A Contribution to the Understanding of Illegal Copying of Software: Empirical and analytical evidence against conventional wisdom

This paper analyzes the causes of illegal copying and its effects in the software market across 66 countries. By studying the aggregated and joint effects of different variables, the analysis shows that supply constraints in the software market, shortage of after-sale support, and characteristics legal framework are major drivers of illegal copying when controlling for income per capita. It also concludes there is enough evidence to show there is a threshold of illegal copying over which its aggregated effect on the software market is positive, and this is an efficient mechanism for market creation. Thus, allowing illegal copying in some countries and at certain periods of time may be a profit generating decision in the long-term, especially in countries with low-developed software markets and with presence of Open Source software. For other hand, the results provide evidence to understand why proprietary software companies would prefer enforcing their copyrights and intellectual property rights contingently and as result of a rational decision-making process. JEL Codes: L86, O34, N40