Determinants of software piracy under risk aversion: a model with empirical evidence

Abstract

This paper studies the determinants of software piracy in world economies from a risk avoidance perspective. A risk aversion model for the commercialization of pirated software is developed to account for behavioral elements of risk and uncertainty avoidance among countries’ software pirates (i.e., counterfeiters and suppliers) and test empirically for the effects of country characteristics on piracy levels. Panel regression analysis is conducted to identify the determinants of software piracy using this model on a data set of 87 countries during 2007–2011. The empirical results confirm those obtained in prior research (e.g., the inverted U-shaped relationship between GDP per capita and piracy rates) but divulge that the behavioral-country component capturing the attitudes towards risk of software pirates improves the explanatory power of the statistical regressions after controlling for country performance and institutional factors. We also show that human development and good country governance reduce piracy rates. Besides providing support for our risk aversion-based piracy model and hinting at the need to consider population behavior in policy-making, these findings underline the relevance of human development and country institutions in explaining software piracy rates.

Keywords:

• software piracy
• determinants
• risk aversion
• policy

Acknowledgements

We are grateful to the editor-in-chief, the associate editor and three anonymous referees for their insightful and constructive comments. We thank Raymond So and Karim Malki for help with data collection and organization.

Additional information

Notes on contributors

Ahmed Driouchi

About the authors

Ahmed Driouchi (Doctorate, Ph.D.) is Dean and Professor of Applied Economics at the Institute of Economic Analysis and Prospective Studies, Al Akhawayn University, Ifrane. He conducts research in economic policy, development and behavioral economics. He has published numerous books and journal articles on human development, technology and knowledge transfer, the migration of medical doctors, risk elicitation and agricultural economics.

Mingzhu Wang

Mingzhu Wang (B.A., M.S., Ph.D.) is Assistant Professor of Accounting and Finance at KCL Department of Management. She conducts Accounting and Finance research in the areas of (corporate) governance and managerial ownership. She has published in the European Journal of Finance, Corporate Governance: An International Review, Journal of Business Ethics and the Journal of Accounting and Public Policy.

Tarik Driouchi

Tarik Driouchi (B.A., M.Sc., Ph.D.) is Associate Professor of Financial Management at King’s College London, University of London. He conducts research in the area of financial decision making. His work appears in Omega - The International Journal of Management Science, European Journal of Operational Research, Journal of World Business, Transportation Research B and Advances in Risk Management (Palgrave) among others.