How does digital piracy affect innovation? Evidence from software firms

Wendy A. Bradley and Julian Kolev

Research Policy, 2023, vol. 52, issue 3

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.

Keywords: Piracy; Software; Innovation; Intellectual property (search for similar items in EconPapers)
JEL-codes: D22 L86 M21 O32 O34 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:52:y:2023:i:3:s0048733322002220

DOI: 10.1016/j.respol.2022.104701

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