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Strategic Maneuvering and Mass-Market Dynamics: The Triumph of VHS over Beta
Abstract
This article deals with the diffusion and standardization rivalry between two similar but incompatible formats for home videocassette recorders (VCRs): the Betamax, introduced in 1975 by the Sony Corporation, and the VHS (Video Home System), introduced in 1976 by the Victor Company of Japan (Japan Victor or JVC). Despite being first to the home market, the Beta format fell behind the VHS in market share during 1978 and declined thereafter. By the end of the 1980s, Sony and its partners had ceased producing Beta models. This study analyzes the history of this rivalry and examines its context—a mass consumer market with a dynamic standardization process subject to “bandwagon” effects that took years to unfold and that were largely shaped by the strategic maneuvering of the VHS producers.
... In Figure 1, substitution was forced when technology A was the previously locked-in technology. These rapid, but ordered substitution processes have, for example, been noted by [30] in seventeen cases of technological substitution. Their finding was that the rate of substitution in all the cases, once begun, did not change throughout its history, but was to be considered as a systems property. ...
... Philips and Sony both abandoned this area of technical expertise altogether. The competition between different standards for video recording is an appealing case that is much referred to, but it is also a case with a number of additional angles to it [30]. VHS became the dominant technology during the early 1980s and well into 1990s, even though technically it was not superior. ...
Arthur [1,2] provided a model to explain the circumstances that lead to technological lock-in into a specific trajectory. We contribute substantially to this area of research by investigating the circumstances under which technological development may break-out of a trajectory. We argue that for this to happen, a third selection mechanism--beyond those of the market and of technology--needs to upset the lock-in. We model the interaction, or mutual shaping among three selection mechanisms, and thus this paper also allows for a better understanding of when a technology will lock-in into a trajectory, when a technology may break-out of a lock-in, and when competing technologies may co-exist in a balance. As a system is conceptualized to gain a (third) degree of freedom, the possibility of bifurcation is introduced into the model. The equations, in which interactions between competition and selection mechanisms can be modeled, allow one to specify conditions for lock-in, competitive balance, and break-out.
... The benefits users gain from purchased goods or services increase over-proportionally the more other individual or organizational actors use the same goods or services. Recording material on video cassettes, for example, and reproducing the initial choice of a particular format (i.e., VHS or Beta), was all the more rewarding the more people had already used the format (Cusumano, Mylonadis, and Rosenbloom, 1992). This effect becomes even more dynamic and rewarding if indirect externalities exist too, i.e., the demand becomes even more focused because complementary products and services accompany the focal product -as was the case, for instance, with VHS appliance retailers, video rental stores, the availability of recording material, etc. ...
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... They perceive corporate success as a relatively deterministic outcome of better technology that wipes out alternatives. Yet, business historians know all too well, from the triumph of VHS over Beta (Cusumano et al. 1992) and Apple over Xerox (Graham, 2017), that being a technological pioneer is not a necessary and sufficient condition for success; there are also 'bandwagon effects' (Cusumano et al. 1992, p. 56) and fast followers that compete for success. In addition, technologically-focused explanations tend to downplay the wider institutional context and, specifically, the role of institutions, networks, and their underpinning relations of power (Dobbin, 2005;Graham, 2017). ...
... Within engineering, there is ample research on innovation and new product development methods and strategies (i.e., the application of the agile product development movement to hardware) [3,4,5,6,7,8]. Within policy, business management, and finance, there is also a large body of social science and technology research that focuses on improving innovation and development outcomes with solutions and frameworks for either policymakers or institutional investors [9,10,11,12,13,14,15,16]. There are few papers in the literature that address earlystage hardware startup product development from the viewpoint of the practitioners themselves [17]. ...
Hardware-based startups risk having longer times-to-market, deterring investment in the clean technologies that are critical to a sustainable future. We interviewed 55 leaders at hardware startups, 20 of which are cleantech, mapped their development timelines, and found prototyping to be the longest development step (median of 19 weeks per prototype) regardless of prototype complexity or iteration. Qualitative interview analysis reveals the prototyping team’s choice of development style is a major factor affecting timeline. We define two development styles: natural and structured, typified by free-form exploration and rule-based execution, respectively. On average, natural development takes 35% less time than structured, and is thus preferred for early iterations, but adopting structure at strategic points is needed for timely commercialization. Critical points of transition to a structured style include adding new team members or engaging external partners, which demand clear communication and expectations. When pivoting to a new product or market, returning to a natural style is beneficial.
... A researcher may decide that some events and outcomes should move into the foreground, and that understanding is enhanced by allowing other features to recede into the background (White, 1984). Broad narratives offer explanations for major historical events (e.g., Rosenberg and Birdzell, 1986;Baumol, 1990;Hansen and Libecap, 2004), while more narrow narratives offer explanations for outcomes of individuals (e.g., Hargadon and Douglas, 2001;Haveman et al., 2012), technologies (e.g., Cusumano et al., 1992;Argyres et al., 2015;Lamberg and Peltoniemi, 2020), or firms (e.g., Danneels, 2011;Thompson, 2005;Agarwal and Helfat, 2009). ...
Research Summary
Many strategy studies implicitly rely upon inference to the best explanation (IBE) or modern abduction. We leverage recent work in the philosophy of science to consider how we arrive at “best” explanations, explanations that are lovely, in the sense that they are useful, general, and provide meaning, and likely, in the sense that they are close to the truth. Interpretation of observational results requires an understanding of context that statistical analysis alone cannot provide. At that point of encounter, historical methods—hermeneutics, contextualization and source criticism—can improve IBE by helping scholars (1) generate new candidate explanations and (2) systematically judge, privilege, and balance the explanatory virtues that constitute the loveliness and likeliness of explanations.
Managerial Summary
Many strategy studies iteratively use data and theory to inference to the best explanation of observed phenomena. We leverage recent work in the philosophy of science to consider how we arrive at best explanations that are useful, general, provide meaning, and, at the same time, are close to the truth. Interpreting observational results requires an understanding of the context that statistical analysis alone cannot provide. At that point of encounter, methodological tools from the field of history can improve the process of determining the best explanation by helping scholars (1) generate new candidate explanations and (2) systematically judge and privilege explanations.
People are influenced by the choices of others, a phenomenon observed across contexts in the social and behavioral sciences. Social influence can lock in an initial popularity advantage of an option over a higher quality alternative. Yet several experiments designed to enable social influence have found that social systems self-correct rather than lock-in. Here we identify a behavioral phenomenon that makes inferior lock-in possible, which we call the 'marginal majority effect': A discontinuous increase in the choice probability of an option as its popularity exceeds that of a competing option. We demonstrate the existence of marginal majority effects in several recent experiments and show that lock-in always occurs when the effect is large enough to offset the quality effect on choice, but rarely otherwise. Our results reconcile conflicting past empirical evidence and connect a behavioral phenomenon to the possibility of social lock-in.
Standards are ubiquitous in contemporary society and play a clear role in technological development, organizational functioning, and business success. Standards are very diverse and often boundary crossing in terms of stakeholders and impact, but are such diversity and range reflected by academic studies? We take stock of standardization research over the past decade, considering the full interdisciplinary breadth of this growing field. We use bibliometrics and network analysis to map emergent trends, and conduct an in-depth review of the literature. In doing so, we find that management science, along with economics, is at the core of work on standardization, bridging academic disciplines, and leading theoretical development. Technical disciplines, such as engineering and computer science, supply the largest body of literature, but rarely cross disciplinary boundaries and remain rather isolated. Building on our review, we discuss current debates and controversies and distill four interpretative perspectives on the recent and current developments of standardization research. Finally, we propose a research agenda for standardization research and practice for the years to come.
This paper demonstrates that the traditional categorization of innovation as either incremental or radical is incomplete and potentially misleading and does not account for the sometimes disastrous effects on industry incumbents of seemingly minor improvements in technological products. We examine such innovations more closely and, distinguishing between the components of a product and the ways they are integrated into the system that is the product "architecture," define them as innovations that change the architecture of a product without changing its components. We show that architectural innovations destroy the usefulness of the architectural knowledge of established firms, and that since architectural knowledge tends to become embedded in the structure and information-processing procedures of established organizations, this destruction is difficult for firms to recognize and hard to correct. Architectural innovation therefore presents established organizations with subtle challenges that may have significant competitive implications. We illustrate the concept's explanatory force through an empirical study of the semiconductor photolithographic alignment equipment industry, which has experienced a number of architectural innovations.
This article examines a significant example of "technological pioneering"-the development of an emerging technology in pursuit of future comercial opportunity. In this case, the pioneer's efforts resulted in the birth of a major industry, the manufacture of vidéocassette recorders for the mass consumer market. The authors compare the actions of six firms that were pioneers in the development of this technology-two in the U.S. and four in Japan. Three firms-all Japanese-emerged in the late 1970s as the big winners in the growth of this new industry. However, this is not another case in which international differences in "competitiveness" were decisive. The real success story lies in the management practices of three pioneers, who just happened to be Japanese.
This article surveys the theoretical and empirical literature on mechanisms that confer advantages and disadvantages on first-mover firms. Major conceptual issues are addressed, and recommendations are given for future research. Managerial implications are also discussed.
This paper develops a conceptual framework for analyzing the sequence of technological changes that underlie the development of industries. The framework examines the interaction between design decisions and the coices of customers. Using examples from autos and semiconductors the paper argues that the logic of problem solving in design and the formation of concepts that underlie choice in the marketplace impose a hierarchical structure on the evolution of technology. The nature of the evolutionary process has implications for the dynamics of competition and the management of innovation.
Thesis (Ph. D.)--Ohio State University, 1985. Photocopy.
We analyze technology adoption in industries where network externalities are significant. The pattern of adoption depends on whether technologies are sponsored. A sponsor is an entity that has property rights to the technology and hence is willing to make investments to promote it. Key findings include the following: (1) compatibility tends to be undersupplied by the market, but excessive standardization can occur; (2) in the absence of sponsors, the technology superior today has a strategic advantage and is likely to dominate the market; (3) when one of two rival technologies is sponsored, that technology has a strategic advantage and may be adopted even if it is inferior; (4) when two competing technologies both are sponsored, the technology that will be superior tomorrow has a strategic advantage.