International Software Piracy: Analysis of Key Issues and Impacts

The pervasiveness of software piracy throughout the world is having a profound effect on the software publishing industry and the development of digital intellectual properties and technologies—especially in developing countries, where the piracy rates are extremely high. An economic model is first presented that incorporates the incentive structures for governments, software publishers, and individual consumers. The analytical model provides the economic rationale for the reluctance of a number of governments to aggressively enact and enforce intellectual property rights. An important proposition derived from the analysis states that the government's incentive to enact and enforce copyright laws are closely related to the size of the domestic software industry. The ensuing empirical study provides support for the proposition and further suggests that this relationship holds regardless of the income levels of the countries. Our analysis reveals that alliances between foreign and domestic software publishers through product relationships can be mutually beneficial and will provide an environment of increased copyright enforcement. These results provide a viable strategy to combat global software piracy. With strong policies on copyright enforcement, and a vigorous promotion of alliances between foreign and domestic publishers, a government can increase the net welfare of the country and help establish a strong domestic software industry. Through product relationships with domestic publishers, a foreign publisher can improve profits and operate in an environment of increased intellectual property protection. We then present a general model of ethical behavior related to the impact of behavioral and cultural factors on software piracy. The purpose of this model is to examine whether these determinants of piracy behavior are supranational and transcend cultural and ethical barriers. An empirical study involving U.S. and Indian graduate students suggests that the general model of ethics as related to software piracy is valid in the United States. However, the model results from the Indian sample suggest that additional cross-cultural research with revised models and improved scales is necessary.