Title

How Does Digital Piracy Affect Innovation? Evidence From Software Firms

Publication Date

11-1-2022

Abstract

Despite digital piracy’s well-documented impact on firm revenue, the relationship between piracy
and firm innovation, including the creation of new intellectual property (IP) rights, is not well understood. To fill this gap, this paper estimates the impact of piracy on innovation through a
quasi-experimental design and explores the mechanisms driving this relationship using data on
software firms. Leveraging a 2001 technological shock that suddenly enabled rising software
piracy, we find increases in subsequent R&D spending, copyrights, trademarks, and patents for large, incumbent software firms. Furthermore, firms with large patent portfolios appear to disproportionately increase copyrights and trademarks following the piracy shock. After considering alternatives, our analysis suggests that impacted firms perceive piracy as a form of product-market competition that causes them to increase innovation and balance their IP portfolios.

Document Type

Article

Keywords

piracy, software, innovation, intellectual property

Disciplines

Strategic Management Policy

DOI

10.2139/ssrn.3912074

Source

SMU Cox: Strategy (Topic)

Language

English

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