ECONOMIC IMPACT OF SOFTWARE PIRACY FOR MANUFACTURERS IN
Transcript of ECONOMIC IMPACT OF SOFTWARE PIRACY FOR MANUFACTURERS IN
EXECUTIVE SUMMARY
ECONOMIC IMPACT OF SOFTWARE PIRACY FOR MANUFACTURERS IN THE U.S.William Kerr, Associate Professor of Business Administration, Harvard Business School and Dr. Chad Moutray, Chief Economist, National Association of Manufacturers (NAM)
The theft of intellectual property,
information technology and trade
secrets by firms in emerging
markets is a well-documented
problem. This study proves that
such theft harms both the owners
of this property and the entire
U.S. economy. Far too many
businesses in emerging markets
steal IT as a means to compete
unfairly with manufacturers who
follow the law, costing the U.S.
economy jobs, revenue and GDP.
Reducing global software
theft is an easy and direct
way to level the playing field
between manufacturers in the
U.S. and emerging markets.
Manufacturing Jobs Manufacturers U.S. economy
-42,220 -$239.9B -$69.6B -$6.7B
Cost of software piracy U.S. 2002-2012
manufacturing jobs lost Revenue lost by manufacturing in the U.S.
GDP lost lost in federal tax revenue
We have studied the economic impact of one such
practice, software theft in emerging markets, on
manufacturing in the U.S. sector. Weak rule of law in
emerging markets enables rampant piracy and is a form
of unfair competition. Software is essential in every stage
of the modern manufacturing process. Firms engaging
in this theft get business software at no cost, while their
competitors must pay significant up-front costs and
licensing fees. Software theft therefore results in an unfair
advantage allowing firms to charge lower prices than their
rivals, or invest in additional labor, capital, or research and
development (R&D).
In 2011, the global
commercial value
of pirated software
reached $63.4
billion, a record
high and more than
double the 2003
value of $29 billion.
Software is essential in every
stage of the modern manufacturing
process. Firms engaging in software
theft take business software at no
cost, while their competitors must
pay significant up-front costs and
licensing fees.
Opportunity for economic growth(2.5 percentage point change per year over 4 years)
Jobs Manufacturers U.S. economy
New manufacturing jobs
Revenue added by manufacturing in the U.S.
Added GDP Added federal tax revenue
+27,239 +$29B +$8.7B +$807M
Total impact of a 10 percentage point reduction in global piracy over 4 years
U.S. Industry Jobs created
Manufacturing (direct effect) 27,239
Manufacturing (spillovers) 13,075
Software/IT (direct and spillover) 25,431
Total 65,745
IDC reports that manufacturers in the U.S. spent $29.8 billion on packaged software in 2010.
As American University’s Professor Andrew Popper notes, “firms steal IT in order to gain a cost advantage, merit-based success in the marketplace is at risk and the motivation to create better and more efficient goods and services is in jeopardy.”
Software theft causes a potentially dangerous gap in innovation by both lowering pirating firms’ R&D costs and reducing the benefits to U.S. manufacturers from new innovations.
Over the past decade, the threat
to manufacturers in the U.S. from
software theft in emerging markets
has increased. First, globalization
means that manufacturers in the
U.S. compete more intensely with
emerging market firms engaging
in software theft. Second, the
increased importance of IT and
software in manufacturing has
increased the size of the cost
advantage from software theft.
These factors add up to heightened
unfair competitive pressure on
manufacturers in the U.S., who
rely on software and technology to
remain innovative and competitive
within the global market.
Source: http://www.nam.org/Statistics-And-Data/Facts-About-Manufacturing/Landing.aspx
www.naji.orgwww.nam.org
This study was commissioned by: