The Co-evolution Process of Technological Innovation: An Empirical Study of Mobile Phone Vendors and Telecommunication Service Operators in Japan

Abstract

While the development of information and communication technology (ICT) is usually measured by quantitative indices such as penetration rate, the qualities and characteristics of all countries can be different even if their achievements seem to be similar judging from quantitative standards. The mobile phone market represents the kind of market that should be analyzed from both quantitative and qualitative perspectives.

In this research, the empirical analysis focuses on the mobile phone market in Japan, which has achieved a high internet access rate through mobile phone as well as a significant array of applications. The first analysis, by classifying the existing handset models, shows that high-end handsets occupy the largest share in Japan's market, and the ratio is much higher than the worldwide average level. Further analysis reveals that most domestic handset vendors offer order-made models to maintain high quality and to meet the specific demands of each telecommunication service operators. As a result, global handset vendors find it difficult to enter the co-evolution cycle by simply offering global models to the service operators. Moreover, although the tight tie-up between service operators and handset vendors may be criticized as a conservative or closed relationship, consumers' strong consciousness toward high quality and innovative functions creates a complex demand driven marketplace. In this environment, service operators and handset vendors' commitment to quality enables the virtuous cycle of technological innovation to “roll” along smoothly.