Online piracy, innovation, and legitimate business models

This explorative paper examines the impact of online piracy on innovation and the creation of new, legitimate businesses. While viewed only as a legal matter, online piracy has shown to be an important source of technological and strategic innovation to both industry incumbents and newcomers. This paper briefly describes the evolution of pirate technologies and the associated online communities. Then, it examines the processes by which pirate technologies and communities have stimulated innovation and the creation of pirate as well as legitimate business models. The paper concludes with some suggestions by which incumbents and entrepreneurs may deal with and take advantage of piracy.