Asia Pacific Advances in Consumer Research Volume 5, 2002 Pages 252-257
UNDERSTANDING SOFTWARE PIRACY IN COLLECTIVISTIC COUNTRIES
Lee C. Simmons, The Nanyang Technological University, Singapore
Brian R. Tan, The Nanyang Technological University, Singapore
Piracy is a problem that has plagued the software industry. It is a major concern for developing countries as it undermines their entrepreneurs and innovators by taking away the reward aspect from the risk-reward equation. To reduce piracy rates, one must understand the causes and mechanisms of piracy across cultures.
Possible reasons for the different piracy rates are presented. The mechanisms discussed are; shame culture vs. guilt culture, and degree of collectivism vs. individualism. The concept of guanxi, and how it influences and interacts with the level of collectivism and shame are also explored.
The software industry has grown phenomenally in the past decade, with global sales of $135.4 billion in 1997. Losses resulting from software piracy are estimated at $11.4 billion (Business Software Alliance, 1998). Efforts to combat software piracy have been somewhat useful, as piracy rates declined in 1998 and 1999. However, piracy rates increased in 2000, with Asia Pacific contributing the greatest dollar value, approximating $4.1 billion (or 36%) of the estimated $11.75 billion in losses resulting from piracy (Business Software Alliance, 2001).
Software piracy affects two major stakeholders of intellectual property: countries intending o develop their intellectual industry and software producing firms. Developing countries are affected because their intellectual property industry is undermined, while US firms, developers for most software programs, suffer because they lose potential revenue to illegal vendors. Reducing piracy will benefit the US more in the short-run by increasing short-term profits, while host countries will benefit in the long-run as they strengthen their markets, reward talent and become more competitive within the global arena.
Defined as the use of a software product without paying the owners of the intellectual property, software piracy rates vary by country. The Business Software Alliance measures piracy as the percentage of software in use that are unauthorized copies. The US has the lowest software piracy level of 25% while the countries with the highest piracy rates are Vietnam (97%), China (94%) and Indonesia (89%). (Business Software Alliance, 2001) These figures indicate that there may be some reason other than greed or lack of funds to account for these differences. This paper will attempt to explain what factors in the Peoples Republic of China (94% rate for 2000) and in other countries may be causing these high piracy rates.
With no technological solution for software piracy on the horizon, social or legal programs must be instituted to eliminate or reduce software piracy rates. Before effective programs can be implemented, there must first be an understanding of what mechanisms cause the high rates of piracy in some countries. Nearly all of these countries have laws that prohibit software piracy. They differ, however, in the ways these laws are enforced. The cultural and social norms that sanction, or at least do not condemn, this behavior allow must be examined and ways to change the behavior explored.
In recent years, China has been the focal point for the discussion of software piracy. Much software is pirated in China and sold in shrink-wrapped packaging. US companies that are losing sales to piracy have asked the US government to deny granting China its Most Favored Nation trade status (this is part of the reason why Chinas entry to GATT was delayed) until China shuts down the factories that are illegally duplicating the software.
Before anything can be accomplished beyond government posturing, both the cultural and social causes of the problem must be discovered. The difference in laws and enforcement practices is not sufficient to account for the high software piracy rates. Other countries with similarly lax enforcement have very different piracy rates.
CHINESE CONCEPT OF INTELLECTUAL PROPERTY
In the Journal of Commerce and Commercial (May 4, 1994) Kathy Wilhelm reported that a shopkeeper in Canton was found to be selling pirated software and music CDs with US titles for as low as $1.80. When asked why they were so cheap, the shopkeeper replied that they were copies. The shopkeeper was insulted when asked if this was illegal and promptly showed the reporter her business license and said, "Were completely legal!" Many Chinese people do not even understand why this is a problem. Another example from the same article cites an instance of government officials confiscating some CD disks, making a small cut in the edge, but not into the recorded part, and then reselling them.
Chinese literature reflects that even famous authors copy other authors without citing them. Academic journals in China usually have no cites of other authors or articles. When Jerry Edmondson recently published a paper in "Minzu Yuwen," a Chinese linguistic journal of minority languages, he was told that they would omit the references for "space reasons" (Edmondson, 1996). He then asked about all of the cites and quotes in the body of the paper and they told him those would be removed also. Both he and others (Alford, 1995; Pye, 1992) have told stories of works being copied n Chinese journal articles and when the authors were asked about the practice they replied, "You should consider it a compliment!" It is easy to find writers and thinkers from Chinas past whose words are copied exactly in later works with no citation of the source. If modern artisans or writers are asked why they feel it is acceptable to copy others, they answer, "We are inspired by others. Why should we be constrained? How can you own an idea?" (Edmondson, 1996; Alford, 1995).
This suggests that the Chinese people do not consider piracy of software, or theft of any other intellectual property, to be wrong. Pirated software is perceived as just a cheaper version without the usual guarantee, and it is not unethical should an individual, who purchases pirated software, decides to take the risk of obtaining a sub-standard product for a lower price. It must be noted here that there is a difference in protecting industrial intellectual property (patent) and cultural intellectual property (copyright) and the two are often confused. In some cases cultural intellectual property copying can be considered useful. This could be the case for older works of cultural meaning and art (Wall, 2000). If the legal profession is confusing them, then it could be expected that the public will not see it as wrong to copy one type but not the other.
WHY LAW DOES NOT WORK
The Chinese government has passed laws against piracy to placate the world trade community and the US government. Those charged with enforcing the laws see no reason to do so, as the Chinese legal system is not like the US. In the US there is rule by law. In China, it is rule by person and power. Power resides in the administrator or official. This is more important than any code (Kristof and Wudunn, 1994).
Most Chinese still pay some respect to the Confucian moral code, which tells you how to act in relation to others in society and who has the right to control whom, but it does not emphasize obedience to law. Threat of punishment is not always an effective deterrent. There must be social influences such as guilt and shame (discussed below) to ensure people act appropriately. This is particularly the case in Asia where there are more laws than in Western countries. However, the justice system in Western countries are more involved in enforcing the law strictly, whereas the justice system in many Asian countries tend to focus on using law as a means of deterrence, and enforcement is less stringent.
Most of the 31 factories in China that produce CDs and software are owned, to some degree, by the Chinese government. Many times these owners have relationships, or guanxi, with other companies or foreign entities that must be honored (Simmons and Munch, 1996; Yang, 1994; Brunner, Chen, Sun and Zhou, 1989). When the Chinese people see the government selling pirated software, they do not feel compelled to abide by the law. Police organizations are also not obligated to, and frequently cannot, act against their government. Those that think about it, or even know that there is a law, likely believe that the government has passed these laws under pressure from the US and other countries. It has not been that many years since the communist Chinese government considered stealing information or technology from the "evil" western market economies something to be rewarded.
If law cannot change behavior, other societal controls must be examined. A key element of Chinese business practice is relationship marketing or guanxi (pronounced gwan-see). (Pye, 1992; Simmons and Munch, 1996) This is similar to the USs "good old boy" network, but guanxi is more entrenched. Articles written about guanxi describe it as a "network of networks"(Simmons and Lovett, 1996), "a powerful web that holds a person in place and gives him a basic orientation in life" (Pye, 1968), "connections as substitutes for institutional support" (Xin and Pearce, 1997) and "social connections based implicitly on mutual interest and benefit" (Yang, 1994).
These networks are often referred to as "guanxi wang". Guanxi translates literally as "joined chain" and wang translates as "web" or "interconnected net." These relationships are maintained across countries and cultures. In many parts of Asia it is the Chinese businessman who runs the economy, even though the national culture and identity may be Malay, Vietnamese, or Thai. John Naisbitt in his book "Megatrends Asia" (Naisbitt, 1996) calls guanxi one of the greatest glues that hold Asian business together.
Guanxi encompasses both personal and business relationships, although all guanxi relationships are with an individual and not with a business. Built up over the course of a lifetime, this system delineates the obligations the Chinese owe others and what these others owe them in return for past favors. This interconnectedness extends to both personal and business relationships. Members of a guanxi wang are frequently close friends or relatives. An individuals place and role in society are defined by relationships with others. The Chinese think of these guanxi relationships as personal strategic relationships that will help them get ahead. There is never any thought of not fulfilling an obligation, because that would be to lose face (shamed) and (possibly) become "mei you renqing." This literally means 'not have human feelings. If you come to this state, others are no longer obligated to honor your requests or even to treat you as a part of society or humanity. In the US, a persons relationships are fluid. In China, your friends and family define who you are and your place in society. Not only does ostracism affect an individual, but that individuals network of family and friends will also be affected because they have a responsibility to ensure that the individual behaves appropriately. Everyone is interconnected (Simmons and Munch, 1996; Simmons and Lovett, 1996; Ambler, 1995 and Yang, 1994).
It is this interconnection between people and groups (guanxi wang) that serve to define a collectivistic outlook, and "not standing out" is a trait that is both appreciated and valued. Individuals have a strong need to satisfy others, so that the connections within a guanxi wang are strong and harmonious. This goes to the extent of accepting the viewpoints of others, especially elders and individuals with authority, as right and truthful. Even talented individuals are concerned about the harmony of the group and will try their best to consider the feelings of others within this guanxi wang.
Hence, attempts to target at specific individuals will not be as effective as attempts aimed at altering the groups perception of what is ethical/unethical, and let the inner workings of the group affect the actions of an individual. A strong sense (unspoken convention) within guanxi wangs that using or purchasing pirated software is bad, supported by enforced laws against piracy would probably work well. Effectiveness will also be greatly enhanced should there be buy-in from individuals with authority at the top.
GUILT AND SHAMEBTYPES OF SOCIAL CONTROL
In order to effectively determine an approach to influence social control, one must firmly understand the root cause of decision-making. The two basic controls within an individual when considering the consequence of an action can primarily be seen as the guilt control versus the shame control. The guilt aspect lies primarily from an internal perspective and acts as an internal control that promotes actions deemed as ethical to an individual (and vice versa for unethical behavior). Te shame aspect lies primarily from external influences and acts as an external control that promotes actions deemed as appropriate by members within the individuals guanxi wang. These terms shame and guilt herein are used in a descriptive, and not a pejorative, manner.
Most researchers (Benedict, 1946; Mead, 1950; Bierbrauer, 1992) define shame as a reaction to criticism from others and a fear of rejection and withdrawal of love. Guilt is considered to be a form of self-criticism that comes from comparing ones own standard to the action. Shame results from violating or being caught violating a societal norm. Guilt results from violating ones personal internal standards. Shame results from the existence of a real or imagined audience of ones misdeed while guilt is a negative feeling of self worth and does not require an audience, real or imagined (Lebra, 1973; Bierbrauer, 1992). Cultures may be classified depending on the mechanism of social control, as guilt driven or shame driven, although these two are not mutually exclusive. It is possible to have both working in a single society but the only example found in the literature (Bierbrauer, 1992) was of a shame cultural group that converted to a guilt religion (Islam to Christianity). Guilt appeared to only affect their religious aspects and the study showed that guilt feelings in religion do not appear to transfer to cultural or societal interactions outside the religious context.
It can be observed from previous works (Bierbrauer, 1992; Creighton, 1990; Tangney, 1995) that shame is highly correlated with collectivism, and that guilt is highly correlated with individualism. The concept of collectivism and individualism are dichotomous (while shame and guilt are not dichotomous) and serve as a means to segregate and understand differences in culture that exist across countries. This helps us to understand that attempts to reduce piracy must consider this idiosyncratic country level variable, and hence the effectiveness of laws to combat piracy will depend on how it is structured and enforced.
Law is based on the assumption that behavior is controlled by sanctions (Bierbrauer, 1992). People usually comply with laws either to avoid punishment or for their own benefit. When laws are not structured effectively and not readily enforced, as in many developing countries, this method of behavior modification will not work. To be effective, there must be other, more subtle, forms of behavior control, either group pressure or the influence of an "inner voice" resulting from internalization of cultural values and norms that do not require the presence of the controlling influence (Bierbrauer, 1992). "A full theory of legal behavior must therefore include more than a theory of sanctions. It must also include a theory of normative behavior... this means conscience and a concept of legitimacy." (Friedman, 1975) Little theory has been tested in this area, as it is nearly impossible to do so.
What is important in this context is not specific legal practice, but rather how a populations attitudes are related to cultural orientation. Several researchers have looked at dimensions of cultures that are important for consideration here. These dimensions include: tight vs. loose cultures (Pelto, 1968), high context vs. low context cultures (Hall, 1976), and individualism vs. collectivism (Hofstede, 1984; Triandis, 1986). These researchers all address the same key issue: the degree to which a persons identity or self is part of his or her social environment (Bierbrauer, 1992). Those who come from a culture that defines self as part of the community or in-group are more likely to use the standards of the family or community to define their behavior. Those who come from a more individualistic society will be more concerned about the consequences of behavior to ones needs, interests, and goals (Leung, 1987).
SHAME AND PIRACY
Since the concept of shame and guilt are closely correlated to the level of individualism (where a low level of individualism implies a high level of shame and a high level of individualism implies a high level of guilt), we can use the measurement of individualism by Hofstede (1984, 1991) to determine normative responses to anti-piracy measures and laws.
Hofstede originally collected data on IBM employees worldwide in 1970 (a second round was done in 1982) to determine his original scales that differentiate societies. While he came up with four dimensions, later changed to five after he was able to study China, only the collectivism/ individualism dichotomy scale is pertinent to the concept of guilt and shame. With 117,000 respondents in the first study (1970) and another 60,000 added from the 1982 study, there is more than sufficient power to consider his data fairly accurate for the countries studied. As the study used IBM employees those who actually purchase and use software are likely to be demographically similar to the respondents in Hofstedes study.
Figures for piracy rates comes from the Business Software Alliance (BSA) 1995 report based on 1994 data. The numbers, while not as accurate as some would wish, are likely to be relatively accurate and therefore useful for comparison. For 1994, the percent of illegal software applications in use range from 35% in the US and Switzerland to 99% in Indonesia, Kuwait, and China. This is not surprising, considering that countries ranked low on individualism (and hence high on collectivism) have higher levels of software piracy, where efforts to limit piracy are more guilt focused.
A simple linear regression was performed to see if individualism/collectivism could explain variations in piracy rate. The results are in Table 1a. With an R2 of 0.54, collectivism is a reasonably good predictor of piracy rate. The sign is in the proper direction as predicted and the predictor is significant at the .000+ level; the model has good explanatory ability. The equation (Equation 1) for this regression is: PiracyRate=100.9B.61 (Individualism).
The data demonstrates that as a country is less collectivistic and more individualistic, piracy is reduced. There may be other factors that affect both of these variables, which could be the true explanation of the result. However, the ability of normative behavior to predict the peoples actions is well documented in marketing and other sciences (Fishbein and Ajzen, 1975). Normative influences are a stronger predictor of behavior in collectivistic societies than in individualistic ones. According to Hofstede and others, the levels of individualism/collectivism are stable over time.
In Table 1b, Singapore, Taiwan and Hong Kong have been removed due to outlier behavior. These countries all exhibited levels of piracy that were lower than expected, based on their levels of individualism. None of these go beyond 3 standard deviations in outlying behavior and only Hong Kong is beyond 2 standard deviations. If we examine the possible reasons for their outlying behavior these countries have two things in common: first, they have recently become software producers, and second, they count on the US as one of their major trading partners. Hence, these countries may be good predictors of how much software piracy could be reduced by increasing enforcement and by letting people know why software piracy is damaging to their own software/intellectual property industry. Other country specific variables should be considered on a country level case study to determine how the interactions of anti-piracy efforts have worked in a collectivistic society.
A second linear regression was done excluding these countries and produced an R2 as shown in Table 1b. The move from 0.54 to 0.63 is a significant increase. Once again the sign is in the proper direction and the significance is very good at the .000+ level. The equation (Equation 2) for this regression is: PiracyRate=104.7B.6 (Individualism). Considering the small number of cases in this regression, the results are encouraging. This implies that broad-based and punitive measures taken by these three countries could have a lasting impact in the fight against piracy and may represent a possible means to effectively combat piracy for more collectivistic countries. However, these software-producing countries should be considered as best case scenarios for enforcement efforts as the development of their own intellectual property industry will likely contribute to the feeling that piracy maybe wrong.
The development of a countrys intellectual property industry would likely change public beliefs. Most countries will not be able to develop their own intellectual property industry in the short term. Without some technical advance that would make piracy either difficult or not economically feasible, the near term best solution for software developers is to attempt to force the countries involved to enforce their anti-piracy laws. At the same time, the belief that piracy is something to be frowned upon should be nurtured in such a manner that it becomes an unspoken convention among the multiple guanxi networks. This dual approach will likely have a greater on against piracy, as the act of obtaining pirate software is transactional in nature, and is seen as a "relationship" that falls outside of normative guanxi wangs.
From this analysis it may be possible to measure to what extent the software piracy rate in Singapore, Taiwan, and Hong Kong could be decreased by more vigorous enforcement. Enforcement here is not just enforcing the laws, but as Friedman (1975) indicated it is also the changing of what is seen as normative behavior within the society and ones attitude towards that normative behavior. It is probable that the reduction in rates there are comparable to rates that would be obtained in other countries if the US attempted to use its influence to increase enforcement.
Using the regression with the adjusted data (Equation 2) without Singapore, Taiwan and Hong Kong to predict the piracy rates for the given level of collectivism/shame. Figures of 88% are obtained for Hong Kong, 91.5% for Singapore and 93.5% for Taiwan were obtained. The percentage differences of the actual and predicted rate are 26% for Hong Kong, 33.5% for Singapore and 21.5% for Taiwan. The Projected Piracy Percentage (PPP) reduction for Singapore would be expected to be the highest as it has the most significant intellectual property industry and it has the greatest exposure to international trade. Singapore, since 1995, has made a concerted effort to stop piracy by engaging in a public awareness campaign.
This campaign has resulted in a year 2000 rate of 50% (decrease of 8%), (Business Software Alliance. 2001) Hong Kong has a large number of foreigners and foreign corporations and as such its PPP may be slightly higher than average. Simply averaging the PPP reductions from these countries yields 27%. Considering the reasons above and that these three are also best case scenarios, the best case change in PPP for other countries should be approximately in the 20-25% range, should governments push to develop their intellectual property industry, enforce anti-piracy laws and work with local organizations to produce an environment that considers piracy shameful.
It is unreasonable to presume that software piracy can be eliminated. However, a reduction of 20-25% could be achieved, resulting in $2-3 billion savings per year of the estimated $11.75 billion per year (Business Software Alliance, 2001) loss. This reduction in piracy is significant but not as high as the software publishers would prefer. Countries that are successful in reducing piracy rates could be used to shame other countries. Even if the projected piracy rate reduction could be achieved there would still be approximately $9 billion per year in lost revenue (Buiness Software Alliance, 2001). In the long run, a technological solution is needed to facilitate broad based anti-piracy efforts in order to have a sizable, and sustainable impact on piracy.
While this discussion is somewhat simplistic as there certainly is variation in individualism within a country (likely across social class), it does show a possible model with some encouraging numbers. Likely, both guilt and shame strategies should be applied in any effective strategy to reduce piracy, and even those with high individualism characteristics will likely be influenced by shame control, given the collectivistic nature of their society.
This paper has presented evidence that national software piracy rates vary based on collectivism (shame inferred). Some discussion of trade and economic dependence on the US (the largest software producer) in three countries was indicated to have a possible effect on a drop in piracy rates. America likely influences the level of enforcement in countries with a higher trade dependency, which in turn would reduce piracy rates.
These same cultural imperatives apparently affect other parts of a countrys culture, and can be applied to other collectivistic (and often developing) countries. In international business it must be remembered that the ways of doing business in one culture are different from that in another. Different cultures mandate different business practices, and different incentives (levers) should be used to tackle similar issues.
Hall (1960) and others have lamented that the US has cultural myopia. Americans assume that, because the US is the largest economic culture in the world, the way business is done in the US is the best way. Learning the business practices of a culture allows one to do business in that culture. Many other countries are making inroads into international business because they take the time to understand the cultural imperatives of that nation or region. The Japanese took the time to understand the US way of business and now are a powerhouse in the US. However, the US has not taken the same initiative to understand Japan and has very little presence in that country.
Shame and guilt can be measured in every society. There is little likelihood that those societies that use either shame or guilt as a form of social control will move very far towards being high in the other form of social control in anything short of centuries. The study of these forms of social control and the motivation to comply with these normative behaviors has been shown to be effective in many studies that followed the lead of Fishbein and Ajzen (1975). Business people must look at ways to adapt to these differences in societies, and use both shame and guilt incentives (levers), based on the level of individualism/collectivism within a country, to effectively reduce piracy.
There has been little study of shame and relative levels of shame and guilt in societies. As the more collectivistic and shame-controlled societies develop from third world countries into modern international trading nations there must be an understanding of what drives their societies. China is making this move now. With 1.3 billion people and an annual economic growth that has averaged 15% for the past 10 years, China has become an economic powerhouse. Projections that the Chinese GDP will pass the US in 2017 are probably not unreasonable.
It is in the best interest of a country to protect its intellectual property in order to make advances economically. This implies a full range of activities to strengthen its information, capital and legal markets in order to capitalize on its entrepreneurs and innovators. There is great need to reward these individuals lest it curb their desire to invent, innovate and take risk. There is also a need to retain such talent within the country so that the country can reap in the benefits that these individuals may bring about. In order to do this there is need to change the publics perception of intellectual property and to help them understand the concept of risk-reward, in order to facilitate the development of a countrys intellectual property.
This change should be initiated by the local government, with coordination and cooperation from the U.S. Local government initiative is essential as it provides a sense of change from within the group, and hence will more likely be seen as a desirable and acceptable change, rather than one that is imposed by an external party. Instead of using arguments based on guilt, propaganda that enhances the shame of the act might be used to change cultural perceptions. Some appeal that portrays software piracy as detrimental to the collective society would work much better than a guilt appeal.
This line of research is wide open for investigation. Hofstede (1984, 1991) did a monumental study of different cultures. His data is now somewhat dated, but the effort involved means that it will not likely be replicated soon. It might be useful to see how the people of these countries that do not work for IBM, a multi-national corporation, differ from IBM employees. However, the results will probably not be significantly different as the IBM employees did grow up in those cultures and must operate in them. To do so they need to have a reasonably good connection with the cultures.
There may be other dimensions of culture that affect piracy. Certainly the rates of enforcement will affect piracy rates but data for levels of enforcement are not readily available for most countries. Many countries find that type of data too sensitive to be allowed into the public domain. Possibly a surrogate variable may be found here. It is possible that trade dependence on the US would be a weak predictor of the level of piracy enforcement the US diplomatic service could convince countries to impose.
Wealth may be a predictor of lower piracy rates because those with more money can afford to pay for the software they use. There may be feelings of inequity between different cultures leading those in an underdeveloped country to think they can pirate from developed countries to help the their country grow. There is likely to be a normative aspect in that those who see more copying are less likely to consider it wrong. These and several other possibilities are topics for future studies. There may also be some ability to predict other kinds of intellectual property theft using individualism. It may also be interesting to see the interactions between wealth, individualism/collectivism and piracy, as collectivistic countries tend to be more family-oriented with focus on the extended family, with general observations showing that Agriculture based economies tend to have larger families and lower per capita income.
Another area open for study is the investigation of shame cultures and how shame affects other business aspects. Most studies of shame have been undertaken either for psychoanalytic reasons or as studies of cultural differences. These researchers could find no study of business differences due to shame. The study of shame is likely to have considerable implications for many areas of business outside intellectual property and software piracy. In the US, charities generally use guilt appeals to raise funds. These will simply not work as well in a shame culture. Many products use a guilt appeal in their advertising. Examples are the keeping-up-with-your-neighbors type of ads or those touting educational products for children so that they will not "fall behind." In order to do business in any country, one must understand their cultural imperatives.
Finally, this is a preliminary investigation of how shame and guilt impact laws and the reasons why laws are sometimes ignored. Without good measures of shame, only preliminary figures may be obtained. As Robert Burns (translated into modern English) so eloquently put it many years ago; "Oh what some power, the gift to give us, to see ourselves as others see us! It would from many a blunder free us, and a foolish notion."
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