Software piracy and ethical decision making behavior of Chinese consumers.

Publication: Journal of Comparative International Management

Publication Date: 01-DEC-05

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COPYRIGHT 2005 Management Futures

China has one of the highest software piracy rate in the world. It is important to understand consumers' ethical response to software piracy in the Chinese markets and design effective preventive strategies. This paper proposes a conceptual framework for an understanding of consumer ethical decision making. In the proposed framework, the transformation from legal problem recognition to ethical problem recognition is added to the traditional research framework and viewed as the first and most important step in consumer ethical decision making in regards to software piracy. The effects of two culture-related constructs--assumption of responsibility and attitude towards copyright laws on consumer ethical decision making--are examined and two propositions are made. The influence of Chinese culture and history on consumer ethical decision making is discussed. This paper contributes to our understanding of consumer ethical decision making in software piracy and provides new and constructive interpretations of the cultural influence.

Introduction

Software piracy refers to consumers' knowing involvement in illegal software usage. Software piracy may include a number of related practices such as illegal copying of programs, counterfeiting and distributing software, purchasing pirated software and renting unauthorized software. Piracy is different from counterfeit in terms of the consumer awareness of the legitimacy of a product. A counterfeit product is one which a manufacturer produces with the intention of deceiving customers by leading buyers to believe that they are purchasing the genuine article. A pirated product is one where consumers are aware that the product is pirated (McDonald & Roberts, 1994).

While software piracy is prevalent in countries of various geographic, cultural and economic natures, China is one of the countries with the most severe piracy problem. According to the International Intellectual Property Alliance (IIPA), US businesses lost an estimated US$2.86 billion in revenues in 2003 due to copyright violations in China, with business software applications like Microsoft Office comprising 62.5% (US$1.79 billion) and entertainment software comprising 20% (US$568.2 million) of the total losses (IIPA, 2004). The remaining losses come from copyright piracy in records and music (US$286 million), motion pictures (US$178 million), and books (US$40 million) (IIPA, 2004). The large losses from software piracy in the Chinese markets (82.5% of total piracy losses) indicate that addressing software piracy is a priority in the Chinese markets. The software piracy rate in China is estimated in a range of 92% (business software applications) (IIPA 2004) to 96% (entertainment software) (IIPA 2004; Marron & Steel, 2000; Traphagan & Griffith, 1998). As the Chinese software market has been developing fast with the continuous double digit economic development in China, it is among countries with the highest piracy rates. It is expected that the software piracy issue in China will become more critical to multinational software businesses in the future.

Many factors influence software piracy. At the national level, macro factors such as culture, economic development, law and legislation and enforcement (Husted, 2000) are important in determining the prevalence of software piracy in a country. As to micro factors, financial gain is one of the most important reasons for software piracy (Cheng et al., 1997; Moores & Dhillon, 2000; Traphagan & Griffith, 1998; Wee et al., 1995). Other micro-level factors such as demography, benefit-cost evaluation other than the financial gain, situational factors, professionalism, and other gains to consumers, are found to be relevant to consumer attitude towards software piracy (Cheng et al., 1997; Logsdon et al., 1994; Moores & Dhillon, 2000).

The Chinese macro-environment leads to the high software piracy rate. China is a developing economy, and financial benefit from software piracy is high. Copyright legislation only started recently and enforcement mechanism is underdevelopment. The collectivist culture of China is found to be correlated with high piracy rates (Marron & Steel, 2000). However, understanding macro factors is not sufficient in designing anti-piracy policies and strategies as these factors take a long time to change. Businesses need to address micro-level factors to target the consumers of pirated software. A recent focus in micro-level analysis is consumer ethical decision making. Apparently, if consumers do the right thing (not pirate software), the software piracy problem is solved.

The issue of software and its copyrights has been drawing attention in mainstream research for years, but its findings are limited and related theories have yet to be established (e.g., Lerner and Tirole, 2005; Varian, 2005). Applying theories and previous findings of consumer ethical decision making in software piracy in the Chinese markets, we find several research gaps. First, current ethical decision making theories cannot satisfactorily explain consumer behavior in software piracy. Many studies found a weak relationship between consumer moral judgment and their response to software piracy (Logsdon et al., 1994; Simpson et al., 1994). Second, while collectivism, which is a component of the culture construct, has been...

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