Givon, Mahajan and Muller (1995)

Source Details

Givon, Mahajan and Muller (1995)
Title:	Software piracy: Estimation of lost sales and the impact on software diffusion
Author(s):	Givon, M. , Mahajan, V., Muller, E.
Year:	1995
Citation:	Givon, M. , Mahajan, V. & Muller, E. (1995). Software piracy: Estimation of lost sales and the impact on software diffusion. Journal of Marketing, 59(1), 29-37.
Link(s):	Definitive , Open Access
Key Related Studies:	Katz and Shapiro (1986) Mahajan et al. (1990) Sultan et al. (1990) Parker (1992)
Discipline:	O3: Technological Change • Research and Development • Intellectual Property Rights O34: Intellectual Property and Intellectual Capital
Linked by:	Bhattacharjee, Gopal and Sanders (2003), Goles, Jayatilaka, George, Parsons, Chambers, Taylor and Brune (2008)

About the Data
Data Description:	Monthtly shipment data on DOS based microcomputers, spreadsheets, and wordprocessors in the UK for the 68 periods from January 1987 through August 1992.
Data Type:	Secondary data
Secondary Data Sources:	Market Analysis Information Database
Data Collection Methods:	Quantitative Collection Methods Quantitative data/text mining
Data Analysis Methods:	Quantitative Analysis Methods Descriptive statistics (counting; means reporting; cross-tabulation) Structural Equation Modeling
Industry(ies):	Software publishing (including video games)
Country(ies):	United Kingdom
Cross Country Study?:	No
Comparative Study?:	No
Literature review?:
Government or policy study?:
Time Period(s) of Collection:	Not stated
Funder(s):	Not stated

Abstract

Software piracy by users has been identified as the worst problem facing the software industry today. Software piracy permits the shadow discussion of a software parallel to its legal diffusion in the marketplace, increasing its user base over time. Because of its software shadow difussion a software user base, opportunities for cross-selling, and marketing its other products and new generations of the software. Software pirates may influence potential software users to adopt the software, and some of these adopters may become buyers. A diffusion modelling approach is suggested to track shadow diffusion and the legal diffusion of a software over time. The approach enables management to estimate (1) the pirated options over time and(2) the percentage of legal adoptions due to the influence of pirates. The modelling approach is applied to study the diffusion of two types of software (spreadsheets and word processors) in the United Kingdom. The results suggests that although six of every seven software users utilized pirate copies, these pirates were responsible for generating more than 80% of new software buyers, thereby significantly influencing the legal diffusion of software. The implications of these results are discussed.

Main Results of the Study

• Although piracy cultivates shadow diffusion of the software parallel to its legal diffusion in the marketplace, the shadow diffusion can have a significant impact on the legal difussion of the software.

• Through word-of-mouth interactions, pirates may influence the potential users to adopt software, and some of these adopters may purchase the software.

• When tracked over time, these diffusion dynamics permit estimation of the sales lost to the piracy and the influence of pirates in generating buyers for the software.

• The modelling approach is applied to study the diffusion of spreadsheets and word processors in the United Kingdom. The results suggests that six of every seven software users utilized pirate copies, but these pirates were responsible for generating more than 80% of new software buyers, thereby significantly influencing the legal diffusion of software.

Policy Implications as Stated By Author

Firms should note that any attempt to stop or restrict shadow diffusion of software can also significantly slow its legal penetration.

Coverage of Study

Coverage of Fundamental Issues

Issue	Included within Study
Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare
Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)?
Harmony of interest assumption between authors and publishers (creators and producers/investors)
Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption)
Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)

Coverage of Evidence Based Policies

Issue	Included within Study
Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right)
Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction)
Mass digitisation/orphan works (non-use; extended collective licensing)
Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability)
Fair remuneration (levies; copyright contracts)
Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Datasets

Sample size:	68
Level of aggregation:	Monthly data shipment units
Period of material under study:	January 1987-August 1992