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User-led Innovation and the video game industry •

Yuko Aoyama Graduate School of Geography Clark University 950 Main Street Worcester, MA 01610-1477, USA Email: and Hiro Izushi Economics and Strategy Group Aston Business School Aston Triangle Birmingham B4 7ET, UK Email:

Submitted to IRP Conference London, May 22-23, 2008

Acknowledgement–This paper was partially funded by the Ridgefield Foundation. The authors thank Hamil Pearsall at Clark University for an excellent research assistantship.

User-led Innovation and the video game industry Abstract In spite of the recent acknowledgements of “open source development” type of user-led innovation, our understanding is still limited as to its applicability and benefit. Particularly,from the viewpoint of firms making consumer goods, it remains unclear whether they can take advantage of peer-to-peer interaction and collaboration among consumers in the Internet era. Through an analysis of the video game industry, this article highlights its potential and limitations. The current hype of user-led innovation entails the risk of the concept’s being over-applied in terms of itsapplicability across industries and assumption of benefits. We argue that user-led innovation emerged out of not only technology-specific environment, but also culturally-specific context of industries. Our analysis shows that user-led innovation in its applications is likely to be constrained by the cultural context among other obstacles, thereby limiting its usefulness to a set of industries withparticular characteristics. . Keywords: User-innovation, user communities, industry, video games. 1. Introduction

User-led innovation is arguably one of the notable outcomes among many innovations using the Internet. For some products, production process has become increasingly, and even at times, purely interactive. With the emergence of the Internet, a corporate entity is no longer necessaryfor product development but rather has become optional (von Hippel, 2001). Today, innovation, development, and consumption can be potentially organized entirely by the users. This caused some to argue that the barriers and the division of labor that existed between the producer and the consumer are breaking down (Hartley, 2004; Humphreys et al, 2005). Consumers are now the “last worker on theproduction line” (Leadbeater, 2000; Humphreys et al, 2005). Consumers can now escape its previous relative passivity, and instead can actively engage in customizing products to suit their demands. Such user-led innovation increasingly involves peer-to-peer interactions and communal efforts among users. As exemplified by Linux, the Internet offers the unparalleled opportunity to connect previouslydisconnected individuals around the world to engage in a common project. In many cases, what used to be the “provision” of digital products and contents is shifting to peer-to-peer “sharing”, in which information, knowledge, and digital products are co-developed, shared, and distributed freely. The open-source project is essentially a creation of a “regulated commons” (de Laat, 2005), in whichcommunal collaborative effort can take place with anyone from any part of the world who has access to the Internet. While the literature on user-led innovation is relatively new, the role of the user involvement in product development has been explored in the pre-Internet age. In business innovation literature, the role of the user has long been understood as an essential source of information inproduct development, by such pioneers as Lundvall (1988, 1992) and von Hippel (1976, 1977, 1989, 2001, 2005). Most research on the role of the user in the pre-Internet era focused

on the coordination between R&D and marketing within a firm (Neale and Corkindale, 1998). They typically took the shape of case studies, and ranged from resin development at General Electric (Gross, 1989), document...
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