The inverse U curve relationship between software piracy and technological outputs in developed nations

Purpose – The purpose of this study is to examine the relationship between software piracy and technological outputs in developed nations. Design/methodology/approach – The study employs the data of 28 industrialized countries from 2003‐2007. The hypotheses were tested using panel data regression. Findings – The results demonstrate that software piracy appears to have the inverse U curve relationship with the aggregate technological outputs of a nation as measured through the share of high‐tech exports. Research limitations/implications – Even though past studies have tended to focus on the negative impact of software piracy, this study found interesting evidence that its impact is not always absolute. In particular, firms in high‐tech industries may benefit from the presence of software piracy when its level is limited at some optimal level. This benefit may derive from: the dissemination of technical knowledge; the diffusion of software deployment especially in small businesses; and the increase in technical skills of labors. Originality/value – This study is the first that provides the empirical evidence of the inverse U curve relationship between software piracy and technological outputs at the national level.