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Disruptive Innovation and Internationalization Strategies: the Case of the Videogame Industry Par Shoma Patnaik

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Disruptive Innovation and Internationalization Strategies: the Case of the Videogame Industry Par Shoma Patnaik HEC MONTRÉAL Disruptive Innovation and Internationalization Strategies: The Case of the Videogame Industry par Shoma Patnaik Sciences de la gestion (Option International Business) Mémoire présenté en vue de l’obtention du grade de maîtrise ès sciences en gestion (M. Sc.) Décembre 2017 © Shoma Patnaik, 2017 Résumé Ce mémoire a pour objectif une analyse des deux tendances très pertinentes dans le milieu du commerce d'aujourd'hui – l'innovation de rupture et l'internationalisation. L'innovation de rupture (en anglais, « disruptive innovation ») est particulièrement devenue un mot à la mode. Cependant, cela n'est pas assez étudié dans la recherche académique, surtout dans le contexte des affaires internationales. De plus, la théorie de l'innovation de rupture est fréquemment incomprise et mal-appliquée. Ce mémoire vise donc à combler ces lacunes, non seulement en examinant en détail la théorie de l'innovation de rupture, ses antécédents théoriques et ses liens avec l'internationalisation, mais en outre, en situant l'étude dans l'industrie des jeux vidéo, il découvre de nouvelles tendances industrielles et pratiques en examinant le mouvement ascendant des jeux mobiles et jeux en lignes. Le mémoire commence par un dessein des liens entre l'innovation de rupture et l'internationalisation, sur le fondement que la recherche de nouveaux débouchés est un élément critique dans la théorie de l'innovation de rupture. En formulant des propositions tirées de la littérature académique, je postule que les entreprises « disruptives » auront une vitesse d'internationalisation plus élevée que celle des entreprises traditionnelles. De plus, elles auront plus de facilité à franchir l'obstacle de la distance entre des marchés et pénétreront dans des domaines inconnus et inexploités. Par le biais d'une analyse comparative de six entreprises – trois traditionnelles, trois disruptives – cette étude découvre que ces deux propositions sont soutenues, ainsi que des tendances additionnelles dans l'industrie des jeux vidéo – les marchés cibles pour les jeux vidéo changent et plus important encore, les entreprises traditionnelles acquièrent des compétences disruptives par le biais d'acquisitions internationales. Mots clés : innovation de rupture, internationalisation, jeux vidéo, affaires internationales, innovation Abstract This thesis aims to study two of the most relevant trends in business today – disruptive innovation and internationalization. Disruptive innovation in particular has become popular in the fields of innovation and entrepreneurship. However, it has not been as extensively studied as other topics in the academic literature, particularly in conjunction with internationalization and has been prone to being misunderstood and misused. This thesis aims to fill the gap in the literature by not only undertaking a detailed look at disruptive innovation theory, its antecedents and its links with internationalization but further by placing it in the context of the videogame industry, it provides practical and industrial insights by examining another rising trend – that of disruptive mobile and browser games. This study begins by drawing links between disruptive innovation and internationalization from the basis that the search for new markets is a crucial component of disruption. Drawing theoretical patterns from the literature, I postulate that disruptive firms will not have a higher speed of internationalization than mainstream firms, they will also be more likely to overcome market distance and venture into unfamiliar and untapped destinations. Applying a comparative analysis to six firms in the videogame industry – three mainstream and three disruptive – this study finds support for both propositions, as well as additional insights into patterns in the videogame industry - the target markets for videogames are changing and even more significantly, mainstream firms are acquiring disruptive ones through international acquisition. Keywords: disruptive innovation, internationalization, videogames, international business, innovation Table of Contents RÉSUMÉ .............................................................................................................................................. I ABSTRACT ....................................................................................................................................... II TABLE OF CONTENTS ................................................................................................................. III LIST OF FIGURES .......................................................................................................................... VI LIST OF TABLES ......................................................................................................................... VIII LIST OF ANNEXES ......................................................................................................................... IX LIST OF ABBREVIATIONS ........................................................................................................... X ACKNOWLEDGEMENTS ............................................................................................................. XI INTRODUCTION .............................................................................................................................. 1 DISRUPTIVE INNOVATION ................................................................................................................................ 1 INTERNATIONALIZATION .................................................................................................................................. 2 ACADEMIC AND PRACTICAL RELEVANCE ......................................................................................................... 4 METHODOLOGY ............................................................................................................................................... 5 LITERATURE REVIEW .................................................................................................................. 7 1.1 DISRUPTIVE INNOVATION .......................................................................................................................... 7 1.1.1 The Process of Disruptive Innovation ................................................................................................ 8 1.1.2 Defining Disruptive Innovation .......................................................................................................... 9 1.1.3 Theoretical Antecedents of Disruptive Innovation Theory ............................................................... 13 1.2 INTERNATIONALIZATION .......................................................................................................................... 18 1.2.1 Internationalization in the Age of Globalization .............................................................................. 19 1.3 DISRUPTIVE INNOVATION AND INTERNATIONALIZATION ........................................................................ 20 1.3.1 Rationale for Internationalization .................................................................................................... 21 1.3.2 The Internationalization Strategies of Disruptive Firms .................................................................. 24 THE VIDEOGAME INDUSTRY .................................................................................................... 31 2.1 EVOLUTION AND HISTORY OF VIDEOGAMES............................................................................................ 31 2.1.1 1800s – 1940s: The Birth of Computing ........................................................................................... 33 2.1.2 1940s – 1960s: The First Electronic Games .................................................................................... 33 2.1.3 1970s: The Birth of the Videogame Industry .................................................................................... 34 2.1.4 1980s: Boom, Bust and Boom Again ................................................................................................ 37 2.1.5 1990s: Maturation, Consolidation and the Dawn of Blockbuster Games ........................................ 39 2.1.6 2000s and Beyond: Disruption ......................................................................................................... 41 2.2 THE VIDEOGAME INDUSTRY STRUCTURE ................................................................................................ 44 2.2.1 Principal Actors ............................................................................................................................... 46 2.2.2 Business Model ................................................................................................................................. 51 2.2.3 THE EFFECTS OF DISRUPTION ............................................................................................................... 53 2.3 THE GLOBAL VIDEOGAME INDUSTRY ...................................................................................................... 57 2.3.1 Markets ............................................................................................................................................. 57 2.3.2 Internationalization vs Localization ................................................................................................. 60 METHODS .......................................................................................................................................
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