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Peltoniemi.Pdf (3.980Mt) Tampereen teknillinen yliopisto. Julkaisu 805 Tampere University of Technology. Publication 805 Mirva Peltoniemi Industry Life-Cycle Theory in the Cultural Domain: Dynamics of the Games Industry Thesis for the degree of Doctor of Technology to be presented with due permission for public examination and criticism in Festia Building, Auditorium Pieni Sali 1, at Tampere University of Technology, on the 15th of May 2009, at 12 noon. Tampereen teknillinen yliopisto - Tampere University of Technology Tampere 2009 ISBN 978-952-15-2148-5 (printed) ISBN 978-952-15-2180-5 (PDF) ISSN 1459-2045 Abstract Peltoniemi, Mirva. 2009. ―Industry life-cycle theory in the cultural domain: Dynamics of the games industry‖. Department of Business Information management and Logistics, Tampere University of Technology, Tampere, Finland. Keywords: Games industry, industry life-cycle, cultural industries, creative industries Industry life-cycle theory is interested in changes in key industry variables, including entry and exit rates, firm numbers, price, performance and concentration, and in innovative activity as the industry ages. To date, industry life-cycle studies have concentrated on traditional manufacturing industries that produce utilitarian goods. The present study investigates the dynamics of the games industry which is a prime example of a non-manufacturing and non-utilitarian industry. As prior research on the games industry is scarce, the cultural industries literature is reviewed to shed light on the conformities and deviations that can be expected to be found between the propositions of the industry life-cycle theory and the empirical analysis on the games industry. The specificities of cultural industries are discussed in terms of economic characteristics, management challenges and industry dynamics. The empirical study comprises two analytical steps. The first one investigates the evolution of the games industry with standard industry life-cycle tools. In the second one a qualitative systems dynamics model on the micromechanisms of the game development sector is built to explain the observations made in the first step. The key finding of the study is that the dynamics of the games industry differ from the propositions of the industry life-cycle theory in two respects. Firstly, innovative activity has not levelled off in either hardware or software. Secondly, game development has remained an unconcentrated industry. The innovative activity is explained by the constant need for novelty common to all cultural industries and it manifests in the key role that the production of original ideas has in game development firms. The low level of concentration is explained by lesser economies of scale caused by increasing management challenges and the increasing risk of bankruptcy with increase in firm size. The study contributes (1) by applying the industry life-cycle theory to the cultural domain, (2) by combining the phenomena listed in the cultural industries literature and analysing their effect on industry dynamics, (3) by examining the evolution of the games industry in both hardware and software sectors and (4) by highlighting the micromechanisms that produce industry dynamics. The study also has implications for policy-making and management practice. These relate to different forms of public funding, education, outsourcing and the key role of original IP. i ii Tiivistelmä Peltoniemi, Mirva. 2009. ―Industry life-cycle theory in the cultural domain: Dynamics of the games industry‖. Tiedonhallinnan ja logistiikan laitos, Tampereen teknillinen yliopisto. Asiasanat: Peliala, toimialan elinkaari, kulttuurialat, luovat alat Toimialan elinkaaren tutkimus keskittyy selvittämään toimialan iän karttuessa tapahtuvia muutoksia. Niitä seurataan keskeisissä toimialamuuttujissa, joihin kuuluvat alalle tulevien ja alalta poistuvien yritysten lukumäärät, alalla toimivien yritysten lukumäärä, tuotteen hinta, suorituskyky ja toimialan keskittyminen. Lisäksi mielenkiinnon kohteena ovat muutokset innovaatiotoiminnassa. Toistaiseksi ko. tutkimukset ovat keskittyneet valmistavaan teollisuuteen, jonka tuotteet ovat utilitaristisia. Tämä tutkimus tarkastelee pelialaa, joka on erinomainen esimerkki toimialasta, jonka tuotteilla ei ole utilitaristista tarkoitusta ja jossa fyysinen valmistus ei ole keskeisessä roolissa. Pelialan tutkimus on toistaiseksi ollut vähäistä, joten työssä on hyödynnetty kulttuurialoja koskevaa kirjallisuutta. Tämän kirjallisuuden pohjalta on arvioitu, minkälaisia yhdenmukaisuuksia ja poikkeamia on odotettavissa toimialan elinkaaren teorian ja empiirisen materiaalin välillä. Kulttuurialoja käsittelevää kirjallisuutta on käyty läpi taloustieteellisten erityispiirteiden, liikkeenjohdon haasteiden ja toimialadynamiikan osalta. Tutkimuksen empiirinen osa koostuu kahdesta analyyttisestä askeleesta. Ensimmäisessä askeleessa tarkastellaan pelialan evoluutiota toimialan elinkaaren teorian perustyökalujen avulla. Toisessa askeleessa rakennetaan laadullinen systeemimalli pelikehitysalan mikromekanismeista. Sen kautta pyritään selittämään ensimmäisessä askeleessa tehtyjä havaintoja. Tutkimuksen päälöydös on, että pelialan dynamiikka eroaa toimialan elinkaaren teorian propositioista kahdella merkittävällä tavalla. Innovaatiotiheys on pysynyt korkeana sekä laitteisto- että ohjelmistopuolella. Toiseksi, pelikehityssektori on säilyttänyt hajautuneen rakenteensa. Innovaatiotiheys selittyy sillä, että kulttuurituotteille tyypillinen jatkuva uutuuksien tarve tuo omaleimaisuuden keskeiseksi pelikehitysyrityksen tavoitteeksi. Toimialan hajautunut rakenne puolestaan selittyy sillä, että pelikehityksessä skaalaedut ovat vähäisiä johtuen johtamisen haasteiden ja konkurssiherkkyyden kasvamisesta yrityksen kasvun mukana. Tutkimus kontribuoi (1) soveltamalla toimialan elinkaaren teoriaa kulttuurialaan, (2) kokoamalla kulttuurialojen koskevan kirjallisuuden ilmiöt ja analysoimalla niiden vaikusta toimialadynamiikkaan, (3) tarkastelemalla pelialan evoluutiota sekä laitteiden että ohjelmistojen osalta ja (4) nostamalla esiin mikromekanismeja, jotka tuottavat toimialatason dynamiikan. Tutkimuksella on myös implikaatioita koskien elinkeinopolitiikkaa ja yritystoimintaa. Ne liittyvät julkisen rahoituksen muotoihin, koulutukseen, alihankintaan sekä immateriaaliomaisuuden tärkeään rooliin. iii Acknowledgements Finishing the thesis marks the end of a particular kind of period in my life. Even though it has been stressful and demanding I have still thoroughly enjoyed it all. The process has allowed me to concentrate on learning to do research, to immerse myself in the literature, to contemplate various methodological options and to ponder on what the data say. Several people have helped me along the way. I would like to thank Dr. Marjatta Maula who first hired me in 2004 to work on her research project. During the following years Marjatta spared no effort to ensure that my fellow students and I had the prerequisites for working in terms of funding and guidance. Marjatta always encouraged me to think big. I would also like to thank Dr. Antti Lönnqvist, who agreed to take on the task after Marjatta‘s retirement. Antti managed to keep faith at all times, which helped me to do the same. I would like to express my warmest gratitude to the reviewers of the thesis, Professor Antti Ainamo (University of Turku) and Professor Juha-Antti Lamberg (Helsinki University of Technology). Their comments and criticism helped me greatly in developing my work into what it is today. Moreover, their enthusiasm about the research topic managed to convince me that it is one of importance. The funding for my research has come from several sources. The most important of these have been the Graduate School of Tampere University of Technology and the Finnish Funding Agency for Technology and Innovation. These funding bodies have made it possible for me to devote my time to research. In addition, I have received grants from the HPY Research Foundation, the Ella and Georg Ehrnrooth Foundation, the Marcus Wallenberg Economic Research Foundation and the Tampere Foundation for Business Education. These grants have played a significant role in buffering the risks inherent in temporary research positions and have also made it possible for me to attend conferences and summer schools. Furthermore, the British Council and the Foundation for Economic Education enabled my five-month stay at the University of Manchester in 2007. I would like to thank all the funding bodies for their generous support. The choice of semi-structured interviews as one of the data collection methods means that the cooperation of the interviewees was critical in this study. I would like to thank all the interviewees for their time and interest. The Institute of Business Information Management and Logistics at Tampere University of Technology offered me a pleasant place to work and a set of colleagues with whom working has been most enjoyable. A special thank you goes to Elisa Vuori, Harri Laihonen and Matti Koivuaho. I have shared an office with Elisa for five years now and our discussions have played a major role in shaping my research. We have had so much fun and going to the office has always been something to look forward to. Harri and Matti have also been keen on commenting my work and iv offering peer support. During my stay in Manchester I made some wonderful friends. Dr. Chiara Marzocchi and Dr. Davide Consoli have ever since been great sources of encouragement and advice. Finally, I would like to thank my family and friends
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