Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 267: Velocity shifts in the creative economy: incumbent-entrant dynamics in the emergence of Japanese social games

Mirko Ernkvist ()
Additional contact information
Mirko Ernkvist: The Ratio Institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: The Japanese innovation system has been characterized as more prone to disruptive innovation by incumbent firms rather than de novo entrepreneurial entrants (H. W. Chesbrough, 1999). We draw upon the notion that creative industry competition in a high velocity environment is fundamentally different from an environment of more moderate velocity, exploring the notion that velocity shifts following disruptive innovation could be a key underlying mechanism for transformation by entrants in institutional settings that favor incumbents. A higher velocity environment provides a cognitive barrier to incumbent firms’ R&D by making established design heuristics obsolete, introducing novel market analytic methods and shifting established industry logics towards speed, constant iteration and services. The velocity shift in the transition from video games to social games required new specialized assets and new ways of accessing customer preferences though real-time data mining techniques that also challenged engrained cognitive frames of how game design should be pursued. Unlike previous disruptive innovation in the game industry, social games enabled new entrants to rapidly become market leaders. The case points towards a more nuanced view of the influence of disruptive innovation during velocity shifts in creative industries. For studies of technological entrepreneurship, this implies that the velocity shifts following disruptive innovation could provide a previously overlooked important mechanism in understanding how entrants have been able to challenge incumbent firms in Japan.

Keywords: disruptive innovation; social games; velocity shifts; industry emergence

JEL-codes: L26; L82; M12; N85; O32

36 pages, December 31, 2015

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