As multinational firms explore new and promising national markets two of the most crucial elements in the strategic decision regarding market-entry are the level of corruption and existing trade barriers. One form of corruption that is crucially important to firms is the theft of intellectual property. In particular, software piracy has become a hotly debated topic due to the deep costs and vast levels of piracy around the world. The purpose of this paper is to assess how laissez-faire trade policies and corruption affect national software piracy rates. Using invisible hand theory, as well as literature from the fields of international strategy and ethics, formal research hypotheses are posited and tested. Results suggest that corruption mediates the relationship between economic freedom and software piracy. Implications for multinational managers and researchers are also addressed.
Direct and indirect corruption touches the lives of managers in numerous ways. In the international business arena, corruption is more difficult to define and control since the perception of right and wrong, both morally and legally, tends to vary extensively from culture to culture (Wines and Napier, 1992). Many firms have been developing strategies to help their managers make better decisions when faced
with morally precarious situations both at home and abroad. Yet the bulk of these strategies and corporate policies tend to be vague and suffer from a lack of emphasis placed on either the moral situation or the issue at hand. This ambiguous focus on specific issues, coupled with a dearth of empirical work, has been a major criticism of scholarly research in the area of cross-cultural ethics.
Software piracy is generally defined as the illegal or unauthorized copying of computer software (Sims et al., 1996). This includes unauthorized copying of an organization’s internally developed software or illegal duplication of commercially available software (Straub and Collins, 1990)....