volunteers; open source code under the General Public License (GPL) must be distributed free.
Traditional software (proprietary software) cannot be redistributed or changed by users and is sold for profit. The profit motive encourages innovation.
In the software sector, when individuals spend more time on GPL projects, it tends to reduce the resources available to the commercial sector. Research and development in the commercial sector tends to decline more than it increases in the GPL sector.
Open source projects tend to imitate successful traditional projects.
Commercial projects tend to produce higher returns.
This does not mean there would be less total innovation -- that depends on the situation.
When GPL programming is not much cheaper than proprietary software, overall growth is not harmed. When it is much cheaper, overall growth is reduced even if only a few workers spend time on it.