Counterfeiters: Foes or Friends? How Counterfeits Affect Sales by Product Quality Tier

Yi Qian ()
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Yi Qian: Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada; and National Bureau of Economic Research, Cambridge, Massachusetts 02138

Management Science, 2014, vol. 60, issue 10, 2381-2400

Abstract: A key concern about counterfeits and weak intellectual property protection is that they may hamper innovation by displacing legitimate sales. This paper combines a natural policy experiment with randomized lab experiments to estimate the heterogeneous impacts of counterfeiting on the sales and consumer purchase intent related to branded products of various quality levels. I collect new product-line-level panel data (1993--2004) on Chinese shoe companies. I identify heterogeneous effects of counterfeit entry on sales of authentic products of three quality tiers, finding that counterfeits have both advertising effects for a brand and substitution effects for authentic products, additionally the effects linger for some years. The advertising effect dominates the substitution effect for high-end authentic product sales, and the substitution effect outweighs the advertising effect for low-end product sales. The positive effect of counterfeits is most pronounced for high-fashion products (such as women's high-leg boots and dress shoes), shoes tailored to young customers, and high-end products of brands not yet well-known at the time of counterfeiter entry. This paper was accepted by David Hsu, entrepreneurship and innovation.

Keywords: counterfeit; intellectual property rights; China; fashion (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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