Over a third of all software installed in 2006 on personal computers worldwide was obtained illegally, new research claimed today.

The fourth annual global PC software piracy study released today by the Business Software Alliance (BSA) suggests that piracy costs the global software industry nearly $40bn last year.

However, the research, conducted by IDC, conceded that "progress was seen" in a number of emerging markets.

This was most apparent in China, where the piracy rate has dropped 10 per cent in three years. Piracy in Russia fell seven per cent over the same period.

"A number of factors contribute to regional differences in piracy: the strength of intellectual property protection; the availability of pirated software; and cultural differences," said John Gantz, chief research officer at IDC.

"Reducing software piracy around the world will take much more work and investment, but those efforts will pay off in the form of stronger local IT industries that drive broader economic growth."

BSA president and chief executive Robert Holleyman added: ""The good news is that we are making progress, but we still have a lot of work to do to reduce unacceptable levels of piracy.

"These significant losses translate into negative impacts on IT industry employment, revenues, the financial resources available for future innovation and the development of new technologies."

Global losses increased in 2006 by more than $5bn (15 per cent) over the previous year. Of the 102 countries covered in this year's study, piracy rates dropped moderately in 62 countries, while increasing in 13.

China's piracy rate dropped four percentage points for the second consecutive year and has dropped 10 percentage points in the past three years, from 92 per cent in 2003 to 82 per cent in 2006, according to the BSA report.

By reducing China's piracy rate by 10 percentage points over three years, $864m in losses was saved.

"Considering the vast PC growth taking place in the Chinese IT market, this continued decline in China's software piracy rate is quite promising," said Holleyman.