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 inuencing Chinese consumers attitude toward software piracy, including value consciousness, normality susceptibility, novelty seeking, and collectivism. Five attitude measures, which were important in inuencing consumer purchase intention, were identied as reliability of pirated software, recognized social benets of piracy, functionality of pirated software, risks of purchasing, and perceived legality of purchasing. An exploratory study identied three attitude attributes. Research limitations/implications As student samples were used, caution needs to be exercised when generalizing ndings 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 ndings are useful in designing anti-piracy strategies in China. Originality/value This research is one of the rst 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 Grifth, 1998). Estimates reveal that software piracy in China alone cost US businesses $1.85 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 signicantly (Husted, 2000; Marron and
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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, insufcient 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 inuence, 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

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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 inuenced 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 signicant 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 identied that nancial value is one of the most important reasons for software piracy (Cheng et al., 1997; Moores and Dhillon, 2000; Traphagan and Grifth, 1998; Wee et al., 1995). However, other factors, such as demographic factors, benet-cost evaluation other than nancial factors, situational factors, professionalism, and other gains for consumers, are identied 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 inuencing factors, especially nonnancial factors, in consumers purchase decision-making process is an important factor in the design of anti-piracy education and strategies. 341

The study by Ang et al. (2001), entitled Spot the difference: consumer responses towards counterfeits, and published in The Journal of Consumer Marketing in 2001, contributed important research in the examination of nonnancial 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 gratication. 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 ve social and personality factors, normative susceptibility, value consciousness, and integrity inuenced the attitude of Singaporeans toward pirated music CDs, and informative susceptibility and personal gratication 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 signicant 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 Grifth, 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 rened 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

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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 ve social and personality factors by, including informative susceptibility, normative susceptibility, value consciousness, integrity, and personal gratication. Informative susceptibility and normative susceptibility are two forms of consumer susceptibility to social inuence (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 inuence may present negative attitudes toward software piracy. Value consciousness is dened 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 gratication concerns the need for a sense of accomplishment, social recognition, and to enjoy the ner things in life (Ang et al., 2001). Consumers with high personal gratication 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 inuencing 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, 342

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 consumers 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 inuential factor for purchasing pirated software in student groups, but did not nd it as an important inuential factor in working adult samples. Novelty seekers may be more likely to purchase the legal version of software when satised 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 rmly established that attitudes inuence behavioral intentions (Ajzen and Fishbein, 1977). Ang et al. (2001) concluded in their study that attitude toward piracy was signicant in inuencing 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. H1a. Information susceptibility has a negative effect on consumer attitudes toward software piracy. H1b. Normative susceptibility has a negative effect on consumer attitudes toward software piracy. H1c. Value consciousness has a positive effect on consumer attitudes toward software piracy. H1d. Integrity has a negative effect on consumer attitudes toward software piracy. H1e. Personal gratication has a negative effect on consumer attitudes toward software piracy. H1f . Novelty seeking has a positive effect on consumer attitudes toward software piracy. H1g. 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 inuencing 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 benets to society, and found attitude differences between buyers and non-buyers of pirated CDs in terms of social fairness and benets. In H3, the attitude differences between Chinese buyers and non-buyers of pirated software are proposed. However, the attitude components for

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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 inuencing 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 (e.g. 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). 3.1. Measure development The questionnaire used in this research was in Chinese and consisted of ve 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 ve 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 reect 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 rsts 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 specic aspect of sharing between an individual and others is more direct in reecting 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 343

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, ve 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. 3.2. Samples A total of 340 questionnaires were distributed randomly to students on university campuses; 314 responses were received, with a response rate of 92.4 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. 52.3 percent responses are male and 47.7 percent are females. The rate of buyers (75.2 percent) is higher than non-buyers (24.8 percent), which reected the high piracy rate in China (Traphagan and Grifth, 1998). Since the response rate of this survey is high (92.4 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 27.53, and the test signicance level represented by p-value is much smaller than 0.001. This statistic conrms 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 OBrien, 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 Male Female Total Percentage 11 64 75 24.8 Buyers 147 80 227 75.2 Total 158 144 302 100.0 Percentage 52.3 47.7 100.0

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4.1 and 4.2. Section 4.3 examines H3, and also provides an exploratory test to analyze the attitude construct. 4.1. 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 inuencing 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 rst 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 gratication, integrity, novelty seeking, and collectivism, and the dependent variable is consumer attitude toward software piracy. As of ten consumer attitude measures, ve were positive statements and another ve negative statements. To make the scale consistent, reverse scales were used for the ve 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 0.72 for the ten measures of the consumer attitude construct. The values of Cronbach a for social and personality constructs are 0.71, 0.73, 0.80, 0.74, 0.80, 0.78, and 0.74, for informative susceptibility, normative susceptibility, value consciousness, personal gratication, integrity, novelty seeking, and collectivism, respectively. These values are all higher than 0.7, 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 inuencing consumer attitudes toward software piracy, and is included in the nal regression equation. Thus, H1b, H1c, H1f , and H1g are supported, and H1a, H1d, and H1e are not supported. The results from this study are consistent with the Ang et al. (2001) study in nding Table II Final stepwise regression results on factors inuencing attitude
Final stepwise regression equation Value consciousness Normality susceptibility Novelty seeking Collectivism Constant item Notes: R 2 0:22; F 12:18* *

that normative susceptibility and value consciousness inuence consumer attitudes toward software piracy (H1b and H1c), and informative susceptibility and personal gratication do not (H1a and H1e). Different from the Ang et al. (2001) study, integrity is not found as an important factor in inuencing consumer attitudes (H1d). This nding is consistent with other studies (i.e. 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 inuencing 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 inuencing consumer attitudes toward software piracy. 4.2. Relationship between attitude and purchase behavior A stepwise regression also is used to test the inuencing 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 a of the four measures of purchasing intention is 0.86, 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 nal stepwise regression results. For the overall sample, ve independent variables accounted for a R2 of 0.324 of the purchasing intention of pirated software. Five measures inuencing purchase decision are product reliability (0.24), product functionality (0.15), social welfare (0.14), risks (0.10), and legal judgment (2 0.09). 4.3. 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

B-values
0.33 20.04 0.22 0.20 2.15

Standard error 0.05 0.01 0.06 0.07 0.59

Standardized regression coefcients 0.28 20.17 0.15 0.13

t-value
6.45 2 4.17 3.69 2.96 3.68

Signicance level 0.00 0.00 0.00 0.01 0.00

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Table III Final stepwise regression results on attitudinal measures inuencing purchasing intention
Standard B-values error 0.048 0.049 0.058 0.046 0.040 0.384 Standardized regression Signicance coefcients t-value level 0.313 0.181 0.170 0.137 2 0.128 4.976 2.873 2.524 2.256 22.182 5.217 0.000 0.004 0.012 0.025 0.030 0.000

Final stepwise regression equation

Pirated software is as reliable as the legal software 0.239 Without pirated software, many people will not be able to enjoy the benets of using software 0.142 Pirated software provides similar functions as the legal version 0.146 There is little chance of being caught when purchasing pirated software 0.103 Purchasing pirated software is illegal 2 0.0863 Constant 2.004 Notes: R 2 0:324 F 14:017* *

products is less risky, worthier of purchase, will benet 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 signicant differences between buyers and non-buyer attitudes. Except for three measures (e.g. 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 signicant. Generally buyers showed more acceptable attitudes to software piracy than non-buyers. Thus, H3 was supported. 4.4. 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. Table IV Comparison of buyers and non-buyers attitudes
Measures

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 Singaporeans 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 classied measures, which individually were found as purchase inuencers, 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 condence. To test attributes of Chinese consumer attitudes on software piracy, an exploratory factor analysis was done. The signicance level of Bartletts test on attitude measures is 0.000 and the KMO measure is 0.072. 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 0.3, which is a threshold in factor analysis. Factor loadings below 0.3 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

Sample average 5.94 5.99 5.38 5.30 3.74 4.50 3.82 3.73 3.85 4.17

Non-buyers 6.38 6.22 5.59 5.24 3.30 4.04 3.38 4.23 4.41 3.85

Buyers 5.80 5.92 5.31 5.32 3.88 4.65 3.96 3.56 3.66 4.27

t-value
2.10 * * 1.66 1.58 2 0.37 2 2.13 * * 2 2.25 * * 2 2.56 * * 2.73 * * 2.84 * * 2 1.88 *

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

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Table V Factor analysis of attitude measures

Attitude measures Factor loadings F1 F2 F3

Attitude toward social consequences (F1) 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 Attitude toward pirated software (F2) 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 Attitude toward purchasing behavior (F3) Purchasing pirated software is illegal Purchasing pirated software is unethical There is little chance of being caught when purchasing pirated software Cronbach a R 2 (percent)

0.88 0.88 0.78 0.67

0.46

0.80 0.79 0.70 0.84 0.82

0.75 23.71

0.47 0.73 23.02

0.67 0.68 16.19

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 (e.g. 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 0.5). If a threshold of 0.5, which represents high in factor loadings, instead of 0.3, 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 62.92 percent of total variance. 4.4. Re-examine ndings 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. 346

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 reected 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 ndings 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 signicant differences in evaluating social consequences. While buyers recognize the damage of software piracy to intellectual property, their recognition of the damage is signicantly less than nonbuyers. Generally, the group means for both buyers and nonbuyers were above ve, which means that both buyers and non-buyers recognized the benet 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 inuencing consumer purchasing intention. In the ve measures listed in Table III, two measures, pirated software is as reliable as the legal software (the rst 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 fth 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 inuencing power in the consumers purchasing intention, and the consumers 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 rst 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 inuencing consumer attitudes. Different from the Ang et al. (2001) results, integrity was not found to be an important inuencer in consumer attitudes. This nding 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. Conrming the Ang et al. (2001) results, this research found normative susceptibility and value consciousness important, and informative susceptibility and personal gratication 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

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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 consumers 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 benets/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 reected 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: rst, the survey was conducted in a university setting, using a student population sample. Researchers have raised concerns about the generalizability of student-based ndings 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 inuence 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 ndings 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 inuencing consumer attitude and purchase intention can be easily identied 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 ndings of this research, future studies may possess a more mature theoretical foundation in analyzing Chinese markets, and thus employ a model-testing 347

method, such as the structural equation modeling (SEM), to validate a consumer attitude model as a whole. Summarizing the ndings 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 gratication), 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 rst 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 nd their causes for piracy. In this way, they can well manage their anti-piracy efforts. This research found that integrity did not inuence 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

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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 ghting 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 inuencing 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 signicant, 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 inuence purchase intention. On the contrary, recognizing social benets will lead to purchase intention. Therefore, educating on the social consequences caused by piracy does not seem to be a working tactic.

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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 gratication . 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 rsts to try new products. . I am exited to purchase some interesting products. . I own a lot of popular products. . I keep up with fashion.

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8. Attitude toward piracy 8.1 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. 8.2 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. 8.3 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 benet of the material present.

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 pirates 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 (e.g. 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 difcult 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 Proudhoms 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 owners 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 (i.e. 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 nd 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

Consumers are unethical and not just in China Lets 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 lm 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 Peoples 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.

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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 nal 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 $50.00 or whatever. Every time we hear a discussion of software (or other intellectual property such as music or lm) 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 precis of the article Purchasing pirated software: an initial examination of Chinese consumers. Supplied by Marketing Consultants for Emerald.)

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