Analyzing Software Piracy from Supply and Demand Factors: The Competing Roles of Corruption and Economic Wealth

Analyzing Software Piracy from Supply and Demand Factors: The Competing Roles of Corruption and Economic Wealth

Peerayuth Charoensukmongkol (Texas A&M International University, USA), Jose Luis Daniel (Texas A&M International University, USA), Shaun Sexton (Texas A&M International University, USA) and Ned Kock (Texas A&M International University, USA)
DOI: 10.4018/978-1-4666-2136-7.ch055
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Abstract

This study analyzes the competing roles of economic wealth and corruption on software piracy based on the supply-demand perspective. The study argues that even though greater economic wealth may encourage people to buy legal software instead of using pirated software, the ease of access to pirated copies in the open market as a result of corruption can have a stronger influence on the decision to use pirated software. The empirical results also reveal that while an increase in economic wealth can reduce software piracy, its effect tends to be moderated by the level of corruption in a country. These results indicate that a pricing strategy that makes software more affordable is not a sufficient policy for combating software piracy. Additional policies aimed at combating corruption should be implemented concomitantly for effective resolution of this problem.
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Introduction

Software piracy is a major threat to firms operating in the software industry. Although these firms rely on the sale of computer technologies that have low goods-related costs, they tend to have extremely high research and development costs associated with their products (Keil et al., 2000; Rasch & Tosi, 1992; Swanson & McComb, 1991; Zmud, 1980). For this reason, the spread of software piracy is a serious problem. Estimates show that almost half of all software used around the world may be pirated (BSA, 2007). The use of pirated software is not limited to personal use within households, but it has spread to governments, business sectors, and educational institutions (Gan & Koh, 2006; Mishra et al., 2007; Reiss & Cintron, 2011).

Scholars have suggested that the decision to use pirated software, rather than purchase licensed copies, is related to the moral predispositions and justification of individuals, which have their roots in ethics (Chiou et al., 2012; Cronan & Al-Rafee, 2008). Specifically, Davidson and Griffin (2000) defined ethics as “an individual’s personal beliefs regarding what is right and wrong or good or bad” (p. 114). Past literature has suggested that educating individuals about ethics, in order to clarify the risks involved in using pirated software, can help reduce their propensity to use it (Ding & Liu, 2009; Peace et al., 2003). However, other factors also come into play in the spread of software piracy.

In the social sciences, researchers argue that the most effective way to deal with a societal problem is to understand its root causes (Gregor, 2006; Lee et al., 1997; Pearl, 2000; Salmon, 1998). With the aim of combating software piracy problems, scholars in this field have identified many factors that affect the rise and fall of software piracy. As mentioned by Yang et al. (2009), these factors tend to be both economic and cultural. However, in the case of software piracy, although many studies have focused on its determinants, most have only analyzed these determinants independently and have ignored the possibility that some may be moderated by other variables. One exception to this limitation is a study by Moores (2008), who showed that an increase in economic wealth may not necessarily lead to a reduction in software piracy in every country, as national culture had a moderating effect (Leidner & Kayworth, 2006). Most of these prior studies also have tended to focus on the role of these determinants on a cross-sectional basis. Studies have yet to show how changes in these factors over time can affect software piracy.

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