The Chinese Music Industry: Which Strings do Intellectual Property Rights and Social Norms Play?

Abstract: This paper examines the impact of formal and informal institutions on the Chinese music industry. Standard utilitarian theory states that property rights are essential for innovation and this research tests the effects that intellectual property rights has on the Chinese music industry by using panel data on the provincial level for the years 1997 to 2011. In order to further investigate the Chinese music industry, social norms are studied by the means of a survey conducted in China as well as in Sweden in order to test for cross-cultural differences. The results show that intellectual property rights protection has a positive effect on music production in China. However, this effect is only significant and positive for coastal regions, and not for non-coastal regions. On the microeconomic level, the results further prove that consumer behavior is affected by perceptions of illegality. Furthermore, the results show that Chinese consumers are more accepting of music piracy and have a lower will to pay for music compared to Swedish. Hence, this study demonstrates the importance of social norms and intellectual property rights when it comes to music production and consumption.