Haefliger, Jäger and Von Krogh (2010)

Source Details

Haefliger, Jäger and Von Krogh (2010)
Title:	Under the radar: Industry entry by user entrepreneurs
Author(s):	Haefliger, Jäger, Von Krogh
Year:	2010
Citation:	Haefliger, S., Jäger, P., & Von Krogh, G. (2010). Under the radar: Industry entry by user entrepreneurs. Research policy, 39(9), 1198-1213.
Link(s):	Definitive , Open Access
Key Related Studies:	Shah and Tripsas (2007)
Discipline:
Linked by:

About the Data
Data Description:	Data was collected from seven firms to gain a representative view of the Machinima industry. The authors conducted 25 interviews and used other data from available literature to fact-check.
Data Type:	Primary data
Secondary Data Sources:	Review of Existing Academic and Industries Literature
Data Collection Methods:	Quantitative data/text mining Case Study Semi-Structured Interview Qualitative content/text mining
Data Analysis Methods:	Quantitative content analysis (e.g. text or data mining) Textual Content Analysis
Industry(ies):	Software publishing (including video games) Film and motion pictures
Country(ies):	United States Switzerland Germany United Kingdom Netherlands
Cross Country Study?:	Yes
Comparative Study?:	No
Literature review?:	No
Government or policy study?:	No
Time Period(s) of Collection:	2007
Funder(s):

Abstract

We inductively develop a model of the commercialization process for new products or services user entrepreneurs undertake when entering an industry while drawing on proprietary technology developed in another industry. Extending the growing field of user entrepreneurship, we identify a two-phase approach to industry entry by user entrepreneurs who start “under the radar” of incumbent firms, gain experience, attract a first potential customer base, and then, in a second phase, engage in commercialization. During this process, a community of fellow users is of major importance for the entrepreneur, serving as a knowledge pool for skills development and experimentation with different commercialization paths. We study a nascent group of firms founded by users of video games who became entrepreneurs on entering the animation industry by producing Machinima, a new film genre characterized by shooting film in video games. We explain how user entrepreneurs gain access to complementary assets (video games) for their new use (shooting film), how they deal with intellectual property issues when using other firms’ assets, and how user entrepreneurs combine domain knowledge about film production with their experience in video games and the art of Machinima. Our propositions hold implications for management and policy.

Main Results of the Study

- There is a potential relevance of assets for user entrepreneurs’ entry into commercial marketplaces, while there is also a nascent group of firms that contribute to developing a new genre in the industry they enter, which underscores the novelty of their products and the associated risks of IP infringement.

- Selective sharing may apply to different types of asset (game engine, artwork, toolkits, etc.), which in turn represent different trade-offs for the user entrepreneur in terms of gaining access to, or substituting for, the asset; however, commercialising with others’ assets in a new industry remains an understudied area.

- User innovation occurs in communities, where individual domain knowledge is brought to avoid technical problems, share solutions, promote work, and develop or improve technology.

- Entrepreneurs' domain knowledge relevant to commercialisation plays a key role in bringing innovations to industry as products.

Policy Implications as Stated By Author

- Two-stage entry (first under the radar of incumbent firms and then commercialisation) into the animation industry can be helpful in avoiding: i) apparent conflict over IP rights by first relying on informal copyright practices, and ii) large investments in established distribution channels by using the Internet.

- User innovation rests on the advantage provided by sticky knowledge and users’ local perception of their own and their community’s needs, while user entrepreneurs effectively leverage community knowledge for entry into new industries.

- Users diffuse technologies across industry boundaries depending on their assessment of the components of the technology, on their own costs of re-creating it, and on the outcome of the negotiations with the owners of the IP rights to the technology, which may in turn be a question of timing.

- While the user community of Machinimators was instrumental in diffusing knowledge about the application of video games to animation production, process and business knowledge (sequel and storyline development, distribution channels) were revealed to a far lesser extent, which is consistent with both the atomistic versus collective user entrepreneurship and the logic of selective revealing.

Coverage of Study

Coverage of Fundamental Issues

Issue	Included within Study
Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare
Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)?
Harmony of interest assumption between authors and publishers (creators and producers/investors)
Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption)
Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)

Coverage of Evidence Based Policies

Issue	Included within Study
Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right)
Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction)
Mass digitisation/orphan works (non-use; extended collective licensing)
Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability)
Fair remuneration (levies; copyright contracts)
Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Datasets

Sample size:	7
Level of aggregation:	Company
Period of material under study:	2007

Sample size:	25
Level of aggregation:	Individual
Period of material under study:	2007

Haefliger, S., Jäger, P., & Von Krogh, G. (2010). Under the radar: Industry entry by user entrepreneurs. Research policy, 39(9), 1198-1213. [1]

Abstract: We inductively develop a model of the commercialization process for new products or services user entrepreneurs undertake when entering an industry while drawing on proprietary technology developed in another industry. Extending the growing field of user entrepreneurship, we identify a two-phase approach to industry entry by user entrepreneurs who start “under the radar” of incumbent firms, gain experience, attract a first potential customer base, and then, in a second phase, engage in commercialization. During this process, a community of fellow users is of major importance for the entrepreneur, serving as a knowledge pool for skills development and experimentation with different commercialization paths. We study a nascent group of firms founded by users of video games who became entrepreneurs on entering the animation industry by producing Machinima, a new film genre characterized by shooting film in video games. We explain how user entrepreneurs gain access to complementary assets (video games) for their new use (shooting film), how they deal with intellectual property issues when using other firms’ assets, and how user entrepreneurs combine domain knowledge about film production with their experience in video games and the art of Machinima. Our propositions hold implications for management and policy.

Propositions

- There is a potential relevance of assets for user entrepreneurs’ entry into commercial marketplaces, while there is also a nascent group of firms that contribute to developing a new genre in the industry they enter, which underscores the novelty of their products and the associated risks of IP infringement.

- Selective sharing may apply to different types of asset (game engine, artwork, toolkits, etc.), which in turn represent different trade-offs for the user entrepreneur in terms of gaining access to, or substituting for, the asset; however, commercialising with others’ assets in a new industry remains an understudied area.

- User innovation occurs in communities, where individual domain knowledge is brought to avoid technical problems, share solutions, promote work, and develop or improve technology.

- Entrepreneurs' domain knowledge relevant to commercialisation plays a key role in bringing innovations to industry as products.

Method

- Multiple, non-embedded case study, interviews

Discipline

- Management studies

Data

- Interviews with 25 creators and entrepreneurs, digital content analysis

Interventions-Response

- Two-stage entry (first under the radar of incumbent firms and then commercialisation) into the animation industry can be helpful in avoiding: i) apparent conflict over IP rights by first relying on informal copyright practices, and ii) large investments in established distribution channels by using the Internet.

- User innovation rests on the advantage provided by sticky knowledge and users’ local perception of their own and their community’s needs, while user entrepreneurs effectively leverage community knowledge for entry into new industries.

- Users diffuse technologies across industry boundaries depending on their assessment of the components of the technology, on their own costs of re-creating it, and on the outcome of the negotiations with the owners of the IP rights to the technology, which may in turn be a question of timing.

- While the user community of Machinimators was instrumental in diffusing knowledge about the application of video games to animation production, process and business knowledge (sequel and storyline development, distribution channels) were revealed to a far lesser extent, which is consistent with both the atomistic versus collective user entrepreneurship and the logic of selective revealing.