Hongxia Zhang and Hengjia Zang Guanghua School of Management, Peking University, Bejing, China, and

Transcription

1 Purchasing pirated software: an initial examination of Chinese consumers Fang Wang School of Business and Economics, Wilfrid Laurier University, Waterloo, Canada Hongxia Zhang and Hengjia Zang Guanghua School of Management, Peking University, Bejing, China, and Ming Ouyang University of New Brunswick, Fredricton, Canada Abstract Purpose To analyze Chinese consumers in purchasing pirated software; to establish and empirically validate a model for analyzing consumers in software piracy; and to help software companies understand the software piracy issue in China and design anti-piracy strategies Design/methodology/approach A research model was established by extending a model used by Ang et al in studying Singaporeans purchasing pirated CD A survey was conducted Hypotheses were tested through stepwise regressions An exploratory factor analysis was carried out to analyze Chinese consumers attitude toward software piracy Findings Four personal and social factors were found important in influencing Chinese consumers attitude toward software piracy, including value consciousness, normality susceptibility, novelty seeking, and collectivism Five attitude measures, which were important in influencing consumer purchase intention, were identified as reliability of pirated software, recognized social benefits of piracy, functionality of pirated software, risks of purchasing, and perceived legality of purchasing An exploratory study identified three attitude attributes Research limitations/implications As student samples were used, caution needs to be exercised when generalizing findings from this study Regressions were used to test construct relationships in the model, and the model was not tested as a whole Practical implications This research provides an in-depth understanding on Chinese consumers, and the research findings are useful in designing anti-piracy strategies in China Originality/value This research is one of the first to examine the Chinese market, which is a focus of piracy problems for the software industries This research contributes to theory development in developing and testing a model and important constructs, and to industrial practice in providing understanding on Chinese consumers to help design anti-piracy strategies Keywords Computer software, Counterfeiting, China, Consumer behaviour, Factor analysis Paper type Research paper An executive summary for managers and executive readers can be found at the end of this article I Introduction Software piracy is a prevalent and serious problem in Mainland China (hereafter China) China is one of the countries with the highest software piracy rates in the world at 98 percent (Traphagan and Griffith, 1998) Estimates reveal that software piracy in China alone cost US businesses $185 billion in 2002 (Joshphberg et al, 2003) From a national level, China has a low per capita GNP and a low individualistic/high collectivistic culture, to which software piracy correlates significantly (Husted, 2000; Marron and The Emerald Research Register for this journal is available at wwwemeraldinsightcom/researchregister The current issue and full text archive of this journal is available at wwwemeraldinsightcom/ htm 22/6 (2005) q Emerald Group Publishing Limited [ISSN ] [DOI / ] Steel, 2000) The weaknesses in Chinese law legislation and enforcement for copyright protection also leads to the high piracy rate (Yeh, 1999) With a continuous double-digit annual economic development ratio, China is embracing a fast-growing software market, indicating an even more severe software piracy problem in China for the future While software piracy in China is an increasingly serious problem, and the Chinese (or eastern/asian) culture is blamed as one of the major causes for the high piracy rates in Asian countries (Husted, 2000; Marron and Steel, 2000; Swinyard et al, 1990), surprisingly, insufficient research has been dedicated to understanding the software piracy problem in China, especially from the consumers perspective To the best of our knowledge, no research has been conducted to understand Chinese consumer attitudes and behavior toward software piracy Some research has been conducted in countries/areas with a Chinese cultural influence, such as Singapore and Hong Kong Moores and Dhillon (2000) conducted research in Hong Kong, studying shoppers intentions towards purchasing pirated software in various scenarios, and found that lowering the cost of legitimate software may effectively reduce purchases of pirated software Thong and Yap (1998) tested an ethical decision-making theory through a study on entry-level information systems (IS) professionals in 340

2 Singapore, and found that moral intentions to pursue softlifting (illegal copying of software for personal use) behavior is determined primarily by ethical judgments Swinyard et al (1990) conducted research to compare the software piracy morality of students in Singapore and the USA, and discovered differences in moral values between the two groups, as the US group was more influenced by legality of the copying and the Singaporeans focused more on the impact of outcomes They suggested that the cultural difference between the west and the east is a major reason While the results from this research may help to understand Chinese consumers software piracy behavior, they cannot substitute for research on Chinese consumers First, Singapore and Hong Kong are more developed countries/ areas, while Mainland China is much less developed in economy and has a much lower per capita income The impact of high software costs may be more significant in Mainland China Second, the software protection laws are better established and enforced in Hong Kong and Singapore than in mainland China Meanwhile, consumers in Hong Kong and Singapore were educated about copyright laws much earlier than in Mainland China Furthermore, western culture has been popular longer and more deeply in Hong Kong and Singapore societies than in China While Hong Kong and Singapore may represent a mix of western and eastern cultures, China is characterized more by a collectivist culture, which is a main cause for software piracy Meanwhile, China has a much higher piracy rate (about 98 percent) compared to Singapore (averagely 57 percent) and Hong Kong (64 percent) (Marron and Steel, 2000), and a much larger market Thus, conducting standalone research on Chinese consumers in software piracy is valuable To design software protection strategies, analyzing software piracy from the demand side is important (Bloch et al, 1993; McDonald and Roberts, 1994) Actually, the magnitude of the pirated software market provides the strong motivation for illegal suppliers (McDonald and Roberts, 1994) Anti-piracy institutions need to understand the rationale behind the demand to design software protection strategies Previous studies identified that financial value is one of the most important reasons for software piracy (Cheng et al, 1997; Moores and Dhillon, 2000; Traphagan and Griffith, 1998; Wee et al, 1995) However, other factors, such as demographic factors, benefit-cost evaluation other than financial factors, situational factors, professionalism, and other gains for consumers, are identified also (Cheng et al, 1997; Logsdon et al, 1994; Moores and Dhillon, 2000) Software piracy may include a number of related practices such as illegal copying of programs, selling/purchasing pirated software, and renting unauthorized software This research focuses on consumer attitude and behavior in purchasing pirated software Since selling pirated software is an institutional market behavior, it presents a serious threat to the legal distribution of software by competing with and blocking consumer access to legal marketers Usually, consumers are aware during the shopping process that the product is pirated (McDonald and Roberts, 1994) Still, they purchase the pirated software for various reasons Understanding the influencing factors, especially nonfinancial factors, in consumers purchase decision-making process is an important factor in the design of anti-piracy education and strategies The study by Ang et al (2001), entitled Spot the difference: consumer responses towards counterfeits, and published in The in 2001, contributed important research in the examination of nonfinancial factors in consumer purchase decisions on pirated products Ang et al (2001) constructed a model examining social and personality effects on consumer responses toward pirated products As shown in Figure 1, social and personality factors include informative susceptibility, normative susceptibility, value consciousness, integrity, and personal gratification Attitude toward piracy is the moderator construct, and purchase intention is the destination construct The model was tested on Singaporeans through a survey on pirated music CDs Ang et al (2001) found that among five social and personality factors, normative susceptibility, value consciousness, and integrity influenced the attitude of Singaporeans toward pirated music CDs, and informative susceptibility and personal gratification did not Singaporeans who previously had bought pirated CDs had more favorable views about pirated CDs than those who had not bought such products; attitudes toward pirated music CDs was a significant predictor of purchase intention of Singaporeans, accounting for 44 percent of the variance This study, therefore, has three purposes First, the Ang et al (2001) model is submitted to a test in a different market context to understand consumer purchasing pirated software in Mainland China While Chinese consumers are different from Singaporeans, purchasing pirated CDs may also differ from purchasing pirated software Music CDs are for entertainment purposes, and a major portion of software is for business and study use Music CDs are usually much cheaper than software In fact, software has a higher piracy rate than music CDs (98 percent vs 88 percent in Mainland China (Traphagan and Griffith, 1998)) Understanding consumers social and personality factors, their attitudes, and purchase intentions in purchasing pirated software is important in designing an effective prevention strategy in Mainland China Second, the Ang et al (2001) model and study will be extended and refined by adding two more constructs: re-structuring and re-designing attitude measures, and using stepwise regression to analyze the data Third, we intend to establish multi-attributes for the construct of Figure 1 A model of consumer responses on purchasing pirated software 341

3 consumer attitudes toward software piracy in this research, which can help build a foundation for future in-depth studies on Chinese consumer attitudes concerning software piracy This paper is organized as follows: section II discusses the extended model and hypotheses; section III describes the research method; section IV analyzes survey results; section V concludes the paper; and section VI discusses managerial implications II A model and hypotheses The model, shown in Figure 1, is adapted and extended from Ang et al (2001) The Ang et al (2001) model examined five social and personality factors by, including informative susceptibility, normative susceptibility, value consciousness, integrity, and personal gratification Informative susceptibility and normative susceptibility are two forms of consumer susceptibility to social influence (Bearden et al, 1989) Informative susceptibility concerns purchase decisions, which are based on the expert opinions of others, and normative susceptibility concerns purchase decisions, which are based on the expectations of what would impress others (Ang et al, 2001) As software piracy is not legal/ethical and does not have a positive social image, consumers with higher susceptibility to social influence may present negative attitudes toward software piracy Value consciousness is defined as a concern for paying lower prices, subject to some quality constraints (Ang et al, 2001; Lichtenstein et al, 1990) As pirated software usually provides similar functions to the legal version of software but with a lower price, consumers who are value-conscious may have positive attitude towards software piracy Integrity represents the level of consumers ethical standards and obedience to the law The More important integrity is to a consumer, the more negative s/he will feel about software piracy Personal gratification concerns the need for a sense of accomplishment, social recognition, and to enjoy the finer things in life (Ang et al, 2001) Consumers with high personal gratification will value the legal version of software, thus have a negative attitude towards piracy Two new constructs, collectivism and novelty seeking, are added to the model in our study as social and personality factors influencing consumer attitudes The collectivist culture has been used extensively to explain the difference in piracy rates and in consumers ethical decision making between eastern and western countries At the macro-level, the collectivist culture is associated strongly with piracy rates in regression studies (Husted, 2000; Marron and Steel, 2000) In micro-level studies, culture is used popularly as a reason to explain the different attitudes toward and decisions on software piracy among various groups (Swinyard et al, 1990) The Chinese proverb He that shares is to be rewarded; he that does not, condemned is cited widely to refer the impact of the collectivist culture on software piracy (Swinyard et al, 1990) However to the best of our knowledge, no research has directly examined the effects of the collectivist culture on individual consumer attitudes and decisions Without this direct test, the leading relationship from the cultural factor to consumer responses to software piracy cannot be established appropriately Meanwhile, if the cultural factor is a powerful explanation for software piracy, it has to be considered in the model While at the national level, the Chinese as a group present a higher degree of collectivism, individual consumers may have different degrees of acceptance for the culture of software piracy For example, some consumers may think that certain collectivist elements such as sharing and groups are more acceptable or desirable than others The individual differences in agreeing to the collectivism will directly affect the consumer s attitude toward software piracy and his/her purchasing intention Another important factor is novelty seeking Novelty seeking is curiosity of human to seek variety and difference (Hawkins et al, 1980) In an empirical study on consumer motivations for purchasing pirated software versus legal versions, Cheng et al (1997) found that novelty (wanting to try out the software) is the second most important reason only behind cost consideration (software too expensive) out of the nine main reasons Wee et al (1995) found that novelty seeking is an influential factor for purchasing pirated software in student groups, but did not find it as an important influential factor in working adult samples Novelty seekers may be more likely to purchase the legal version of software when satisfied with the product than consumers who are intensively value conscious As software piracy can help promote the diffusion of legal copies (Givon et al, 1995), the novelty-seeking factor is an important factor to understand Marketing literature has firmly established that attitudes influence behavioral intentions (Ajzen and Fishbein, 1977) Ang et al (2001) concluded in their study that attitude toward piracy was significant in influencing purchase intention The attitude to behavioral intention links is tested also in our study To test the model in Figure 1, the following hypotheses are proposed: H1 Relationships between social and personality factors and consumer attitudes toward software piracy H 1a Information susceptibility has a negative effect on consumer attitudes toward software piracy H 1b Normative susceptibility has a negative effect on consumer attitudes toward software piracy H 1c Value consciousness has a positive effect on consumer attitudes toward software piracy H 1d Integrity has a negative effect on consumer attitudes toward software piracy H 1e Personal gratification has a negative effect on H 1f consumer attitudes toward software piracy Novelty seeking has a positive effect on consumer attitudes toward software piracy H 1g Collectivism has a positive effect on consumer attitudes toward software piracy H2 Consumer attitudes toward software piracy leads to their purchase intention H3 Attitude differences exist between buyers and nonbuyers In testing H2, we intend to identify the most important attitude measures influencing consumer purchase intention In analyzing consumer attitude, Ang et al (2001) employed unstructured questions on: the risks in buying pirated CDs, trust in the stores that sell pirated CDs, worthy purchase, fairness to singers and music industry, the morality of buying pirated CDs, and the benefits to society, and found attitude differences between buyers and non-buyers of pirated CDs in terms of social fairness and benefits In H3, the attitude differences between Chinese buyers and non-buyers of pirated software are proposed However, the attitude components for 342

4 Chinese in software piracy and for Singaporeans in CD piracy may not be the same This research intends to identify important attitudinal aspects for Chinese consumers and the most important attitudinal aspects influencing consumer behavior in software piracy III Method A survey was conducted on students of two universities in Beijing Student samples have been used widely in research on software piracy (eg Cheng et al, 1997; Logsdon et al, 1994; Moores and Dhillon, 2000; Sims et al, 1996; Simpson et al, 1994; Swinyard et al, 1990; Wagner and Sanders, 2001; Wee et al, 1995) Owing to the average low income, students are an important user group for pirated software Research suggested that software piracy is prevalent in academia (Cheng et al, 1997) Meanwhile, as university students will dominate future management positions, their attitudes are important for understanding the future prevalence of software piracy (Oz, 1990) 31 Measure development The questionnaire used in this research was in Chinese and consisted of five parts Part I measured respondents attitude toward software piracy; part II measured their social and personality factors; part III measured their purchasing intention; part IV asked whether they had purchased pirated software before; and part V collected demographic information Seven-point Likert-scales were employed in parts I-III of the questionnaire, with 1 representing disagree or not important, and 7 representing agree or important the Appendix provides the construct measures used in the questionnaire in English Measures of the five social and personality constructs, tested by Ang et al, are adapted from Ang et al (2001) and other literature (Bearden et al, 1989) Novelty seeking is a relatively new construct for piracy research, and was tested by Wee et al (1995) as a variable Measures of cultural factors exist in literature, including cultural values scale (Donthu and Yoo, 1998), Asian Values Scale (Kim et al, 1999), and universal structure of values (Schwartz and Sagiv, 1995) To identify good measures in novelty seeking and in individual responses to collectivism to reflect Chinese consumers in software piracy, a list of measures for novelty seeking and collectivism, was developed according to the meaning of the constructs and literatures Two focus groups examined this list of measures, one with twelve Chinese students and another with ten Chinese industrial experts According to their feedback and suggestions, four measures for each construct were selected Four questions were asked to evaluate novelty seeking, including: I am always one of the firsts to try new products ; I am exited to purchase some interesting products ; I own a lot of popular products ; I keep up with fashion Instead of focusing on the relationship between an individual and others as used in some previous cultural values scales (such as Asian Values Scale (Kim et al, 1999)), the focus groups suggested that the specific aspect of sharing between an individual and others is more direct in reflecting the collective culture relevant to the Chinese response to software piracy Thus, four questions to evaluate collectivism directly address the concept of sharing, including he that shares is to be rewarded and he that does not, condemned ; I like to share with others ; I wish others can share with me ; the more people share a product, the more valuable the product is Ten measures of the attitude construct were developed based on responses from two focus groups on what are the important attitudes of Chinese consumers to software piracy To capture consumer attitude unbiased, of ten attitude measures, five were given as negative statements, including Software piracy infringes intellectual property ; Software piracy damages interests and rights of software manufacturers ; Software piracy damages the software industry ; Purchasing pirated software is illegal ; and Purchasing pirated software is unethical Another 5 measures captured consumer attitude through positive statements, including Without pirated software, many people will not be able to enjoy listening to music ; Pirated software has similar quality as the legal version ; Pirated software provides similar functions as the legal version ; Pirated software is as reliable as the legal software ; and There is little chance of being caught when purchasing pirated software Four measures, of which two were adapted from Ang et al (2001), were developed on consumer purchase intention 32 Samples A total of 340 questionnaires were distributed randomly to students on university campuses; 314 responses were received, with a response rate of 924 percent A total of 12 responses were not completed appropriately, thus were excluded in the data analysis A total of 302 responses were retained for data analysis through EXCEL and SPSS software Table I shows the sample distribution on gender and buying behavior 523 percent responses are male and 477 percent are females The rate of buyers (752 percent) is higher than non-buyers (248 percent), which reflected the high piracy rate in China (Traphagan and Griffith, 1998) Since the response rate of this survey is high (924 percent), this buyer/ non-buyer distribution represents the real buyer/non-buyer distribution in university students in Beijing The Z-test is performed to test whether the percentages of buyers in different gender groups are the same under the assumption of the Binomial distribution The results show that the Z-test statistics is 2753, and the test significance level represented by p-value is much smaller than 0001 This statistic confirms that the buying decision is biased by gender and that the percentage of buyers in the male group is larger than that in the female group (Moores and Dhillon, 2000; Rahim et al, 2000; Simpson et al, 1994; Sims et al, 1996; Solomon and O Brien, 1990; Wong, 1985) IV Results To validate the model in Figure 1 and test H1 and H2, regression analyses are carried out and discussed in sections Table I The sample distribution Non-buyers Buyers Total Percentage Male Female Total Percentage

5 41 and 42 Section 43 examines H3, and also provides an exploratory test to analyze the attitude construct 41 Relationships between social and personality factors and attitude Following previous studies on piracy, such as Ang et al (2001), Logsdon et al (1994), Tan (2002), and Wee et al (1995), this study uses the method of regression to analyze relationships proposed in Figure 1 Since we would like to identify the most important factors influencing consumer attitude toward piracy, stepwise regression is used to analyze the relationships between the social and personality factors and the attitude construct Stepwise regression is a hybrid forward selection and backward elimination procedure (Jennrich, 1995), and is a good computer assisted model building method It selects subsets of variables for researchers to consider and a good deal of insight can be obtained by watching the entry process (Jennrich, 1995) It is a suitable analysis tool as this study is one of the first to investigate software piracy in China and any detailed/underlying information can be useful The independent variables are informative susceptibility, normative susceptibility, value consciousness, personal gratification, integrity, novelty seeking, and collectivism, and the dependent variable is consumer attitude toward software piracy As of ten consumer attitude measures, five were positive statements and another five negative statements To make the scale consistent, reverse scales were used for the five measures with negative statements for data analysis of consumer attitude toward software piracy in this section First, reliability of the constructs is tested through Cronbach a to evaluate the extent of consistency among construct measures The value of Cronbach a is 072 for the ten measures of the consumer attitude construct The values of Cronbach a for social and personality constructs are 071, 073, 080, 074, 080, 078, and 074, for informative susceptibility, normative susceptibility, value consciousness, personal gratification, integrity, novelty seeking, and collectivism, respectively These values are all higher than 07, which demonstrates sound reliability of measures in these constructs (Nunnally, 1978; Rivard and Huff, 1988) Thus, the averages of measures of each construct are used as variables in regression analysis As shown in Table II, four variables (value consciousness, normality susceptibility, novelty seeking, and collectivism) are found important in influencing consumer attitudes toward software piracy, and is included in the final regression equation Thus, H 1b, H 1c, H 1f, and H 1g are supported, and H 1a, H 1d, and H 1e are not supported The results from this study are consistent with the Ang et al (2001) study in finding that normative susceptibility and value consciousness influence consumer attitudes toward software piracy (H 1b and H 1c ), and informative susceptibility and personal gratification do not (H 1a and H 1e ) Different from the Ang et al (2001) study, integrity is not found as an important factor in influencing consumer attitudes (H 1d ) This finding is consistent with other studies (ie Logsdon et al, 1994; Simpson et al, 1994), which also found a weak relationship between consumer moral judgment and their response to software piracy An explanation used in previous studies (Logsdon et al, 1994; Simpson et al, 1994) is that consumers do not consider software piracy as an ethical issue Both of the two new constructs developed in this study are found to be important in influencing consumer attitudes, which indicates that the model proposed in this research is a valuable and important extension of the Ang et al s (2001) Especially, since culture is used widely as an explanation to consumer low moral intensity or ethical insensitivity of software piracy in ethics research (Logsdon et al, 1994; Swinyard et al, 1990), inclusion of the cultural factor (collectivism in this study) is important Culture may be the reason for the different results of this study and Ang et al s (2001) in evaluating the importance of integrity in influencing consumer attitudes toward software piracy 42 Relationship between attitude and purchase behavior A stepwise regression also is used to test the influencing effects of attitude measures on purchasing intention As the measures of the attitude construct may represent different, though related, aspects of attitude, and we intended to identify the most important measures, ten measures of the attitude construct are used as independent variables in regression The Cronbach aof the four measures of purchasing intention is 086, which demonstrates a consistency of construct measures Thus, the average of the four measures of purchasing intention is used as the dependent variable in the regression analysis Table III shows the final stepwise regression results For the overall sample, five independent variables accounted for a R 2 of 0324 of the purchasing intention of pirated software Five measures influencing purchase decision are product reliability (024), product functionality (015), social welfare (014), risks (010), and legal judgment (2009) 43 Attitudes toward software piracy In testing Singaporeans attitudes toward pirated CDs, Ang et al (2001) found that buyers and non-buyers had different attitudes toward software piracy Compared to non-buyers, buyers of counterfeits perceive that the purchase of such Table II Final stepwise regression results on factors influencing attitude Final stepwise regression equation B-values Standard error Standardized regression coefficients t-value Significance level Value consciousness Normality susceptibility Novelty seeking Collectivism Constant item Notes: R 2 ¼ 0:22; F ¼ 12:18** 344

6 Table III Final stepwise regression results on attitudinal measures influencing purchasing intention Final stepwise regression equation B-values Standard error Standardized regression coefficients t-value Significance level Pirated software is as reliable as the legal software Without pirated software, many people will not be able to enjoy the benefits of using software Pirated software provides similar functions as the legal version There is little chance of being caught when purchasing pirated software Purchasing pirated software is illegal Constant Notes: R 2 ¼ 0:324 F ¼ 14:017** products is less risky, worthier of purchase, will benefit society and entertainers more, as less unethical, and that stores selling counterfeits can be trusted To identify attitudinal differences to software piracy between Chinese buyers and non-buyers, ten measures were developed by the focus groups Table IV compares the attitudes toward software piracy of Chinese buyers and nonbuyers As the Ang et al (2001) result, this study found the significant differences between buyers and non-buyer attitudes Except for three measures (eg Software piracy damages interests and rights of software manufacturers ; Software piracy damages the software industry ; Without pirated software, many people will not be able to enjoy listening to music ), attitudinal differences between buyers and non-buyers to the other seven measures were significant Generally buyers showed more acceptable attitudes to software piracy than non-buyers Thus, H3 was supported 44 An exploratory study on Chinese multi-attribute attitude to software piracy Given that ten measures were used in testing Chinese consumer attitude toward software piracy, an exploratory study was carried out to identify embedding attitude structure and developing multi-attributes for Chinese consumer attitudes toward software piracy The multi-attribute attitude model (Bettman et al, 1975) is an important theoretical tool to evaluate consumer attitudes Ten measures used in this study may represent certain attitude attributes, which form the basic and simpler attitudinal structure and help researchers to understand consumers Consumer attitude attributes have not been investigated thoroughly by previous researchers on piracy studies For example, while Ang et al (2001) used 12 measures for Singaporean s attitudes to CD piracy, and subjectively grouped the twelve measures to seven sub-titles, ACLT used no quantitative method to verify the existence or appropriateness of these seven sub-titles In a study on nonprice determinants of intention to purchase counterfeit goods, Wee et al (1995) also subjectively classified measures, which individually were found as purchase influencers, to the categories of psychographic, demographic, product-attribute variables in their discussions without further factor analysis Without appropriate data analysis, these groupings cannot be used by researchers as a reference on attitude structure with confidence To test attributes of Chinese consumer attitudes on software piracy, an exploratory factor analysis was done The significance level of Bartlett s test on attitude measures is 0000 and the KMO measure is 0072 Both show that it is appropriate to use factor analysis to uncover the underlying dimensions of the attitude measures The principle component extraction method with varimax rotation is employed Table V shows the factor loadings with the absolute value larger than 03, which is a threshold in factor analysis Factor loadings below 03 can be ignored The resulting factor loadings in Table V clearly support the existence of three attributes of the attitude construct An attitude attribute was named attitude toward social consequences, including measures, Software piracy Table IV Comparison of buyers and non-buyers attitudes Measures Sample average Non-buyers Buyers t-value Software piracy infringes intellectual property ** Software piracy damages interests and rights of software manufacturers Software piracy damages the software industry Without pirated software, many people will not be able to enjoy listening to music Pirated software has similar quality as the legal version ** Pirated software provides similar functions as the legal version ** Pirated software is as reliable as the legal software ** Purchasing pirated software is illegal ** Purchasing pirated software is unethical ** There is little chance of being caught when purchasing pirated software * Notes: * p, 0:1; ** p, 0:05 345

7 Table V Factor analysis of attitude measures Attitude measures Factor loadings F1 F2 F3 Attitude toward social consequences (F1) Software piracy infringes intellectual property 088 Software piracy damages interests and rights of software manufacturers 088 Software piracy damages the software industry 078 Without pirated software, many people will not be able to enjoy listening to music Attitude toward pirated software (F2) Pirated software has similar quality as the legal version 080 Pirated software provides similar functions as the legal version 079 Pirated software is as reliable as the legal software 070 Attitude toward purchasing behavior (F3) Purchasing pirated software is illegal 084 Purchasing pirated software is unethical 082 There is little chance of being caught when purchasing pirated software Cronbach a R 2 (percent) infringes intellectual property ; Software piracy damages interests and rights of software manufacturers ; Software piracy damages the software industry ; Without pirated software, many people will not be able to enjoy listening to music An attitude attribute, focusing on consumer attitude towards pirated products (eg Pirated software has similar quality as the legal version ; Pirated software provides similar functions as the legal version ; Pirated software is as reliable as the legal software ), was named attitude toward pirated software Another attitude attribute focused on consumer judgments toward the behavior of purchasing pirated software, and thus was named attitude toward purchasing behavior, with measures Purchasing pirated software is illegal ; Purchasing pirated software is unethical ; and There is little chance of being caught when purchasing pirated software Two measures, each from the attitude toward purchasing behavior and the attitude toward social consequences, load on attitude toward pirated software However, the loadings are rather low (less than 05) If a threshold of 05, which represents high in factor loadings, instead of 03, is used, these two loadings will be eliminated The three attributes and their measures can be used in future research on consumer attitude toward software piracy The three attributes explain 6292 percent of total variance 44 Re-examine findings from hypothesis testing by multi-attribute attitude structure As three attitude attributes were established in an exploratory factor analysis, we found it interesting to apply this attitudinal scheme to earlier data analysis results for hypothesis testing First, the three attitude attributes were applied to the attitude comparison of buyers and non-buyers, shown in Table IV Clearly, under the scheme of three attitudes, the differences between buyers and non-buyers were reflected intensely by their attitudes toward pirated software (product), and toward purchasing behavior Buyers had more positive views on pirated software and purchasing behavior than non-buyers This result is consistent with previous findings on buyer and non-buyer differences in evaluating related attitude measures on pirated product and purchasing behavior (Ang et al, 2001; Nia and Zaichkowsky, 2000; Wee et al, 1995) Except for one measure (software piracy infringes intellectual property), buyers and non-buyers did not show significant differences in evaluating social consequences While buyers recognize the damage of software piracy to intellectual property, their recognition of the damage is significantly less than nonbuyers Generally, the group means for both buyers and nonbuyers were above five, which means that both buyers and non-buyers recognized the benefit and damages of software piracy to society Also interesting is the application of the three attitudinal attributes to results in Table III when analyzing important attitude attributes in influencing consumer purchasing intention In the five measures listed in Table III, two measures, pirated software is as reliable as the legal software (the first one in Table III) and pirated software provides similar functions as the legal version (the third one in Table III), are for the attitude attribute toward pirated software Two measures, purchasing pirated software is illegal (the fifth one in Table III) and there is little chance of being caught when purchasing pirated software (the fourth one in Table III) are for the attitude attribute toward purchasing behavior One measure, without pirated software, many people will not be able to enjoy listening to music, is from the attitude attribute toward social consequences This may suggest that different attitude attributes have different influencing power in the consumer s purchasing intention, and the consumer s attitudes toward pirated software and purchasing behavior are more important when compared to the social consequences This needs to be tested further in future research V Conclusions This research is one of the first to understand Chinese consumer attitudes in software piracy In addition, this research extended a previously tested model by Ang et al (2001) by adding two social and personality factors, collectivism and novelty seeking These two factors were found important in influencing consumer attitudes Different from the Ang et al (2001) results, integrity was not found to be an important influencer in consumer attitudes This finding supported a conclusion provided by many other studies (Logsdon et al, 1994; Simpson et al, 1994) that there was a weak relationship between consumers moral judgment and their response to software piracy Confirming the Ang et al (2001) results, this research found normative susceptibility and value consciousness important, and informative susceptibility and personal gratification not important in determining consumer attitude This research redesigned measures based on an analysis of the Chinese markets To analyze the attitudinal structure of the Chinese for software piracy further, this research 346

8 conducted an exploratory factor analysis, which was rarely attempted in previous studies and needed to be researched further Three attributes of consumer attitudes toward software piracy (attitude toward social consequences, attitude toward pirated software, and attitude toward purchasing behavior) were established Attitude toward pirated software (product) concerns the consumer s evaluation of pirated products compared to legal software Consumer attitudes on product attribute were found to be relevant in previous research Wee et al (1995) found that product attribute variables were important in explaining purchase intention toward counterfeit products Nia and Zaichkowsky (2000) found that those consumers who owned only original goods and no counterfeits believed that counterfeits were inferior products; those who owned counterfeits had a positive image of them and did not believe these products were inferior Attitude toward purchasing behavior concerns the consumers legal and ethical judgments and their risk evaluation of the behavior of purchasing pirated software These factors are important in consumer decision making (Tan, 2002; Wang et al, 2003) Attitude toward social consequences concerns the consumer evaluation of the benefits/damages of the software piracy to society In applying the three attitude attributes to examine data analysis results in this research, we found that the different attitudes toward piracy between buyers and non-buyers reflected mainly on attitude measures toward pirated software and purchasing behavior Attitudes toward pirated software and social consequences were found important in determining future purchase intention The research has the following limitations: first, the survey was conducted in a university setting, using a student population sample Researchers have raised concerns about the generalizability of student-based findings across the consumer population (Burnett and Dunne, 1986; Park and Lessig, 1977; Szymanski and Henard, 2001) In general, responses of college student subjects tend to be slightly more homogeneous than those of non-student subjects (Peterson, 2001) These sampling issues may influence how students evaluate each construct, and the relationships among constructs In particular, students may not be good representatives for the Chinese population However, our research is not only effects application research (Calder et al, 1981) at the descriptive level (Farber, 1952) for analyzing Chinese markets, but also theory application research (Calder et al, 1981) at a conceptual level (Farber, 1952) in establishing and validating a research model for Chinese consumers As research with a theoretical nature, the use of college students is supported (Calder et al, 1981; Peterson, 2001) However, caution must be exercised when generalizing findings from this study Following many previous studies in this area including that by Ang et al (2001), this research employs the regression method to analyze relationships among the three layers of constructs in the model As the most important factors influencing consumer attitude and purchase intention can be easily identified through regression, and as constructs and measures were under development in this study for the Chinese software piracy research, the model is not tested as a whole Based on the findings of this research, future studies may possess a more mature theoretical foundation in analyzing Chinese markets, and thus employ a model-testing method, such as the structural equation modeling (SEM), to validate a consumer attitude model as a whole Summarizing the findings and limitations of this research, we suggest a new model, shown in Figure 2, to be tested in future research This model eliminates the unimportant social and personality factors (namely, informative susceptibility, integrity, and personal gratification), and focuses on four important factors (namely, normative susceptibility, value consciousness, collectivism, and novelty seeking) It incorporates three consumer attitude constructs, which are established in this research VI Managerial implications This research studied Chinese consumers in software piracy and analyzed personal and social factors, consumer attitude, and purchase intention for pirated software This research is among the few that examined the Chinese market and provides highly demanded information and knowledge for software companies marketing in China For industry practitioners, this research provides an in-depth understanding of Chinese consumers, which can be used in designing anti-piracy education programs in China To achieve success in anti-piracy in China, software companies first need to hold an appropriate view of Chinese consumers Chinese consumers in piracy should not be simply and always addressed as with malicious intention This research found that novelty seeking is an important factor determining consumer attitude to software piracy that led to purchase intention Software piracy sometimes is just a way that consumers try out new software, especially when business information availability and software accessibility in China are not at the same level as in developed countries and average computer literacy of Chinese consumers are low It is not fair to judge that Chinese consumers steal (as used by Bill Gates in a Fortune interview (Schlender, 1998), and apparently agreed by many international software companies trading in China) without proper consumer analysis and segmentation, and it is not constructive for these companies doing business in China At least, for young students, who were samples in this research, novelty seeking is an important factor in using pirated software Indeed, the motivation for exploring new things serves well for software dilution for software companies Software companies need to well segment consumers and find their causes for piracy In this way, they can well manage their anti-piracy efforts This research found that integrity did not influence Chinese consumers attitude toward software piracy, but normative susceptibility did This means that good people do not think evil of software piracy and good people pirate On the other hand, people who want to look good presented negative Figure 2 A suggested model for future research 347

9 attitude towards piracy, which led to less purchase intention This means that the outside motivation is more important than inner virtues in helping reduce piracy Thus the key population to target in fighting software piracy is those who are eager to prove themselves, rather than those who are well established in society This implies that young consumers may be a good target to aim for in order to start anti-piracy education in China Just like other marketing tasks, customer segmentation and target are important in implementing antipiracy programs In designing anti-piracy strategies and education programs, three areas need to be covered to achieve success, including differentiating legal and pirated software, educating social consequences of software piracy, and educating consequences of purchasing behavior This research suggests that product differentiation between legal and pirated software is a key to prevent piracy Consumer perceived differences of the reliability and functionality between pirated and legal software are important in determining their purchase intention The quality measure of consumer attitude toward pirated software was not found important in influencing purchase intention, and the reason may simply lie in the electronic nature of software, as software can be copied and reproduced perfectly without quality compromise To reduce piracy, vendors can educate consumers and reinforce consumer perceptions that legal software is more functional and reliable than the pirated one Vendors can provide superior services, such as technical support, warranties, or updates, to differentiate from pirated software Changing Chinese consumers attitude towards purchasing behavior is also critical Software businesses need to change consumer perception that there is little risk of being caught in purchasing pirated software Also, it is important to enhance the education efforts in China Although many know that piracy is illegal, many Chinese consumers may not realize that purchasing pirated software is illegal as well The focus of copyright law reinforcement in China has largely been on the business side that is to crack down on pirated software manufacturing Consumers may have the perception that it is the sellers who are illegal and consumers do not have legal responsibility, especially they pay when purchasing Offering education on the legality of purchasing pirated software may be an essential tool in reducing piracy rates in China This research found that the attitudinal differences between buyers and non-buyers of pirated software on many social consequences measures are not significant, and the mean values indicated that the social consequences of software piracy were recognized by both buyers and non-buyers in China Meanwhile, recognizing social damages did not influence purchase intention On the contrary, recognizing social benefits will lead to purchase intention Therefore, educating on the social consequences caused by piracy 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10 Nia, A and Zaichkowsky, JL (2000), Do counterfeits devalue the ownership of luxury brands?, The Journal of Product and Brand Management, Vol 9 No 7, pp Nunnally, JC (1978), Psychometric Theory, 2nd ed, McGraw-Hill, New York, NY Oz, E (1990), The attitude of managers-to-be toward software piracy, OR/MS Today, August, pp 24-6 Park, CW and Lessig, VP (1977), Students and housewives: differences in susceptibility to reference group influence, Journal of Consumer Research, Vol 4 No 4, pp Peterson, RA (2001), On the use of college students in social science research: insights from a second-order metaanalysis,, Vol 28 No 4, pp Rahim, MM, Rahman, MN and Seyal, AH (2000), Software piracy among academics: an empirical study in Brunei Darussalam, Information Management & Computer Security, Vol 8 No 1, pp Rivard, S and Huff, SL (1988), Factors of success for enduser computing, Communication of the ACM, Vol 31 No 5, pp Schlender, B (1998), The Bill & Warren Show, Fortune, July 20, pp Schwartz, SH and Sagiv, L (1995), Identifying culturespecifics in the content and structure of values, Journal of Cross-cultural Psychology, Vol 26 No 1, pp Simpson, PM, Banerjee, D and Simpson, CLJ (1994), Softlifting: a model of motivating factors, Journal of Business Ethics, Vol 13 No 6, pp Sims, RR, Cheng, HK and Teegen, H (1996), Toward a profile of student software pirates, Journal of Business Ethics, Vol 13, pp Solomon, SL and O Brien, JA (1990), The effect of demographic factors on attitudes toward software piracy, Journal of Computer Information Systems, Summer, pp Swinyard, WR, Rinne, H and Kau, AK (1990), The morality of software piracy: a cross-cultural analysis, Journal of Business Ethics, Vol 9 No 8, pp Szymanski, DM and Henard, DH (2001), Customer satisfaction: a meta-analysis of the empirical evidence, Journal of the Academy of Marketing Science, Vol 29 No 1, pp Tan, B (2002), Understanding consumer ethical decision making with respect to purchase of pirated software,, Vol 19 No 2, pp Thong, JYL and Yap, C-S (1998), Testing an ethical decision-making theory: the case of softlifting, Journal of Management Information Systems, Vol 15 No 1, pp Traphagan, M and Griffith, A (1998), Software piracy and global competitiveness: report on global software piracy, International Review of Law Computers & Technology, Vol 12 No 3, pp Wagner, SC and Sanders, GL (2001), Considerations in ethical decision-making and software piracy, Journal of Business Ethics, Vol 29 Nos 1/2, pp Wang, F, Zhang, H and Ouyang, Mm (2003) pp 17-20, Understanding consumer ethical decision-making in software piracy: a new framework, paper presented at the 2003 Economics & International Business Research Conference, Miami, FL, December Wee, C-H, Tan, S-J and Cheok, K-H (1995), Non-price determinants of intention to purchase counterfeit goods, International Marketing Review, Vol 12 No 6, pp Wong, K (1985), Computer crime-risk management and computer security, Computer and Security, Vol 4, pp Yeh, P (1999), Yo, ho, ho and a CD-ROM: the current state of software piracy in the PRC, Law and Policy in International Business, Vol 31 No 1, pp Appendix Measures in the questionnaire 1 Informative susceptibility To make sure I buy the right product or brand, I often observe what others are buying and using If I have little experience with a product, I often ask my friends about the product I often consult other people to help choose the best alternative available from a product class I frequently gather information from friends or family about a product before I buy 2 Normative susceptibility It is important that others like the products and brands I buy If other people can see me using a product, I often purchase the brand they expect me to buy I like to know what brands and products make good impressions on others If I want to be like someone, I often try to buy the same brands that they buy 3 Value consciousness I am concerned about price and product quality I compare prices for the best value for money I like to be sure that I get my money worth I try to maximize the quality for the money spent 4 Integrity I value honesty I value politeness I value responsibility I value self control 5 Personal gratification A comfortable life is important to me An exciting life is important to me A sense of accomplishment is important to me I value pleasure I value social recognition 6 Collectivism He that shares is to be rewarded and he that does not, condemned I like to share with others I wish others can share with me More people share a product, the more valuable the product is 7 Novelty seeking I am always one of the firsts to try new products I am exited to purchase some interesting products I own a lot of popular products I keep up with fashion 349

11 8 Attitude toward piracy 81 Attitude toward social consequences Software piracy infringes intellectual property Software piracy damages interests and rights of software manufacturers Software piracy damages the software industry Without pirated software, many people will not be able to enjoy listening to music 82 Attitude toward pirated software Pirated software has similar quality as the legal version Pirated software provides similar functions as the legal version Pirated software is as reliable as the legal software 83 Attitude toward purchasing behavior Purchasing pirated software is illegal Purchasing pirated software is unethical There is little chance of being caught when purchasing pirated software 9 Purchase intention I would recommend pirated software to a friend Upon request, I will consider purchasing pirated software for a friend I will buy pirated software I will buy pirated software from peddlers Executive summary and implications for managers and executive readers This summary has been provided to allow managers and executives a rapid appreciation of the content of this issue Those with a particular interest in the topics covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present Consumers are unethical and not just in China Let s get one thing out of the way from the start Software piracy is theft, is illegal in almost every place and represents a serious problem for software designers and distributors There is no essential difference between you copying or downloading software without permission and me walking into PC World and stealing the same product off the shelf But for two things too many people seem to think that the illegal copying of software, music, video and film is not really a proper crime and I am much more likely to get caught, tried and punished for shoplifting the same software you have copied off the guy at the next desk A great deal of criticism has been leveled at the developing world (and especially the People s Republic of China) for the failure to enforce anti-piracy rules We should be wary here since, despite the failures of China and other developing countries, most of the losses associated with copyright theft come from individual consumer decisions in the developed world often with the complicity of domestic governments and courts Nevertheless, software piracy is a serious issue in China and becoming more so as that economy expands its use of technology Do Chinese consumers believe they are breaking the law? In the USA there is no excusing the consumer who knows full well that copying or downloading software without permission is illegal In China, with its newly expanding consumer market and rapid business start-up growth, there is some truth to the argument that an education process is required to explain that the pirate s customer is as guilty as the pirate Wang et al suggest that this confusion still pertains in China and argue that simply charging in calling Chinese consumers thieves is not necessarily conducive to getting a reasonable solution to the problem There is an evident need for cooperation between the software designers and distributors and the Chinese government in getting across the message that software piracy is taken seriously and that the customer of the pirate is a culpable as the pirate himself However, this approach to date has concentrated (rightly and understandably) on those individuals and groups running substantial businesses founded on the theft of intellectual property The widespread abuse of intellectual property rights (eg buying a license for one user and loading the software onto ten PCs) in China and it seems everywhere else has not been a matter of concern to government Indeed, some governments having acted to make it more difficult for businesses to protect their software through encryption As Wang et al describe, most people abusing software do so knowing that what they are doing is probably illegal and that if they are caught little or nothing will happen to them Anyway, these people will say, everybody is doing the same so what is the problem? Collective societies and intellectual property Almost nobody (and certainly not the Chinese government) subscribes to Proudhom s famous dictum property is theft Yet some cultures remain more group oriented than others (collectivist is the preferred description) and this is seen as a contributory factor to the prevalence of intellectual property theft in places like China Indeed, Wang et al show that the more group-oriented individuals in their study are more likely to engage in the theft of software (as we would see it) or the sharing of property as the others see it However, there is again some confusion when we use the term share If I have a lawnmower, I can share its use with you, my neighbor The same applies to a piece of software you can visit my house and use the software on my computers without any offence being committed If you copy my software, you are not sharing but making a second product without the content owner s permission you are committing an offence To address the problem of collectivist societies, we need to look at the contracts we issue for our products and the associated pricing There is nothing to stop us selling product that can be used across a personal network (ie within the group) but this would not be of value in individualistic cultures such as the USA or UK Trial and test an incentive to theft Wang et al report that, as well as collectivism, the search for novelty is a motivator for software theft If I can try it out for free there is less likelihood that I will pirate the software in order to find out whether it serves my purposes At present, for most basic software, there is no option but to pay full price to buy As a result, those who want to test the product before buying (what seems a reasonable desire) have an incentive for 350

12 using pirated software even when the intention is subsequently to buy the software from a legitimate source As with sharing there are simple adjustments to business models that can address this tendency (indeed some software producers have done this) The offering of trial periods, payment on registration rather than at initial purchase and similar offers can all address novelty-seeking behavior by allowing investigation and assessment before final commitment to purchase We have to adopt a carrot and stick approach trying to stop software theft and removing the elements that encourage consumers to engage in such theft Price the real issue for many consumers China, despite its rapid economic growth, remains a relatively poor country Many consumers and smaller business cannot (or will not) afford the price of software And for those copying off friends or colleagues, the gap is enormous On the one hand we can steal the software for free (and not get caught) while on the other we can pay $5000 or whatever Every time we hear a discussion of software (or other intellectual property such as music or film) piracy, voices are heard saying that the owners of the intellectual property are ripping off the customer Fingers are pointed at the vast billions made by big name companies and their owners, who can, we are told, afford to lose some of this product In ethical terms this does not justify the theft, but it attempts to shift the ethical failure away from the consumer towards the producer If everybody is bad then me being bad does not matter Businesses need to recognize that software will always be vulnerable to theft so long as the price gap remains so substantial Moreover, newer software products are the targets of the pirates because the margins are greater for the thieves too The challenge however, does not boil down to locking up a few big players but lies in getting people to accept that downloading a software program from the web without permission is ethically indistinguishable from stealing a car (A précis of the article Purchasing pirated software: an initial examination of Chinese consumers Supplied by Marketing Consultants for Emerald) 351