Northumbria Research Link Citation: Nucciarelly, Alberto, Li, Feng, Fernandes, Kiran, Goumagias, Nikolaos, Cabras, Ignazio, Devlin, Sam, Kudenko, Daniel and Cowling, Peter (2017) From value chains to technological platforms: The effects of crowdfunding in the digital game industry. Journal of Business Research, 78. pp. 341-352. ISSN 0148-2963 Published by: Elsevier URL: https://doi.org/10.1016/j.jbusres.2016.12.030 <https://doi.org/10.1016/j.jbusres.2016.12.030> This version was downloaded from Northumbria Research Link: http://nrl.northumbria.ac.uk/id/eprint/29993/ Northumbria University has developed Northumbria Research Link (NRL) to enable users to access the University’s research output. Copyright © and moral rights for items on NRL are retained by the individual author(s) and/or other copyright owners. 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JBR-09384; No of Pages 12 Journal of Business Research xxx (2017) xxx–xxx Contents lists available at ScienceDirect Journal of Business Research From value chains to technological platforms: The effects of crowdfunding in the digital game industry Alberto Nucciarelli a,b,⁎, Feng Li b, Kiran J. Fernandes c, Nikolaos Goumagias d, Ignazio Cabras d, Sam Devlin e, Daniel Kudenko f, Peter Cowling f a Department of Economics and Management, University of Trento, via Inama 5, 38122 Trento, Italy b Faculty of Management, Cass Business School, City, University of London, 106 Bunhill Row, EC1Y 8TZ London, UK c Department of Management, Durham University Business School, Mill Hill Lane, Durham DH1 3LB, UK d Department of Business and Law, Newcastle Business School, Northumbria University, Ellison Place 2, Newcastle-upon-Tyne NE1 8ST, UK e York Centre for Complex Systems Analysis (YCSSA), University of York, York Centre for Complex Systems Analysis, Ron Cooke Hub, Deramore Lane, York YO10 5G, UK f Department of Computer Science, University of York, Deramore Lane, York YO10 5GH, UK article info abstract Article history: This study contributes to understanding the effects of crowdfunding on the value creation process in the digital Received 1 August 2015 game industry. Specifically, it integrates the value chain logic with the platform logic to examine collaborative Received in revised form 1 September 2016 value creation enabled by opening up the business models of game developers to the crowd. Through a multiple Accepted 1 December 2016 case design this research shows that the benefit of using crowdfunding goes well beyond fundraising. As an im- Available online xxxx plementation of open innovation, crowdfunding unifies the channels that bring capital, technology and market fi Keywords: knowledge from the crowd into the game. This nding leads to the exploration of a new complex system of in- Reward-based crowdfunding teractions between game developers and value chain stakeholders, and invokes the analysis of crowdfunding Digital game industry as a form of technological platform to identify and analyze new types of collaboration and competition. This re- Value chain search limits its findings to the effects of reward-based crowdfunding. Other forms of crowdfunding require fur- User communities ther investigations. The paper also aims to help practitioners understand how crowdfunding is transforming the Technological platforms game industry. © 2017 Elsevier Inc. All rights reserved. 1. Introduction other perks (see Belleflamme, Lambert, & Schwienbacher, 2014; Mollick, 2014; Frydrych, Bock, Kinder, & Koeck, 2014; Zheng, Li, Wu, & Crowdfunding has opened up a new channel for organizations and Xu, 2014; Thuerridl & Kamleitner, 2016). This paper focuses on re- individuals to receive funding from a pool of individuals (i.e. the ward-based crowdfunding, which has seen over 290,000 projects crowd) for different types of projects. Previous studies have identified being funded on Kickstarter.com alone over the last three years four types of crowdfunding that are based on charity, equity, lending (2013–2016). Some industries in particular show an intensive use of or reward (Wilson & Testoni, 2014; Kuppuswamy & Bayus, 2015; crowdfunding (i.e. games, music, and movie industries) due to difficul- Meer, 2014; Moritz & Block, 2014; Dushnitsky, Guerini, Piva, & ties not only in persuading traditional funders (e.g. venture capitals, Rossi-Lamastra, 2016). Charity-based crowdfunding is mainly used to banks) on account of their risk aversion but also in establishing a direct support philanthropic and charitable causes (e.g. startsomegood.com), connection with the market before the creation of the product. while equity-based crowdfunding (e.g. crowdfunder.com, crowdbnk. The digital game industry is a test-bed for crowdfunding because it com) and lending-based crowdfunding (e.g. fundincircle.com)helpen- provides an ideal domain for exploring emerging trends. This is mostly trepreneurs and businesses share future financial returns with those due to the digital nature of its products, the proliferation of independent who support them. Reward-based crowdfunding allows fund-seekers studios and the consequent necessity of establishing a link with the end to seek financial support from the crowd in exchange for products or market during early phases of game development. By April 2016, game developers launched over 23,000 Kickstarter-based projects for ⁎ Corresponding author at: Department of Economics and Management, University of US$480+ million (20% of total pledged funds on the platform), includ- Trento, via Inama 5, 38122 Trento, Italy. ing 63 of the 166 US$1 million+ projects. By engaging in crowdfunding E-mail addresses: [email protected], [email protected] campaigns, independent game developers have de facto opened their (A. Nucciarelli), [email protected] (F. Li), [email protected] (K.J. Fernandes), business models to customers, leading to a new form of value creation [email protected] (N. Goumagias), [email protected] (I. Cabras), [email protected] (S. Devlin), [email protected] (D. Kudenko), (see on this also Wirtz, Schilke, & Ullrich, 2010; Zott & Amit, 2010; [email protected] (P. Cowling). Baldwin & von Hippel, 2011; Chesbrough, 2011; Abrahamson, Ryder, http://dx.doi.org/10.1016/j.jbusres.2016.12.030 0148-2963/© 2017 Elsevier Inc. All rights reserved. Please cite this article as: Nucciarelli, A., et al., From value chains to technological platforms: The effects of crowdfunding in the digital game industry, Journal of Business Research (2017), http://dx.doi.org/10.1016/j.jbusres.2016.12.030 2 A. Nucciarelli et al. / Journal of Business Research xxx (2017) xxx–xxx & Unterberg, 2013; Djelassi & Decoopman, 2013). This opening is only (Section 2). In line with Creswell (2012), the methodology section pre- formally aimed to secure funding for projects; it actually allows game sents the research design and research method in detail (Section 3). The developers to validate their ideas, engage with user communities, and analysis of the game industry and the six case studies (Section 4) ex- refine and pre-test games with end customers. As a consequence, open- plore the transformation at the value chain level and open up to the ing business models comes along with changes in the industry value role of reward-based crowdfunding as a technology-enabled platform chain because it has impact on a series of relationships between devel- orchestrated by game developers (Section 5). Concluding remarks fol- opers and other industry stakeholders (e.g. investors, publishers, low in Section 6. distributors). From a methodological point of view, the paper adopts a research strategy based on multiple-case design to understand the different as- 2. Literature review pects of changes in the industry value chain. Multiple-case design also helps observe crowdfunding as a growing phenomenon in the game in- 2.1. The evolution of the value chain as a mental model dustry and uncover previously unexplored and emerging trends (Eisenhardt, 1989; Eisenhardt & Graebner, 2007; Yin, 2013). Kaplan's (2011) review paper on research in cognition and strategy From a theoretical perspective, the analysis of cases has first re- refers to studies on cognition in organizations to provide an organiza- quired the adoption of the value chain mental model to interpret tional response to their environments and the need to focus on man- them from the perspective of an individual firm (see Kaplan, 2011; agers' actions. The analysis of managerial and organizational cognition Hadida & Paris, 2014; Huff, 1990; Porac & Thomas, 1990; Porac, and cognitive processes familiarizes managers with the development Thomas, & Baden-Fuller, 1989, 2011; Walsh, 1995; Hodgkinson,