The Encroachment Speed of Potentially Disruptive Innovations with Indirect Network Externalities: The Case of E-Readers

The authors examine factors that affect the encroachment speed of disruptive innovations with indirect network externalities. The authors focus on the 2010 introduction of a new generation of e-readers in Japan and explore the reasons why, relative to comparable e-readers in the United States, the Japanese e-readers were introduced later and adoption rates have been lower. Existing research suggests several possible explanations for these cross-country differences, including the attitudes and behaviors of the firms that compose the paper book value network in Japan, environmental variables such as legal and regulatory constraints, and cultural differences between Japan and the United States. To assess the importance of these explanations, the authors interviewed 20 key figures in the United States and Japan and reviewed a variety of published information sources. Findings indicate that the slower encroachment speed of e-readers in Japan reflects a kind of myopia among publishing industry insiders arising from three sources: (1) organizational factors, (2) technology factors, and (3) environmental factors. Important elements within these categories include the interpretation of the market performance of earlier generations of e-readers, the interdependence of partners within the value network for e-books, the presence of competing technology formats that create uncertainty among consumers regarding the availability of e-books for a specific platform, and the existence of regulations and institutionalized activities that constrain the supply of e-books and retail pricing flexibility. Findings have important implications for future studies of encroachment speed, the management of disruptive technologies, and strategic responses to potentially disruptive innovations launched by fringe competitors and new entrants.