Dual Licensing in Open Source Software Markets

In this paper we present a theoretical model to study the characteristics and the commerciaI sustainability of dual licensing, an open source (OS) business strategy that has gained popularity among software vendors. With dual licensing, a firm releases the same software product under both a traditional proprietary license and an open souree one. We show that the decision to employ a dual licensing strategy occurs whenever the feedbacks of the open souree community are valuable enough compared to the quality of the software that the firm is able to develop in-house. Our analysis points to the centraI role of an appropriate managing of OS licenses in order to balance the pros and cons of "going open source" and to make this versioning strategy viable for software vendors; our analysis also suggests a possible explanation for the observed proliferation of open source licenses.