If you are interested in trying to understand why open source works, you ought to read this paper. Benkler suggests that the free/open source software phenomenon is an instance of a broader social economic phenomenon which he calls "commons-based peer production". His analysis of commons-based peer production positions it as an alternative method of production when compared to firms and markets:

In particular, this mode of production is better than firms and markets for two reasons. First, it is better at identifying and assigning human capital to information and cultural production processes. In this regard, peer production has an advantage in what I call "information opportunity cost." That is, it loses less information about who the best person for a given job might be than either of the other two organizational modes. Second, there are substantial increasing returns, in terms of allocation efficiency, to allowing larger clusters of potential contributors to interact with large clusters of information resources in search of new projects and opportunities for collaboration. Removing property and contract as the organizing principles of collaboration substantially reduces transaction costs involved in allowing these large clusters of potential contributors to review and select which resources to work on, for which projects, and with which collaborators. This results in the potential for substantial allocation gains.