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Dual licensing in open source software markets

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  • Comino, Stefano
  • Manenti, Fabio M.

Abstract

In this paper we present a theoretical model to study the characteristics and the commercial 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 source one. We show that the decision to employ a dual licensing strategy occurs whenever the feedbacks of the open source 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 central 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.

Suggested Citation

  • Comino, Stefano & Manenti, Fabio M., 2011. "Dual licensing in open source software markets," Information Economics and Policy, Elsevier, vol. 23(3), pages 234-242.
  • Handle: RePEc:eee:iepoli:v:23:y:2011:i:3:p:234-242
    DOI: 10.1016/j.infoecopol.2011.07.001
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    References listed on IDEAS

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    1. Josh Lerner, 2005. "The Scope of Open Source Licensing," Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(1), pages 20-56, April.
    2. Comino, Stefano & Manenti, Fabio M. & Parisi, Maria Laura, 2007. "From planning to mature: On the success of open source projects," Research Policy, Elsevier, vol. 36(10), pages 1575-1586, December.
    3. Fabio M. Manenti & Stefano Comino & Marialaura Parisi, 2005. "From Planning to Mature: on the Determinants of Open Source Take-Off," Industrial Organization 0507006, EconWPA, revised 29 Sep 2005.
    4. Justin Pappas Johnson, 2002. "Open Source Software: Private Provision of a Public Good," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 637-662, December.
    5. Chaim Fershtman & Neil Gandal, 2007. "Open source software: Motivation and restrictive licensing," International Economics and Economic Policy, Springer, vol. 4(2), pages 209-225, August.
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    7. Paul Belleflamme, 2005. "Versioning in the Information Economy: Theory and Applications," CESifo Economic Studies, CESifo, vol. 51(2-3), pages 329-358.
    8. Gayer, Amit & Shy, Oz, 2003. "Internet and peer-to-peer distributions in markets for digital products," Economics Letters, Elsevier, vol. 81(2), pages 197-203, November.
    9. Lanzi, Diego, 2009. "Competition and open source with perfect software compatibility," Information Economics and Policy, Elsevier, vol. 21(3), pages 192-200, August.
    10. Mikko Mustonen, 2005. "When Does a Firm Support Substitute Open Source Programming?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 121-139, March.
    11. Koski, Heli, 2007. "Private-collective Software Business Models: Cordinatitons and Commercialization via Licensing," Discussion Papers 1091, The Research Institute of the Finnish Economy.
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    Citations

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    Cited by:

    1. Eric Darmon & Dominique Torre, 2010. "Open source, dual licensing and software compétition," Post-Print halshs-00497623, HAL.
    2. Engelhardt, Sebastian v. & Freytag, Andreas, 2013. "Institutions, culture, and open source," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 90-110.
    3. Thomas Le Texier & Mourad Zeroukhi, 2015. "How Can Proprietary Software Firms Take Advantage Over Open Source Communities? Another Story of Pro fitable Piracy," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201503, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    4. Stefano Comino & Fabio Maria Manenti, 2015. "Intellectual Property and Innovation in Information and Communication Technology (ICT)," JRC Working Papers JRC97541, Joint Research Centre (Seville site).
    5. Ginchev Ivan, 2008. "Optimality conditions for scalar and vector optimization problems with quasiconvex inequality constraints," Economics and Quantitative Methods qf0805, Department of Economics, University of Insubria.
    6. Stefano Colombo & Luca Grilli & Cristina Rossi-Lamastra, 2014. "Network Externalities, Incumbent’s Competitive Advantage and the Degree of Openness of Software Start-Ups," Computational Economics, Springer;Society for Computational Economics, vol. 44(2), pages 175-200, August.
    7. Atal Vidya & Shankar Kameshwari, 2015. "Developers’ Incentives and Open-Source Software Licensing: GPL vs BSD," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(3), pages 1381-1416, July.
    8. German Lambardi, 2009. "Software Innovation and the Open Source threat," Working Papers 09-15, NET Institute, revised Sep 2009.

    More about this item

    Keywords

    Open source software; Open source business models; Embedded software; Dual licensing; Versioning;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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