Technological leapfrogging: Lessons from the U.S. video game console industry

California Management Review

Volumn 45, Issue 3, 2003, Pages 6-32

  Schilling, Melissa A ^a  

^a NONE

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[No Author keywords available]

Indexed keywords

EID: 0037835775     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.2307/41166174     Document Type: Review

References (57)

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2. J. Choi, "Network Externalities, Compatibility Choice, and Planned Obsolescence," The Journal of Industrial Economics, 42 (1994): 167-182; M. Katz and C. Shapiro, "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, 94 (1986): 822-841; M. Katz and C. Shapiro, "Product Introduction with Network Externalities," The Journal of Industrial Economics, 40/1 (1992): 55-83.
3. J. Choi, "Network Externalities, Compatibility Choice, and Planned Obsolescence," The Journal of Industrial Economics, 42 (1994): 167-182; M. Katz and C. Shapiro, "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, 94 (1986): 822-841; M. Katz and C. Shapiro, "Product Introduction with Network Externalities," The Journal of Industrial Economics, 40/1 (1992): 55-83.
4. Choi, op. cit.; Katz and Shapiro (1986, 1992), op. cit.; M. Thum, Network Externalities, Technological Progress, and the Competition of Market Contracts, International Journal of Industrial Organization, 12 (1994): 269-289.
5. Choi, op. cit.; Katz and Shapiro (1986, 1992), op. cit.; M. Thum, "Network Externalities, Technological Progress, and the Competition of Market Contracts," International Journal of Industrial Organization, 12 (1994): 269-289.
6. Choi, op. cit.; Katz and Shapiro (1986, 1992), op. cit.; M. Thum, "Network Externalities, Technological Progress, and the Competition of Market Contracts," International Journal of Industrial Organization, 12 (1994): 269-289.
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8. W.B. Arthur, "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," The Economic Journal, 99/394 (March 1989): 116-131; W.B. Arthur, Increasing Returns and Path Dependency in the Economy (Ann Arbor, MI: The University of Michigan Press, 1994); M. Schilling, "Technological Lock Out: An Integrative Model of the Economic and Strategic Factors Driving Technology Success and Failure," Academy of Management Review, 23 (1998): 267-284.
9. W.B. Arthur, "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," The Economic Journal, 99/394 (March 1989): 116-131; W.B. Arthur, Increasing Returns and Path Dependency in the Economy (Ann Arbor, MI: The University of Michigan Press, 1994); M. Schilling, "Technological Lock Out: An Integrative Model of the Economic and Strategic Factors Driving Technology Success and Failure," Academy of Management Review, 23 (1998): 267-284.
10. R.K. Chandy and G. Tellis, "The Incumbent's Curse? Incumbency, Size, and Radical Product Innovation,' Journal of Marketing, 64/3 (2000): 1-18; Sheremata, "The Impact of Network Effects on Strategies of Innovation," panel presentation at the 1997 Strategic Management Conference, Berlin, 1999.
11. R.K. Chandy and G. Tellis, "The Incumbent's Curse? Incumbency, Size, and Radical Product Innovation,' Journal of Marketing, 64/3 (2000): 1-18; Sheremata, "The Impact of Network Effects on Strategies of Innovation," panel presentation at the 1997 Strategic Management Conference, Berlin, 1999.
12. K. Polsson, Chronology of Events in the History of Microcomputers, published on the World Wide Web, 1997, 〈www.islandnet.com/~kpolsson/comphist/〉.
13. J. Kittner, M.A. Schilling, and S. Karl, "Microsoft's Xbox," Boston University Teaching Case, 2001.
14. Polsson, op. cit.
15. S. Cohen, Zap! The Rise and Fall of ATARI (New York, NY: McGraw Hill, 1984).
16. Polsson, op. cit.
17. D. Sheff, Game Over: How Nintendo Zapped an American Industry, Captured Your Dollars and Enslaved Your Children (New York, NY: Random House, 1993).
18. Kinner, Schilling and Karl, op. cit.
19. Dyan Machan, "Cheap Didn't Sell," Forbes, August 3, 1992, pp. 52-55.
20. A. Brandenberger, "Power Play (A): Nintendo in 8-Bit Video Games," Harvard Business School Case #9-795-167, 1995a.
21. A. Brandenberger, "Power Play (B): Sega in 16-Bit Video Games," Harvard Business School Case #9-795-103, 1995b.
22. J. Hadju, "Rating the Hot Boxes," Fortune, 128/16 (1993): 112-113.
23. N. Turner, "For Giants of Video Games It's an All-New Competition," Investor's Business Daily, January 24, 1996, p. A6.
24. J. Trachtenberg, "Short Circuit: How Philips Flubbed its U.S. Introduction of Electronic Product," Wall Street Journal, June 28, 1996, p. A1.
25. It is interesting to note that Atari's 1993 introduction of the 64-bit Jaguar with performance comparable to the other 32-bit systems is probably a significant reason for the blurring of the distinction between 32-bit and 64-bit systems. It may thus have contributed to the erosion of any perceived technological advantage Nintendo's 64-bit system had over the 32-bit systems.
26. Y.D. Sinakin, "Players Take Bold Step to Keep Up with New Rules," Electronic Buyers' News, February 19, 1996, p. 50.
27. The electronics and toy supply chains share some notable similarities. Both require fast speed to market, are characterized by short lifecycles and quickly eroding margins, and demonstrate high rates of cannibalization. M.E. Johnson, "Learning from Toys: Lessons in Managing Supply Chain Risk from the Toy Industry," California Management Review, 43/3 (Spring 2001): 106-124.
28. "Sony Interactive Gains Seasoned Toy Exec," Interactive Daily, October 24, 1995, p. 1.
29. P. Hisey, "Saturn Lands First at Toys "R" Us," Discount Store News, 34/11 (1995): 6-8.
30. T. Lefton, "Looking for a Sonic Boom," Brandweek, 39/9 (1998): 26-30.
31. Kittner, Schilling, and Karl, op. cit.
32. M.A. Schilling, R. Chiu, and C. Chou, "Sony Playstation2: Just Another Competitor?" in M. Hitt, D. Ireland, and B. Hoskisson, Strategic Management: Competitiveness and Globalization (St. Paul, MN: West Publishing, 2001).
33. Kittner, Schilling, and Karl, op. cit.
34. D. Becker and J. Wilcox, "Will Xbox Drain Microsoft?" CNET News.com, 2001; L.P. Norton, "Toy Soldiers," Barrons, 81/20 (2001): 25-30; S.H. Wildstrom, "Xbox: It's All About the Games," Business Week, December 24, 2001, p. 22.
35. D. Becker and J. Wilcox, "Will Xbox Drain Microsoft?" CNET News.com, 2001; L.P. Norton, "Toy Soldiers," Barrons, 81/20 (2001): 25-30; S.H. Wildstrom, "Xbox: It's All About the Games," Business Week, December 24, 2001, p. 22.
36. D. Becker and J. Wilcox, "Will Xbox Drain Microsoft?" CNET News.com, 2001; L.P. Norton, "Toy Soldiers," Barrons, 81/20 (2001): 25-30; S.H. Wildstrom, "Xbox: It's All About the Games," Business Week, December 24, 2001, p. 22.
37. T. Elkin, "Gearing Up for Xbox Launch," Advertising Age, 71/48 (2000): 16.
38. "Class of the Titans," Accountancy, December 27, 2001, p. 30.
39. D. Frankel, "Video Game Business Boffo on Big Launches," Video Business, December 31, 2001, p. 38.
40. "Class of the Titans," Accountancy, December 27, 2001, p. 30.
41. It is worth noting that all of the game consoles were outsold by Nintendo's GameBoy Advance handheld game machine over the Christmas 2001 selling season. Its price point and small size made it a popular choice for gift giving.
42. A. Pham, "Nintendo's First-Half Profit Drops by 45%," The Los Angeles Times, November 22, 2002, p. C3.
43. M. Snider, "'Vice City' Shakes Up Video Game Industry," USA Today, November 18, 2002, p. D03.
44. Sheremata, op. cit.
45. C.W.L. Hill, "Establishing a Standard: Competitive Strategy and Technological Standards in Winner-Take-All Industries," Academy of Management Executive, 11/2 (1997): 7-26.
46. Hill, op. cit.; Schilling, op. cit.
47. Hill, op. cit.; Schilling, op. cit.
48. D. Machan, "Great Job - You're Fired," Forbes, 158/7 (1996): 145-147.
49. There are risks, however, of creating demand for products that are not yet available. A firm that pre-advertises its next generation of products may find that it prematurely dampens sales of its existing products as customers hold off purchases in anticipation of the next generation. C. Billington, H. Lee, and C. Tang, "Successful Strategies for Product Rollovers," Sloan Management Review, 39/3 (1998): 23-30. Furthermore, advertising products that do not yet exist can create the impression of shortages, which can spur customers to inflate their expected purchases. Volatility and uncertainty in demand is amplified as it travels up the supply chain, resulting in a bullwhip effect that can cause severe inventory and cash flow problems for a producer. H.L. Lee, V. Padmanabhan, and S. Whang, "The Bullwhip Effect in Supply Chains," Sloan Management Review, 38/3 (1997): 93-102.
50. There are risks, however, of creating demand for products that are not yet available. A firm that pre-advertises its next generation of products may find that it prematurely dampens sales of its existing products as customers hold off purchases in anticipation of the next generation. C. Billington, H. Lee, and C. Tang, "Successful Strategies for Product Rollovers," Sloan Management Review, 39/3 (1998): 23-30. Furthermore, advertising products that do not yet exist can create the impression of shortages, which can spur customers to inflate their expected purchases. Volatility and uncertainty in demand is amplified as it travels up the supply chain, resulting in a bullwhip effect that can cause severe inventory and cash flow problems for a producer. H.L. Lee, V. Padmanabhan, and S. Whang, "The Bullwhip Effect in Supply Chains," Sloan Management Review, 38/3 (1997): 93-102.
51. A. Brandenberger, "Power Play (C): 3DO in 32-Bit Video Games," Harvard Business School Case #9-795-104, 1995c.
52. Brandenberger (1995b), op. cit.
53. M.E. McGann, "Crossing Swords," Dealerscope Consumer Electronics Marketplace, 37/10 (1995): 63-65.
54. It is interesting to note that Philips should have also benefited from such reputation effects; however, its product was considerably more expensive and not targeted directly at the games market. Philips also did not have the extensive relationships with software developers and other content providers that Sony had.
55. P. Tjahyadikarta and M.A. Schilling, "Palm Economy," in M. Hitt, D. Ireland, and B. Hoskisson, Strategic Management: Competitiveness and Globalization (St. Paul, MN: West Publishing, 2001).
56. J. Palacio, M.A. Schilling, and H. Shiotani, "Shrinking the Standard: Sony Corp. and the MiniDisc," in M. Hitt, D. Ireland, and B. Hoskisson, Strategic Management: Competitiveness and Globalization (St. Paul, MN: West Publishing, 2001 ).
57. Chandy and Tellis, op. cit.