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Parallel import in Russia’s software industry: Expected consequences

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  • Anton N. Morozov

    (Lomonosov Moscow State University, Moscow, Russia)

Abstract

Amid the withdrawal of foreign software developers from the Russian market, policymakers continue to discuss the option of legalising software parallel import. The purpose of the article is to assess the expected effects of the software parallel import introduction. The methodological basis of the study is industrial organization theory and new institutional economics theory. Among the research methods are theoretical and mathematical modelling and comparative analysis. The empirical evidence includes publicly available data on the pirated content consumption retrieved from the web source I Know (iknowwhatyoudownload.com) and financial statements of Russian software developers (SPARK-Interfax database). The article presents a theoretical model describing the consumer’s choice between original and pirated versions of programs and analyses the situation, where the most popular software product gets inaccessible. Our analysis shows that when costs of piracy are low, users of ‘out-of-the-box’ programs will not switch to another software and prefer the pirated version of the previously used program. The results of the model are compared with data on the pirated software consumption in Russia. We have found that consumers prefer foreign software to Russian counterparts, which means that if parallel import is legalised, Russian software developers will fail to occupy the niche of home-use software, which remains an important reserve for the industry’s further development. Free access to foreign software distorts consumer incentives. The institution of parallel imports should be modified so that the consumer keeps paying the price of the original’s, the state guarantees such software is secure, and intellectual property violations are strictly controlled.

Suggested Citation

  • Anton N. Morozov, 2023. "Parallel import in Russia’s software industry: Expected consequences," Upravlenets, Ural State University of Economics, vol. 14(5), pages 106-120, November.
    • Handle: RePEc:url:upravl:v:14:y:2023:i:5:p:106-120
    DOI: 10.29141/2218-5003-2023-14-5-7
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    References listed on IDEAS

    as
    1. Baten, Joerg & Bianchi, Nicola & Moser, Petra, 2017. "Compulsory licensing and innovation – Historical evidence from German patents after WWI," Journal of Development Economics, Elsevier, vol. 126(C), pages 231-242.
    2. Banerjee, Dyuti S., 2003. "Software piracy: a strategic analysis and policy instruments," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 97-127, January.
    3. Gayer, Amit & Shy, Oz, 2003. "Copyright protection and hardware taxation," Information Economics and Policy, Elsevier, vol. 15(4), pages 467-483, December.
    4. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
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    More about this item

    Keywords

    software market; software; parallel import; compulsory licensing; software piracy; intellectual property;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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