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Demographic Analysis of Software Piracy Users

Software Piracy: Most common factors that influence the intention to use among college students in Selangor, Malaysia


Software piracy is one of the worst problems facing the software industry, and the piracy rate around the world is rising and in 2008 alone software industry lost more than US$ 5.3 billion due to software piracy, and in the same time frame Malaysian software industry lost around US$ 368 million.
Many previous researches concluded that software piracy is common among college students, preventive and deterrents techniques were no effective in combating the piracy problem, therefore there is a great urgency to identify the factors that leads to software piracy in order to formulate better strategies to overcome the problem.
This research identified six variables that influence the intention of college students to use pirated software; they are Gender, Age, Value Consciousness, Attitude, Peer pressure and Novelty seeking.
A survey was conducted with students who are attending colleges in Selangor, Malaysia, with a total of 247 respondents participated in the survey. The study found out that Value consciousness, Attitude, Peer pressure and Novelty seeking are the factors that has significant relationship with intention to use pirated software, however gender and age was not found to be significant factors that influence the intention to use pirated software.

1.0 Chapter 1: Introduction:

Software piracy can be considered as robbery, an infringement of copyrights, and anything that is copyrighted can be pirated and almost anything worth copying is worth pirating (Honick and Craig, 2005).
Independent study sponsored by Business software Alliance (BSA) shows that software piracy is the worst problem that software industry faced, BSA defines software piracy as the unauthorized copying or distribution of software’s. When the end users purchase the software they do not become the owner of the product, however they have the rights to use the software under the terms and conditions oppose by the copyright owner of the software.
According to Microsoft there are 5 basic type of piracy,
1- End user copying: Here individuals or organizations copy and distribute unlicensed copies of the software or purchase a licensed copy and use beyond the allowed limits.
2- Hard disk loading: this is practiced by computer manufacturers who use a legal copy of a software to install as many PC they want and sold to end users who are not aware of the wrong doing
3- Counterfeiting: software and its packaging are illegally produced in a large scale.
4- Online: Online piracy occurs when the end user download the software from an online source without the permission of the copyright owner.
5- License misuse: software distributed with a discount rates for the high-volume customers, computer manufactures, and academic institutions that then redistribute these software to others who are not qualified for the software.

1.1 Background of the problem

TA study conducted by BSA (200X), shows that piracy rates went up from 38% in 2007 to 41% in 2008 worldwide, however the encouraging news is that among the 110 countries the study was conducted, in 57 counties (52%) the piracy went down and in one third of the countries piracy remained unchanged (35%).The monetary losses for software vendors grew from US $ 5.1 billion to US $ 5.3 billion from 2007 to 2008.
Lowest piracy countries according to the BSA(200x), research were the United States Luxemburg, New Zealand and Japan, at around 20% and highest piracy rates were among Armenia, Georgia, Bangladesh and Zimbabwe around 90%.
Research conducted by International Data Corporation (IDC 200X) shows that, if piracy is lowered 10% in four years it will create more that 600,000 jobs worldwide. Robert Holleyman, the president and CEO of Business software Alliance stated that in 2008 more that 40% of the software installed worldwide was obtained illegally and cost US $ 50 billion of losses to the software industry.
For every dollar of the software sold another 3 or 4 dollars are paid to the local IT farms, in other words software piracy means less jobs in Information Technology Industry, as per IDC (200x) study if piracy is reduced 10%, governments will generate more that US $ 24 billion in revenue without increasing tax. According to Rothken (1998) buyers of legitimate software has to pay an additional 15 dollars to every 100 dollars spent on software, meaning software add 15% to the price of legitimate software because of software piracy.
Software piracy will also increase cybercrime and security problems, a study conducted by IDC in 2006 shows that more than 29% of the websites and 61% of peer-to-peer sites offering illegal software infect the computers with virus and other types of identity theft tools.
Software piracy is somewhat out of controlled in the real world, Microsoft investigators found pirated software in the computers of a police department who were investigating piracy, and also one out of three software used in business are pirated ( Carbon 1997).
The population of Malaysia is estimated at 28 million and spends more than US$ 4.6 billion in information technology, which is 2.9% of the annual GDP. There are more than 6,900 companies employing 222,100 employers in the field of information technology (BSA, 2007).

1.2 Problem statement

In Malaysia piracy increased by 1% (from 58% in 2007 to 59% in 2008) and it terms of financial losses, Malaysia lost over US $ 368 million compare to US $ 311 million in 2007. If piracy could be brought down to 10% in next 4 years (2008-2011), Malaysia could create an additional 2,600 jobs, financial gain of US $ 660 million to Malaysian software companies and US $ 144 million in tax revenue for federal, regional and local governments (BSA, 2007).
This research aim to find the common factors that influences the intention of college students in Malaysia to use pirated software, as finding these factors will help to combat the issue of software piracy more efficiently.

1.3 Objective of the study:

Software piracy has become a worldwide dilemma due to the financial and economic losses the software industry and governments has to face, also extra cost, viruses and other identity theft problems the consumers have to bear. For an issue that has gone out of control, like software piracy, it’s important to identify grass root problems.
In the case of software piracy it is important to identify what factors influence the intention of individuals to use pirated software; this will help the software industry to come up with better strategies in the fight against software piracy.
TAs colleges and universities are identified as breeding grounds for software piracy by Hinduja (2007,) and use of pirated software is a common problem in universities and which even happens inside classrooms (Kurger 2003) and college students believe it’s ethical to use pirated software (Cohen and Cornwell, 1989), its important to find what factors that influence these behaviors in college students in Malaysian context.

1.4 Purpose of the study:

TA study conducted by Cohen and Cornwell (1989) shows that software piracy is acceptable among the college students, research done by Hinduja (2007) illustrate that colleges and universities are breeding grounds for software piracy.
Protecting the intellectual property is a key factor for the copyright holder and for the consumers as well. The financial loss the software companies are facing is due to the casual attitude of the consumers towards intellectual property rights (SIIA & KPMG 2001).
Unauthorized distribution and use of software without copyright owner’s permission is illegal. Number of legal cases conforms that copy right and patent laws apply to computer software. In the case of Whelan Association Inc v. Jaslow Dental Laboratories, Inc (1986), Lotus Development Corp v. Paperback software Int’l (1990), Plains Cotton Corporative International Inc v. Altai Inc (1992) court ruled that intellectual properties were protected (Lau, 2006).
According to the Malaysian copy right act 1987, if an individual or a corporation was found in position with unauthorized software, the user may face criminal charges, they will face a fine of not exceeding RM 10,000 for each infringing copy, or prison sentence of not exceeding five years, or both.
Preventives and deterrents are the commonly used techniques in the fight against software piracy (Gopal and Sanders, 1997), preventives makes it difficult for software crackers to crack the software by increasing the security features. The idea behind the preventive concept is that, when it becomes difficult to crack, the software hackers will find cracking software’s are hard and eventually give up. Deterrent uses the laws and regulation to prevent software piracy.
The truth is preventives and deterrents are not so effective, the higher security that is placed in the software’s are checked by more advanced tools, it’s only a matter of time for software crackers to crack the security codes, the fact that deterrents are not working can be seen from the fact that only 1-5% of the computer abuse is detected.
This proves the need to find the influential factors that derives individuals towards software piracy, understanding these factors will help to formulate better strategies to deal with the problem of software piracy.

1.5 Justification of the study:

There have been number of studies conducted in relation with software piracy among the college students, however a study focused on college students in Malaysia is not found, Since Malaysia also looses enormous amount of revenue and jobs as a result of software piracy, and the fact that colleges and universities are identified as the breeding ground of software piracy and these are the people who are going to be professionals tomorrow, it’s important to identify the factors the influence the intention of college students in Malaysia to use pirated software.
Since most of the current studies are conducted outside Malaysia, there might be some significant difference in the behavior of the college students in Malaysia compare to previous research done in other countries. As there are no researches done on college students in Malaysia, it will be difficult to guaranty that those factors brought in by other literature can we applied to college students in Malaysia. T

1.6 Research questions

This study aims to answer following questions.
Will factors like Value consciousness, Attitude, Peer pressure and Novelty Seeking influence the intention to use pirated software among college student in Malaysia?
Will demographic factors like Age and gender influence the intention to use pirated software among college students in Malaysia?

1.7 Organization of the study:

This study has five chapters; the chapter one includes the background of the problem, problem statement, objective and purpose of the research, justification and research questions.
The second chapter is a Literature review, which talks about different theories related to behavior and ethics, findings of the previous literature and few models used in articles writing in the subject of software piracy are discussed.
Third chapter is the methodology, which talks about the research philosophy, purpose, approach, and strategy and sample selection used in this study.
The forth chapter talks about the findings of the study and the fifth chapter is a conclusion of this study, along with the limitation of the study and further research suggestions.

2.0 Chapter 2: Literature Review

First part of this chapter reviews different theories related to behavior and ethics, particularly the Theory of Reasoned Actions by Fishbein and Ajzen, Theory of planned behavior by Ajzen and theory of moral development by Kohlberg were discussed, which will be useful in understanding the factors influence an individual’s intention to use pirated software.
Second part of this chapter is focused on the findings of the previous literatures, specifically the literatures related to factors the influence individuals to use pirated software will be examined and finally the models used in some literatures will be used to explain software piracy.

2.1 Theory of reasoned action

Theory of Reasoned Action, developed by Icek Ajzen and Martin Fishbein (1980) were used to explain why an individual behaves in a certain manner. The theory is based on the assumption that humans are rational and information available to them will be used systematically.
TRA uses attitude and norms to predict behavioral intentions, that is when attitude leads to certain behavior but the relevant norms suggest something else, then both factors influence the behavior.
The Theory of Reasoned Actions (TRA) identifies that behavior is a function of intention and intention is a function of both attitude and subjective norms.
Theory of Reasoned Action is an useful tool used in predicting certain behaviors, its has been applied in predicting number of behaviors like dental hygiene, smoking, breast cancer examinations and the use of seatbelts. (Change, 1998)
Enker (1987) examined how attitude and normative belief is related to cheating and he found out that theory of reasoned action was a useful tool in understanding moral behavior of an individual.
The motive behind explaining the theory of reasoned action is to understand the sequence of actions that leads to a certain behavior such as software piracy.

2.2 Theory of planned behavior

In 1985, Ajzen concluded that Theory of Reasoned Action was not fully completed; he explained that TRA was insufficient, as it does not give consideration to situations where behavior is not under the individual’s control. To address these restrictions in TRA, Ajzen developed the Theory of Planned behavior (TPB), which was an extension of Theory of Reasoned Actions
The new model proposed by Ajzen included the Perceived Behavior Control (PBC) which was not found in TRA. PBC could be easily measured, and identifies the individuals’ belief on the difficulty level in performing a certain behavior (Ajzen and Madden, 1986).
The Theory of Planned Behavior states that an intention to behave in a particular fashion originates from persons attitude, subjective norms and perceived behavioral control.
Similar to the Theory of Reasoned Action (TRA), Theory of Planned Behavior (TPB) is used is in wide range of situation to predict a behavior (Flanny and May, 2000)
Chang (1998) tested the validity of both Theory of Reasoned Action and Theory of Planned behavior in software piracy. The research was conducted to see the capacity of TRA to explain software piracy behavioral intentions and to see whether TPB can predict software piracy more accurately than TRA.
Chang (1998) concluded that perceived behavioral control is the most important factor that influences individuals to used pirated software. Individuals who behave unethically most of the time do not have the full control of the situation. Opportunities must be available to the individual for him to use pirated software.

2.3 Kohlberg’s theory of moral development

Kohlberg (1969) developed the theory of moral development, which consists of 3 level of moral development and each level contains 2 stages. The concept behind the moral development stages is that, an individual mature morally when they mature intellectually.
Preconvention is the first level of moral development, this is the beginning of the moral development process, and in the first stage of preconvention level (Punishment and obedience orientation) an individual will have full respect for the authority and only concentrate on avoiding any punishment. At the second stage of the first level (reward orientation) an individual will focus on achieving personal benefits such and rewards. At this stage an individual will concentrate more on satisfying his or her own needs rather than fulfilling the needs of others or society as a whole.
Conventional is the second level of moral development, in this level individuals focus more on a group, this is the level where peer pressure begins to influence the decision of an individual. At the first stage of this level an individual will think in terms of social convention, someone is labeled good or bad based on familial and social norms. If individuals turn to second stage of level two, they mature morally and focus on law and regulations, at this stage the focus is on maintaining social order, so that societies can function in an orderly manner.
Post conventional is the final level of the moral development proposed by Kohlberg, if an individual reaches the first stage of post conventional level one should be able emphasize on what could be legally binding, however one should be able to understands that laws can be amended to meet the social demand. When an individual is at the final stage of moral development or the universal ethical principle orientation individuals see himself as a judge for the moral problems. Individuals at this stage are more concern about human rights, justices and equity in decision making.
According to Kohlberg, most people are stuck at the conventional level, authority orientation stage, where law and order is the key aspect of moral decision making. A study conducted by Lane and Lane (1996) on the subject of softlifting (pirating software for personal use) found out that many students who participated in their study remained in the conventional level, authority orientation stage, of the moral development, based on their research they concluded that moral reasons behind software piracy was less important to the student compare to the benefit from softlifting.

2.4 Software piracy literature
2.4.1 Age

Prior research conduct on software piracy shows that age had a significant influence on software piracy, hence younger responded were found more acceptable to use pirated software (Al-Rafee and Cronan 2006; Peace 1997 and Gopal and Sanders 1997). Research conducted by Liebowitz (2004) on piracy in the music industry showed that 41% of internet users between the age group of 18 – 29 download music illegally compare to 21% in the age group of 33-44. However a study conducted by Kini et al, (2004) concluded that age has no significant influence on software piracy.

2.4.2 Gender

Kini et al.., (2004), suggest that female students have a higher morality than male students, thus female students use pirated software less than their male counterparts. Ford and Richardson in their research in 1994 also concluded that females are more ethical than males; therefore females will use pirated software less than males, as software piracy can be considered unethical.
Even thought the research conducted by Weng et al, (2005) explained that gender was not a significant factor in the behavior to use pirated software, and one possible factor that researches shows male use pirated software is because they are more risk takers than female, this explanation seconds the research done by Solomon and O’Brien, (1990) Banjerjee (1992) and Sim et al (1996),as they concluded that gender was practically accountable to the decision of an individual to use pirated software.

2.4.3 Consequences of using pirated software

Using pirated software could be costly for an organization, even thought their employees used the pirated software without the knowledge of the top management, the management could be held liable for the action on their employees (Robinson and Reithel.., 1994).
However individuals do not see the use of pirated software as a crime or unethical behavior (Im and Van Epps, 1991, Reid et al.., 1992). Also risk of been prosecuted was not identified as a significant factor in the study conducted by Hsu and Shiue (2008), because in reality it’s highly unlikely to get caught and been prosecuted for using pirated software. Kini et al, (2004) suggest that there is lack of recognition and enforcement to intellectual property laws, making software piracy a common phenomenon.

2.4.4 Income and economic conditions related to software piracy

The study conducted by Gopal and Sanders, (2000) and Yang et al.., (2009) indicated that ability for an individual to purchase the original software’s is related to his or her income. Countries with higher Gross National Income (GNI) such as United States, Japan and Luxemburg has a lower piracy rate (less than 21%) compare to Georgia, Bangladesh, and Armenia, where piracy rate is more than 92% (BSA, 2008), and for these poor countries software piracy rate remains an economic issue (Moores, 2008).
Individuals who earns a high income tend to use pirated software lesser than the individuals who earns a lower income (Wee et al.., 1995). Lamayem et al.., (2004) also backed this concept by stating that economic growth declines the piracy rate in a country; however some individuals might continue to use pirated software due to hobbits. Yang et al, (2009), also stressed that economic improvement tend to reduce the use of software piracy. Top 10 high and low piracy rates

Countries with high piracy rate
Countries with low piracy rate
United States
New Zealand
Sri Lanka

Table 2.2: Top 10 High and Low piracy rate

Source: BSA piracy report 2008
Moores (2008) in his study on “An Analysis of the impact of economic Wealth and National Culture on the rise and fall of software piracy rates” found out that Software Piracy Rate (SPR) in a country is related to its economic wellbeing and Individualism-collectivism (IDV) of a country.

2.4.5 Cost of original software

At an individual level, the cost of original software is considered as prime factor that influences the decision of an individual to use pirated software or not (Cheng et al, 1997).
Moores and Dhillion, (2000), Rawlinson et al, (2007,) in their research found out that most university students do not have much discretionary income with which to purchase original software, they also point out that reduction of the price of the original software will reduce the software piracy rate.
Studies conducted by many researchers in the subject of software piracy identifies that financial gain that an individual gets from using pirated software is the most common reason to use pirated software (Cheng et al..,1997, Moores and Dhillion, 2000; Traphagan & Griffith, 1998; Wee et al.., 1995). According to Al-Rafee and Cronan (2006) many users believed that original software’s are overpriced, this concept was also supported by the studies conducted by Albert-Miller (1999);Block et al.., (1993); Cheng et al.., (1997).

2.4.6 Software piracy in an ethical context

Banerjee et al.., (1998,) developed a research framework based on the Theory of Planned Behavior (TPB) to model the ethical behavior intentions of Information system (IS) professionals and found that individual and situational characteristics do influence ethical behavior intentions.
Loch and Conger (1996) in their study found that attitude and social norms play an important role in ethical decision making situation which can be related to the use of pirated software. Researches done on the subject of software piracy found that software piracy was a normative and accepted behavior, (Cohen and Cornwell 1989), and many individuals do not consider software piracy as a moral issue and use of pirated software is widely common among the business students (Soloman and O’Brien 1990)
Simpson et al.., (1994,) examined factors influencing softlifting, and identified five factors that influence and individuals decision making process, they are, stimulus to act, socio- cultural factors, legal factors, personal factors, situational factors. They found out that personal and situational factor influence the softlifting behavior.
Thong and Yap .., (1998,) also attempted to explain soft lifting behavior using ethical decision making theory (the theory suggest that individuals are influence by deontological[1]F and teleological[2]F consequences of behavior) study showed both were found to influence the decision to use pirated software.
Peace et al.., (2003,) generated a software piracy model using Theory of Planned behavior (TPB) as a framework to explain the intention to use pirated software. The study concluded that attitude (which is affected by the cost of original software, punishment severity and punishment certainty), subjective norms and perceived behavioral control were found to be significant factors that influence the intention of and individual to use pirated software.
Zhang et al.., 2009 used the general theory of crime and deterrence theory to explain behavior that leads to digital piracy and they found out that only risk taking and punishment certainty leads to digital piracy.
Simpson et al.., (1994,) found out that, Academic institutions are increasingly including ethical education in their curriculum. However many studies done on software piracy suggest that ethical education in academic institution had no or minimal effect on the intention of the students to use pirated software (Simpson et al.., 1994; Taylor and Shim.., 1993). Even though, individuals who felt a moral obligation or guilt towards software piracy have less intention to use pirated software (Cronan and Al-Rafee.., 2007).
Logsdon et al.., (1994) and Al-Rafee and Cronan (2006) in their studies tested the assumption that individuals with higher level of moral development, are less likely to use pirated software, however they did not find a strong relationship between level of moral judgment and attitude towards using software piracy. The researchers also warn the software developers that even individuals with higher moral reasoning may engage in software piracy.
It’s believed that culture of a country influences the development of an individual’s moral judgment and on understanding of moral intensity regarding software piracy. Christensen and Eining (1990) indicated that individual do not see piracy as inappropriate behavior and they do not believe their friends and superiors believe its inappropriate behavior.
Researches concludes that use of pirated software’s in colleges and universities are more common than the general public (Kini et al, 2004). A study conducted by Taylor and Shim (1993) found out that professors use pirated software’s more than business executives.
With a sample size of 243 college students , Kuo and Hsu (2001) conducted a research based on Bandura’s social cognitive theory (Bandura, 1982) and they discovered that self-efficacy was an important element in software piracy, subject with higher self-efficacy were more likely to engage in piracy. The famous psychologist Albert Bandura defines self-efficacy as “over belief in our ability to succeed in a specific situation”.
Kini et al (2004) studied the cultural differences between the students of United States and Thailand in relation to software piracy, and they found out that students of United States has higher moral understanding towards software piracy compare to the students in Thailand. Swinyard et al (1990) in their research suggested that Asians have a more casual attitude towards software piracy than Americans, they are more likely to copy or buy software and less likely to criticize anyone who uses pirated software.
Ferrell and Gresham (1985) emphasized the importance of peer group working supervisors in affecting ethical behavior. Christensen and Eining (1991), identified that the decision to use pirated software are influenced by the attitudes of friends and organization, these researchers also indicated that students do not perceive software piracy as inappropriate since they also believe their friends and superiors share this same view.

2.4.7 Problem of software piracy

Software’s were the first product that’s copied electronically in a large scale (Swinyard et al.., 1990). According to Yang, (2009) software piracy is a huge problem for policy makers and consumers alike, due to the uncertainty involving cross border conflicts, business losses and consumer exposing to virus and different kind of identity theft.
McDonald and Roberts (1994) also considered software piracy as a very serious problem though out the world and the reason that it has become so hard to deal with this problem is the easiness in duplicating a copyrighted product. Tang and Farn (2005) concluded that supply to the pirated software will exists as long as there is a demand for pirated software, enforcement of laws and regulation and awareness programs may minimize the piracy rates, but it will not stop people from using pirated software.

2.4.8 Software piracy from a different angle

Researchers who try to take the use of software piracy positively suggests that, software piracy can be seen as a form of product sampling, and that sampling can aid in the diffusion of a good (Gupta et al, 2004).As per Mahajan and Muller 1995, the success of excel over lotus 1, 2, and 3 was due to the high tolerance level towards software piracy.
Givon et al, (1995), in their paper, “Software Piracy: Estimation of lost sales and impact on software diffusion” used a diffusion modeling approach to estimate the sale of software piracy, and they concluded software piracy creates shadow diffusion of the software same as the diffusion of original software in the market, the shadow diffusion is a major influential factor on the diffusion of the original software. They argue that the sellers of the pirated software’s may influence the potential buyers to adopt the pirated software, and some of these adopters might even purchase the original software.
However, Solomon and O’Brien.., (1990,) had a different view; they think software piracy will de-motivate the software developers to bring quality products to the market. Also the consumers have to pay a higher price to use original software; because the price of the legitimate software is inflated in order to make up to the loss of revenue from software piracy (Eining and christensen.., 1991; Taylor and Shim, 1993,). In the fight against software piracy, Germany has started enforcing a charge on every CD burner that is sold to compensate the loss of revenue due to piracy (Cronan and Al-Rafee.., 2007,)

2. 5 Models used in literatures of software piracy

In this section, previous research models are discussed in order to explain software piracy. Five models related to software piracy will be examined here, as shown below.

2.5.2 Tim Goles et al Model

Tim Goles et al.., 2007 proposed a model to identify the intention to softlift, their model is shown below:
The model shows that there is a significant positive relationship between Perceived usefulness, past behavior, technical personal identity, and risk taking personal identity towards attitude to softlift. And negative relation between awareness of the law, moral personal obligation, and legal personal identity towards attitude to softlift. Furthermore the past behavior and attitude towards softlifting has a positive relation with the persons intention

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