Elsevier

Research Policy

Volume 32, Issue 3, March 2003, Pages 423-444
Research Policy

Hardware gimmick or cultural innovation? Technological, cultural, and social foundations of the Japanese video game industry

https://doi.org/10.1016/S0048-7333(02)00016-1Get rights and content

Abstract

This paper examines the role of creative resources in the emergence of the Japanese video game industry. We argue that creative resources nurtured by popular cartoons and animation sector, combined with technological knowledge accumulated in the consumer electronics industry, facilitated the emergence of successful video game industry in Japan. First we trace the development of the industry from its origin to the rise of platform developers and software publishers. Then, knowledge and creative foundations that influenced the developmental trajectory of this industry are analyzed, with links to consumer electronics and in regards to cartoons and animation industry.

Introduction

Although video game industry may not generally be regarded as a sector offering forms of “haut culture” or refined art, it has become a sizeable industry with pervasive influences on popular culture. The current worldwide market for video games is estimated to be at US$ 18 billion. In 1999 alone, 215 million copies of games were purchased in the US, which amount to two for every American household (IDSA, 2001). Despite its ubiquity and its significant influence upon youth culture, however, relatively little is known about the industry, and particularly, the role of creative resources in industry formation and competitive strength. Research on video games so far has emphasized the moral issues and psychological impacts (Loftus and Loftus, 1983, Greenfield, 1984, Kinder, 1991, US Congress, 1994). The industry’s developmental trajectory, which incorporated multiple aspects of emerging technologies in computers, multimedia and the Internet, represents a contemporary synergy of digital technologies, artistic creativity, and multimedia entertainment.

Broadly speaking, there is an increasing domination of US and English language-based exportable cultural products, under the influence of multinational firms of the US origin, in forms of Hollywood films, rap music, and in commodities such as Levi’s Strauss jeans, Coca-Cola, and Nike shoes, forcing other national players into a niche market (Llewelyn-Davies, 1996). Japan’s video games therefore represent an exception to this trend in the western world. Although the industry was first established by Atari, an American firm, most industry insiders today agree that without Japanese firms such as Nintendo and Sony Computer Entertainment (SCE), it would not have amounted to more than just a passing fad. In fact, after the famous video game industry crash of 1983, which virtually wiped all demand in the US, Nintendo played a significant role in re-establishing the industry as a profitable business. More recently, Sony, armed with significant reputation in consumer electronics, successfully combined hardware and software resources to dominate the global market with PlayStation and PlayStation 2. How did the Japanese video game industry manage to penetrate the global market?

The paper explores the aforementioned question by addressing widespread misconceptions that surround Japan’s video game industry. While we acknowledge numerous books that document industry trends available in the Japanese language, few scholarly studies exist that focus on the cross-sectoral use of creative resources and offer a systematic interpretation on the role of technical expertise developed in other industrial sectors.1 Our aim is to analyze the relatively neglected aspect of the industry through examining its distinctive historical, institutional and cultural foundations.

We argue creative foundations in cartoons and animation films, as well as cross-industry links to consumer electronics, have functioned as important foundations for this industry to emerge in Japan. We begin this paper by first offering the significance and misconceptions of video games as an industry (Section 2). We analyze how its evolutionary trajectory was influenced by interplays between hardware manufacturers and software publishers (Section 3). We will then shift our discussion to the skills foundations of the industry, based on historical and contemporary evidence for inter-industry sharing of labor pool and drawing from interviews of industry insiders (4 Cross-sectoral links and sharing of resources for video game development in Japan, 5 Sources of creativity in Japan’s software publishing: cartoons and animation films).

Section snippets

Video games as a creative industry: its significance and misconceptions

New technologies deeply influence art form of the period, as was recognized by Benjamin (1936) during the industrial revolution and was elaborated in his article, “The work of art in the age of mechanical reproduction”. Advanced information and communication technologies now offer a new frontier through digitization and simulation, opening up a possibility for new forms of art in cyberspace. Unlike cinema and televisions, which involve passive audience, video games emerged out of older

The birth of the video game industry and its early demise in the US

It is a well-known fact that the video game industry has its origin in the US in the form of arcade games. The first computer game, “Space War”, was developed by Steve Russell at MIT lab in 1961, using DEC’s new interactive mini-computer, PDP-10. Inspired by science fiction, the game featured two spaceships shooting beams to destroy each other. It quickly gained popularity at the MIT lab and was freely duplicated to specialized labs with computer equipment across the nation. The program was

Cross-sectoral links and sharing of resources for video game development in Japan

As the previous section showed, the evolution of the industry has been influenced by a variety of actors from broad sectoral backgrounds. The onset of the industry, which began with the application of computer programming for arcade games, was subsequently infused with technologies in consumer electronics to produce home-based video game consoles. Finally, the battle over platforms has been waged increasingly based on the access to hit game software. In Japan, the two major platform developers,

Sources of creativity in Japan’s software publishing: cartoons and animation films

Today, software publishers command a decisive power in Japan’s video game market. While the history of the industry is dominated by competing platforms, an increasing proportion of profits is being made in game software. Platform developers sell their consoles at a razor-thin margin and make a greater part of their profits from in-house software publishing or licensing fees from third-party software publishers. The ratio between hardware and software market in Japan shifted from 1 to 2.4 in

Conclusion

The developmental trajectory of the video games industry revealed a complex interplay between hardware and software technologies from its origin, and more recent trends represent a transition from hardware, engineering-driven to increasingly software-centered industry supported by artistic creativity drawn from cartoon and animation film industries. To signify this shift, the battle over platforms today to a large extent hinges upon the coordination with software publishers that provide hit

Acknowledgments

We would like to thank those who granted interviews for the research, as well as two anonymous reviewers for their constructive comments. Financial support of Clark University with Faculty Development Grant along with excellent research assistantship provided by Kathryn Michaud, Clark University are also gratefully acknowledged. An early version was presented at the Management of Creativity and Creative Industries Stream, Critical Management Studies Conference, Manchester School of Management,

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