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Research Policy

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nnovation and recurring shifts in industrial leadership: Three phasesf change and persistence in the camera industry�

yo Kang a, Jaeyong Song b,∗

Haas School of Business, University of California, 2220 Piedmont Avenue, Berkeley, CA 94720, USAGraduate School of Business, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 151-916, Korea

r t i c l e i n f o

rticle history:eceived 31 October 2013eceived in revised form 31 August 2015ccepted 2 January 2016vailable online xxx

EL:706333

eywords:

a b s t r a c t

This study examines factors underlying three phases of change or persistence in industrial leadershipin the sector of interchangeable-lens cameras over the past century. During this period there were twomajor phases of leadership change, both associated with the emergence of innovations involving majordiscontinuities in the industry’s core technologies. First, Japan won market leadership from Germany inthe mid-1960s after commercializing the single-lens reflex (SLR) camera that replaced the previouslydominant German rangefinder camera. Second, in the late-2000s, Japanese latecomer firms and a Koreanfirm developed Mirrorless cameras, which allowed them to capture the majority of market share from theincumbent Japanese leaders. We also examine the long period (about 60 years) between these two phasesof change, during which leading Japanese firms were able to sustain their market leadership despite thedigital revolution from the 1980s to 1990s. This paper explores the factors influencing these contrasting

atch-up cyclendustrial leadershipnnovationnterchangeable-lens camera

experiences of change and persistence in industry leadership. The analysis integrates several aspectsof sectoral innovation systems – i.e., windows of opportunity associated with technology, demand, andinstitution – as well as the strategies of incumbents and latecomer firms. The conclusions highlight thecomplex and diverse combinations and importance of the factors that help explain the patterns of shiftsin leadership.

© 2016 Elsevier B.V. All rights reserved.

. Introduction

Latecomer firms may have considerable difficulty catching upith industry leaders. Consumers frequently choose leading firmsith better products, superior resources, and proven capabilities.

ncumbent leaders strengthen their dominant position by lever-ging their market power and building barriers to entry. Valuablessets resulting from market dominance, such as secure branding,ood reputation, network effects, access to high-level information,nd slack resources further reinforce their superior position. In thisense, many researchers and practitioners have emphasized the

Please cite this article in press as: Kang, H., Song, J., Innovation and recpersistence in the camera industry. Res. Policy (2016), http://dx.doi.or

mportance of market leadership and incumbent advantage.Interestingly, however, latecomers occasionally surpass incum-

ents and become new industry leaders. Furthermore, this catch-up

� This research has been supported by the Center for Global Business and Research,eoul National University.∗ Corresponding author.

E-mail addresses: hyo [email protected] (H. Kang), [email protected]. Song).

ttp://dx.doi.org/10.1016/j.respol.2016.09.004048-7333/© 2016 Elsevier B.V. All rights reserved.

tends to occur repeatedly in many industries; new leaders subse-quently lose the dominant market position to other rising firms.Although leading firms must have learned from their own expe-riences when catching up, they lose their technological edge andmarket competitiveness to challengers, just as former incumbentsdid before them. Despite the elaborate strategies and actions of newmarket leaders to satisfy consumers, they often seem powerless toprevent this pattern from being repeated.

We investigate recurrent shifts in industrial leadership and themechanisms behind them in the context of the interchangeable-lens camera industry. In doing so, we look at multiple levels in twoimportant dimensions of the industry. First, we identify recurrentshifts in leadership at the firm level – that is, shifts between (a groupof) individual firms, sometimes occurring within economies – andalso at the national level. Second, we note that catching up is notlimited to explanatory factors relevant at the firm level. Leadershipshifts that happen at the national level imply that analyses at the

urring shifts in industrial leadership: Three phases of change andg/10.1016/j.respol.2016.09.004

firm level cannot be exhaustive, and that broader perspectives andmultiple levels of analysis are necessary. We therefore examine awide range of explanatory factors that contribute to leadership shiftor catch-up and their interactions on different levels..

dx.doi.org/10.1016/j.respol.2016.09.004


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ARTICLEESPOL-3332; No. of Pages 12

H. Kang, J. Song / Resear

In this study, we analyze successive shifts in industrial leader-hip between countries as well as firms. We examine the influencef technological advances, market demand, government policies,

nternational conditions, and the interaction between strategies inatecomer firms and the responses of leaders. Our cases includerms in the camera industry, which has been the focus of sev-ral studies. For example, Wu et al. (2014) examined technologicalhanges in several camera manufacturing companies from the per-pective of firm heterogeneity and complementary assets. Theirocus, however, was on the relationship between complementaryssets and trajectory choices within a firm rather than inter-firmompetition. The growth of Canon and Nikon has been examined,ith a focus on Japan’s support for the optical industry before

nd during World War II, by Alexander (2002) and Donze (2014),espectively. However, the dynamics of innovation and industrialeadership, especially between countries, have been overlooked.o the best of our knowledge, no study has investigated successivehanges in industrial leadership in the camera industry within aomprehensive analytical framework. In particular, the recent pro-iferation of Mirrorless cameras pioneered by Japanese and Koreanatecomers requires elucidation.

Our focus is on the interchangeable-lens camera industry, whichrovides us with invaluable opportunities to examine the mecha-isms behind its recurrent leadership shifts. Three major phasesan be identified in its 100-year history. The first notable histori-al event was the development of the 35-mm rangefinder cameraeveloped by German firms in the early twentieth century. This was

ollowed by three different technologies or product designs. Therst was the single lens reflex (SLR) camera introduced by Japaneserms in the mid-1950s, which captured the major market share by

he mid-1960s. In turn, this was followed by the development of theigital SLR (DSLR) camera in the 1980s–1990s by the (then) leading

apanese firms, which continued to dominate the camera market.inally, the Mirrorless camera was developed by other latecomerapanese and Korean firms in the late 2000s, achieving a large mar-et share by the mid-2010s despite significant barriers to entry

n this industry. These varied episodes in the interchangeable-lensamera market provide ample opportunities to study changes inndustrial leadership that occur repeatedly not only between firms,ut also between countries.

In terms of research methodology, we rely mainly on sec-ndary sources of information when scrutinizing the three phasesf leadership in the interchangeable-lens camera market. We lookt global or national market shares either at the individual firmevel or at the level of technological standards. Other, less explicitimensions, such as superiority of new technologies, their rapidiffusion/adoption, and industry experts’ opinion, are considereds well.

Our baseline research question is as follows: what are the factorshat make changes in industrial leadership possible (or impossi-le)? Subsequent questions that naturally arise include: why didhe catch-up in this industry occur successively? Finally, whatre the commonalities and peculiarities across multiple catch-upases?

This paper is organized as follows. In Section 2, we providehe theoretical framework for our analyses on multiple leader-hip shifts across firms and nations. We also outline importantoncepts related to technological change and catch-up. In Section, we describe the specific product that claims our attention: the

nterchangeable-lens camera. In Sections 4–6, we analyze the threehases of industry leadership in chronological order. In each sec-


ion, we begin with a brief narration of the catch-up story and theniscuss three windows of opportunity and strategic actions of both

atecomer and leader firms. Section 7 then summarizes our mainndings and concludes the study.

PRESSicy xxx (2016) xxx–xxx

2. Theoretical framework

In scrutinizing successive changes in industrial leadership thathappened at the firm or country levels, we comprehensivelyidentify explanatory factors at various levels. Several fine theo-ries and frameworks have been developed, such as product cycletheory (Posner, 1961; Vernon, 1966), sectoral systems of inno-vation (Malerba, 2002), patterns of technological catch-up (Leeand Lim, 2001), and national innovation systems (Freeman, 1987;Lundvall, 1992; Nelson, 1993). However, given that our studyentails both temporal variation (successive leadership shifts) andlevel-of-analysis variation (firm, industry, national, and interna-tional factors), no single theory may be adequate to explain thephenomena of interest.

Recognizing a need for a more integrative approach, Lee andMalerba (2016) devised a new theoretical framework that cap-tures the various features of dynamic shifts in industrial leadership.Their framework consists of two main components: windows ofopportunity and strategies of firms. First, they further developedthe concept of windows of opportunity, building on Perez andSoete (1988), as follows. As an industry evolves, one or more ofthe fundamental components of the sectoral system may change.This change paves the way for latecomers to catch up. Three win-dows of opportunity are proposed in that study: (1) changes inknowledge/technology, (2) changes in demand, and (3) changesin institutions and public policy. The second component that com-pletes the framework is firm capabilities and strategies. In dynamicindustrial environments, firms are actors that compete in themarket. In this study, we distinguish the strategies of incumbentleaders from those of challengers, and discuss strategic interac-tions between them. Windows of opportunity and firm strategiesare intimately connected to each other and to the cycle of leadershipshift (or catch-up) in industries.

To facilitate analysis of these two important components of Leeand Malerba (2016), we highlight several important concepts abouttechnological change. First, to assess the effects of new technolo-gies, we make use of Tushman and Anderson’s (1986) insightfulwork; they classified technological discontinuity in terms of a firm’sexisting competence. A competence-enhancing discontinuity repre-sents “an order-of-magnitude improvement over prior products[that] build[s] on existing know-how”, whereas a competence-destroying discontinuity is a “mastery of the new technology whichfundamentally alters the set of relevant competences within aproduct class” (Tushman and Anderson, 1986: p. 442). Incum-bent firms in an industry are in a superior position to exploitcompetence-enhancing discontinuities, whereas a competence-destroying discontinuity, which disrupts the established industrystructure, favors new entrants or latecomers.

Second, Lee and Lim (2001) developed a similar concept fromthe perspective of firm strategies. Building on Perez and Soete’s(1988) “leapfrogging” concept, they drew a contrast betweenpath-creating catch-up (in which a new technological trajectoryis pioneered) and path-following catch-up (in which latecomerspursue the same technological path as the existing leaders). Path-skipping catch-up, in which the existing technological trajectory isfollowed but several steps are skipped, lies in between.

Along with challenging firms’ capabilities and strategies, incum-bents’ responses also play an important role in the catch-upprocess. Incumbent leaders generally have superior resources andcapabilities compared to latecomers and thus are inclined tobuild on their current technological assets or trajectories. Thispath dependency makes industrial leaders inattentive to changing


demands or disruptive technologies. This is often called the “incum-bent trap” (Chandy and Tellis, 2000) or “success trap” (Levinthal andMarch, 1993). We discuss how the competitive assets or strategies


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hat made catch-up possible in the past may become a liability ofuccess at a later stage.

The ultimate goal of this study is to identify important explana-ory factors, their interactions, and their changing roles over time.o this end, we verify the following propositions: (1) shifts in indus-rial leadership happen repeatedly in an industry (baseline); (2)he aforementioned three windows of opportunity and strategiesf firms interact and together determine the success of a catch-upframework); (3) certain factors are commonly observed as nec-ssary conditions, such as competence-destroying discontinuitylong with latecomers’ path-creating strategies (commonalities);4) the relative importance of each factor differs across catch-upases, and there is no one-size-fits-all explanation for the catch-p cycle (peculiarities); and (5) shifts in industrial leadership cane grasped fully when we look at changes in windows of opportu-ity and firm responses comprehensively and weigh their relative

mportance (general implications).

. The interchangeable-lens camera market

The camera industry is large and heterogeneous. It supplies aide range of products for use in numerous applications (e.g., mili-

ary, medical, scientific, and satellite) in widely differing settingsnd at different levels of technical skill (amateur, professional).everal criteria can be used to classify different types of cam-ras. These include differences in the product’s applications andsers, the particular characteristics of the equipment itself suchs sensor size, the number of picture elements (pixels), lens inter-hangeability, body size, price, consumer substitutability, supplierubstitutability, and so on. The approach to classification taken inhis research differs from that in several other studies of the indus-ry. For example, Tripsas and Gavetti (2000) focused narrowly onnly the development of digital imaging cameras in a single U.S.ompany, Polaroid, while Miranda and Lima (2013) took a veryroad approach by examining the camera industry as a whole. Thetudies ofWindrum (2005) and Windrum and Birchenhall (1998)ell between these extremes, using a classification of photographicroducts based on the type of consumer: amateur vs. profes-ional. However, this definition is not suitable for the purposesf our research on the catch-up cycle. The distinction betweenmateur and professional is rather indefinite, and patterns of cam-ra consumption for both groups have tended to converge overime as technology improves (producer side) and becomes moreidespread and affordable (consumer side). A clearer and more

onsistent classification is required for our purposes. Therefore, wedentify sensor size and lens interchangeability as the two mostmportant characteristics that distinguish various camera products.

e describe these characteristics as follows.First, since a camera is an optical device that takes photographs

y recording light, the size of the image sensor, which receivesnd processes light, largely determines the image quality. As seenn Table 1, sensors in digital cameras vary in size from 1/2.3” to

edium Format. Film cameras usually require 35-mm film, whichorresponds to a Full Frame digital image sensor (36 × 24 mm).

Second, lens interchangeability determines the flexibility of userxperience with camera products. An interchangeable-lens cameraystem consists of camera bodies and lenses that are compatible.or the consumer, interchangeable-lens cameras provide a superiorser experience and better image quality that fits a specific pur-ose. Due to the interchangeability of lenses, the camera systemecomes highly flexible in terms of choice of focal lengths, number


f aperture blades, and maximum aperture size (lens speed). On theechnology side, the interchangeable-lens camera system requires

uch more sophisticated technology. In addition, major players inhe camera market do not share their lenses with other camera

PRESSicy xxx (2016) xxx–xxx 3

manufacturers, and thus all lenses are generally incompatible withcameras made by different makers. The interchangeable-lens cam-era and its lenses comprised 76.9% of the total sales revenue in theworld camera market in 2015 (CIPA, 2016).

In our research on the camera industry, therefore, we investigatethe intersection of these two important features: sensor size andlens interchangeability. Specifically, we focus on interchangeable-lens cameras with middle-range sensors ranging from (Micro) FourThirds to Full Frame, following the views of camera experts andproducers. We hereafter call this submarket the interchangeable-lens camera market. This enables us to define the relevant marketof analysis consistently for all three phases of industrial leadershipover the course of a century, which is discussed in the followingthree sections of the paper.

4. The leadership shift from Germany to Japan (mid-1960s)

4.1. Catch-up story

In the early 20th century, the 35-mm film rangefinder cam-era was an astounding invention. Oskar Barnack, a German opticalengineer working for Ernst Leitz GmbH, invented 35-mm film,which produces high-quality photographs, by cutting movie film.Adopting its employee’s innovation, Ernst Leitz GmbH first intro-duced a 35-mm film rangefinder camera, the Leica I, in 1925(Forbes, 1988; Gustavson, 2009). The 35-mm film made it possibleto design a much lighter, smaller, and more portable camera.

The rangefinder camera was a great success. After the releaseof the Leica I in 1925, the German rangefinder camera set theglobal standard for portable camera products; it quickly replacedthe bulky and inconvenient box camera (Forbes, 1988). Later, in1932, the second entrant Zeiss-Ikon of Germany released the Con-tax I. While various rangefinder cameras from different makers(including Japanese late entrants) were later released, Germanymaintained its market leadership for several decades.

In the early days of their involvement in the camera business,Japan produced rangefinder cameras which resembled those oftheir German counterparts. Japanese latecomer firms, however,could not compete with German leaders in the rangefinder cam-era market. They also wanted to solve the problems inherent in thedesign of rangefinder cameras. As such, Japanese latecomers deter-mined to develop a different technology, the SLR camera, in the late1950s.

Products made by these Japanese challengers soon outper-formed those made by the incumbent German firms. The SLRcamera design ensured perfect compatibility between variouslenses and camera bodies. Furthermore, SLR cameras were simplerto use and cheaper than rangefinder cameras (Forbes, 1988). Forthese reasons, although larger and weightier than the rangefindercamera, the Japanese SLR camera rapidly replaced the German-dominated rangefinder camera and became the market standard.Japan leapfrogged over Germany in terms of camera productionand export in the early 1960s (Windrum, 2005; Donze, 2014).

4.2. Windows of opportunity: technology and demand

While Germany dominated the rangefinder camera market inthe early 20th century, an opportunity to catch up – involving bothtechnology and demand conditions – presented itself. Althoughrangefinder cameras replaced box cameras with their innovative


product design and portability, two critical drawbacks were inher-ent in their design: parallax and limited lens interchangeability. Therangefinder camera embodies two lenses, as shown in Fig. 1. Theone in the front is the main lens for receiving light and recording it


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Table 1Comparison of Image Sensors by Type.

Sensor Type 1/2.3” 1” (Micro) Four Thirds APS-C 35-mm (Full Frame) Medium Format

Surface Area 28.5 mm2 116.2 mm2 224.9 mm2 330–370 mm2 864 mm2 1,977 mm2

Crop Factor 5.6 2.7 2 1.5–1.6 1 0.6–0.8Most Adopted Compact Camera DSLR Camera, Mirrorle

Crop factor: the ratio of a 35-mm frame’s diagonal to the diagonal of other types of image

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Fig. 1. Structure of the Rangefinder Camera.ource: Camerapedia

o the film. Another lens is built into the viewfinder, which enableshe photographer to frame the photo and adjust the focus.

Having two lenses in one camera causes a parallax problem, displacement in the position of the subject viewed along twoifferent lines of sight. The resulting image differs from what thehotographer sees through the viewfinder. Moreover, the degree ofifference is not consistent over distance; the closer the subject is,he larger the difference becomes. Therefore, the viewfinder doesot support multiple lenses of different focal lengths.

In the early days of photography, on the demand side, thedvantages (notably portability) of the rangefinder camera out-eighed its demerits. As time went on, however, these two

rawbacks became increasingly critical problems for photogra-hers (Windrum, 2005). They wanted parallax-free cameras with

ull flexibility in terms of compatible lenses. On the technol-gy side, however, this demand change could hardly be satisfiedithin the then-current design of rangefinder cameras. The situa-

ion was clearly an opportunity for the latecomer firm because thencumbent leaders could not adequately cope with new demandsing their existing product designs and technological expertise.

apanese SLR cameras with their two new distinctive components the mirror box and the penta-prism – resolved the drawbacks ofangefinder cameras. As Panel (A) of Fig. 2 illustrates, the SLR cam-ra uses a single lens and reflex mechanisms to eliminate parallaxr framing errors. This brought a competence-destroying disconti-uity into the interchangeable-lens camera market.

.3. Windows of opportunity: policy and institutions

Along with the demand and technology windows of opportu-ity, important industrial changes were induced by international


ffairs and government policies. World War II, in particular, pro-ided an opportunity for market entry and growth for Japaneserms, whereas it worked against the leading German firms.

ss Camera DSLR Camera

sensors.

We first discuss the influence of World War II. During wartime,to cope with the surging demand for optical military equipment,Germany sent optical engineers to Japan. This allowed Japan toabsorb advanced knowledge in the fields of optics and imaging. Forinstance, Nikon acquired most of its early technologies for opti-cal products with the help of German firms before the war, andthis technological aid was further accelerated during World War IIwhen Nikon began producing optical instruments for military use(Business Week, 1965; Alexander, 2002).

The surge in demand due to the war can also be thought of inrelation to international politics/institutions. Most manufacturers,including Canon and Nikon, engaged in producing optical compo-nents for munitions during the war (Donze, 2014). Accordingly,after the war, the Japanese optical industry was well equipped to fillpostwar demand for optical products. In contrast, Germany’s pro-duction facility was extensively damaged during the war. To makematters worse, postwar labor costs surged in Germany and madeit almost impossible to withstand Japanese competition.

Furthermore, during the Korean War, opportunities arose to dis-seminate the brand and technology of Japanese cameras. Americanphotographers experienced the excellence of the Nikon camerawhen they came to Korea and Japan as war correspondents. In thisway, Nikon could promote their products in North America duringthe Korean War, and subsequently, its worldwide reputation forexcellent camera products began to grow (Business Week, 1965).

Second, Japan implemented strong policies for promoting thecamera and optics industries. Prior to the 1960s, Japan had activelypromoted its camera and optics industries. With the aim of achiev-ing self-sufficiency in important technologies, an optical researchlaboratory that had already been established in 1906 to promote theindustry was used for producing optical weapons for the JapaneseArmy (Alexander, 2002). This was the origin of the current giants inthe camera industry, Canon and Nikon. In addition, Japan stronglyprotected its camera industry by imposing a duty on importedoptical products. The import duty for camera products was 50%from 1911 until World War II; it was even temporarily increasedto 100% in 1924–1925. Camera imports were restricted by quotasand authorizations, including a ban on importing luxury camerasuntil 1960, by which time the Japanese had caught up with theirGerman competitors in the camera industry (Donze, 2014).

Japanese promotional policies in the camera industry were notlimited to a self-supply regime and high import duties. Manyengineers were hired by the arsenals of the Army and Navy, pro-viding private firms with a “human resource reservoir” in whichengineers could be educated and trained (Donze, 2014). In addi-tion, government-led projects and human resource developmentwere later transferred to private companies. For instance, afterthe Great Kanto Earthquake of 1923, “many talented militaryengineers and research projects were assigned to Nippon Kogaku[Nikon]. . . expanding both the number of technicians or staff andthe breadth of the company’s research capabilities” (Alexander,2002: p. 21). The Japanese government (and Navy Ministry) alsoswiftly intervened to help rebuild Nikon’s production facilities after


try because this high value-added industry contributed to foreignexchange earnings and had great potential to be transformed intoa civilian industry.



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Fig. 2. DSLR Camerource: Wakabayashi (2012).

Joint R&D activities among private firms, universities, andational institutes became popular after the war, during which timehe Japanese further improved upon their camera and optic tech-ologies. Japanese governments and industrial associations wereeeply involved in promoting product quality and exporting inhe camera/optics industry (or armaments industry), and mostapanese manufacturers of cameras and optical products benefitedrom their policies (Donze, 2014).

In connection with the demand window of opportunity, evenfter World War II, American occupation authorities and theew Japanese government demanded a large number of cameras.or example, Nikon’s camera research and relevant technologicalchievements developed primarily as a result of direct demand andressure from the Japanese government and military (Alexander,002: p. 26). A large-scale Japanese mass-production system (with

ow wages) also became possible because of the government’sfforts. In contrast, Germany pursued a policy of “Klasse stattasse” (quality beats quantity), resisting the shift to mass produc-

ion (Windrum et al., 2014).

.4. Latecomer capabilities and strategies

Latecomers, or followers, generally make good use of informa-ion leaked from their forerunners (Berndt et al., 2003; Ethiraj andhu, 2008; Hoppe and Lehmann-Grube, 2001). In the first case,ermany willingly transferred knowledge of camera technologynd relocated many technicians to Japan. As a natural conse-uence, they initially imitated German camera designs and pursued

“Japanese Leica” via reverse engineering (Donze, 2014).After a certain point, however, incumbent leaders become reluc-

ant to transfer knowledge and technology to other firms, whichay become a potential threat (Kogut and Zander, 1996; Song

t al., 2003). In addition, the reputation, brand power, and technol-gy of German rangefinder cameras were almost unsurpassable.onfronting this competitive environment, Japan conducted mar-et surveys and stayed sensitive to changes in consumer demandor new technologies (Business Week, 1965: p. 50). Japaneseatecomers then recognized that the SLR camera held great poten-ial to remedy the parallax and lens-incompatibility problemsf rangefinder cameras, thereby satisfying changing consumeremands.

In the late 1950s, Japanese latecomers boldly pioneered a newechnology, the SLR mechanism, which resolved parallax (or fram-ng) errors. Their pioneering efforts to initiate a new technologicalrajectory (i.e., path creation) brought a competence-destroyingiscontinuity to the market, rendering the German incumbent’s


angefinder camera obsolete (Windrum, 2005). Interestingly andmportantly, the SLR camera was not a Japanese invention; a Ger-

an firm, Zeiss Ikon, designed the first SLR camera, the Contax S,n 1949. However, the early SLR design had several problems. One

Mirrorless Camera.

of the most prominent was that an additional manual motion wasrequired before shooting. The photographer must manually openthe aperture fully in order to see an object through the single lens(viewfinder) and focus; the aperture then needs to be adjusted tothe desired setting. By the time Nikon’s SLR camera came onto themarket in 1958, Japanese firms had already made this motion auto-matic and solved other problems, such as the 180◦ flipped image,further improving the SLR design (Business Week, 1965: p. 50).As a result, Japanese SLR cameras provided photographers withmuch more functionality and flexibility. One single camera wasnow usable with any kind of lens.

Two noteworthy strategies made the Japanese latecomers’catch-up possible: mass production and cooperation. First, whileGerman incumbents pursued a wide range of camera productsfor diversified purposes for economies of scope, Japanese firmsadopted a mass production system for general-purpose camerasfor economies of scale (Windrum et al. 2014; Donze, 2014). Bycompartmentalization and rationalization of their manufacturingprocess, Japanese firms succeeded in achieving both high qualityand low price. Second, being latecomers in the camera market,Japanese firms cooperated closely. Although Canon developedcamera bodies, it lacked technologies and production lines forproducing rangefinders and lenses. Nikon remedied this situationby providing Canon with these components, as they had supe-rior facilities and technology for optical products, having suppliedthem to the Imperial Japanese Navy (Donze, 2014). The coopera-tion between these two specialized firms facilitated technologicaladvances and economies of scale in the catch-up process. This pat-tern is also observed in the third case described in section 6.

4.5. Industry leaders’ response

While Japanese followers searched for alternative technologies,German leaders continued to focus on the rangefinder camera.However, photographers increasingly demanded the freedom toutilize various lenses with full functionality. Due to the significantimprovements provided by the SLR camera in terms of the two crit-ical problems of the rangefinder camera, German manufacturerswere in danger in the early 1960s. Nonetheless, Germany remainedhighly confident and looked down on Japanese firms (Donze, 2014).Leica, for example, cared (too much) about quality, as evidenced bythe statement from Günther Leitz, a Leica president, that “Leica willproduce nothing that it can’t make to the highest standards of per-fection, regardless of market demand” (Business Week, 1965: p.50).

The successful history of German companies also lowered their


incentive to move on to new technologies, which in the end madetheir established resources and capabilities partially obsolete. Theiroverconfidence and strategic inertia turned out to be critical to theleadership shift. Günther Leitz believed that “there will always be


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group of people large enough to provide a market for our kind ofroduct” (Business Week, 1965: p. 56). Leica continued to manufac-ure rangefinder cameras despite the fact that “the ultimate answero the problem of flexibility. . . was obviously the single lens reflex”Business Week, 1965: p. 50). Japanese challengers with their SLRameras offered more of what consumers wanted: a single cameraor all purposes. Bruno Frey, who became the president of Leica in987, later acknowledged that “Leica hasn’t had a strategy attunedo the market. . . Leica just gave up the market to the Japanese”Forbes, 1988: p. 100). It was their inability to move away fromheir rangefinder camera design (i.e. the “success trap”) that madehe German forerunners fall behind.

It is noteworthy that Leica did endeavor to solve the problemsf the rangefinder camera. After a long delay, Leica finally devel-ped an “SLR-like” camera, an interchangeable-lens camera withinhe boundary of a rangefinder camera. The product was compatibleith several lenses. Leica’s M-3 (released in 1965), for instance, had

viewfinder that would support up to four different lenses. How-ver, this short-sighted path-dependent advance was never enougho cope with the innovation in user experience and functionalityrought about by the Japanese challengers. Its limited compatibilityas still a great disadvantage of the German rangefinder, compared

o the flexibility of Japanese SLR cameras.

. Sustained Japanese leadership (late 1960s to late 2000s)

.1. Leadership persistence story

In this second phase, incumbent firms’ leadership persistedespite the transition to digital technology in the interchangeable-

ens camera industry. This was a non-trivial technologicaliscontinuity, although different from the two successful cases ofatch-up described in this study. The incumbent Japanese leaders inhe market persisted despite the efforts of latecomers who soughto challenge them. This contrasting case provides us with a valu-ble opportunity to deepen our understanding of shifts in industrialeadership.

The leaders in the SLR camera market, Canon and Nikon, devel-ped the digital SLR (DSLR) cameras. Although they were not theery first manufacturers to introduce the DSLR camera in the mar-et, they rapidly adopted and promoted this product when theigital revolution hit the market, thereby preserving their supe-iority in terms of resources and capabilities. Canon, together withodak, released a transitional DSLR camera (an SLR camera with

digital back), known as the EOS DCS3, in July 1995. Canon laterntroduced its first home-grown DSLR camera, the EOS D30, in May000. Nikon released its first DSLR camera, the Nikon D1, in June999.

The latecomers’ technology shared the same trajectory as thatf the incumbent firms. In fact, the first DSLR camera was devel-ped by a latecomer in the SLR camera market. Eastman Kodak, anmerican camera manufacturer, was the first to develop a proto-

ype digital camera in 1975 (Reuters, 2011). However, the companyailed to commercialize and capitalize on its DSLR cameras in aimely manner, fearing that doing so would threaten Kodak’s stronglm business. Other latecomers introduced their DSLR cameras in

he decade from 1990 to 2000. Some manufacturers that had notroduced SLR cameras entered the DSLR market around this times well, including Sony, Panasonic, Pentax and Samsung.

The digital technology revolution and relevant windows ofpportunity, however, did not change the leadership in this indus-


ry. In the era of digitization, Japanese leaders succeeded in furthertrengthening their leadership position in the interchangeable-lensamera market. Reuters reported that Canon and Nikon togetherccupied nearly 100% of the global interchangeable-lens camera


market in 2003, at a time when the market was still young (Reuters,2004). Fig. 3 shows that these firms continued to occupy about80% of both the Japanese and global interchangeable-lens cameramarkets in 2008; indeed, their dominance had persisted for severaldecades from the 1960s to the mid-2000s despite the introductionof digital technology.

5.2. Windows of opportunity: technology

The “digital revolution”, or the large-scale change from analog todigital technology, gradually occurred from the 1960s to the 2000s.The camera industry was no exception; the digital SLR (DSLR) cam-era, in which photographic film is replaced with a digital imagingsensor, was developed as a result of the digital revolution. The DSLRcamera had evident advantages over the SLR camera. The SLR cam-era uses film, which is non-reusable, inconvenient, and costly. Forphotographic films, for example, its speed (i.e., the sensitivity of thefilm to light) and color impressions (such as Provia and Astra) arepre-determined. In contrast, digital photography using an imagesensor allows photographers to change such photographic settingsjust before or even after shooting. They can also re-use the memorycard and review an image immediately through a digital display,not requiring film exchange and development.

The technological change from SLR to DSLR cameras differedfundamentally from the changes involved in our two cases ofsuccessful catch-up in several respects. First, similar to the devel-opment of television technology, where 60% of the digital televisionproduction process was the same as that of analog television (Leeet al., 2005), the DSLR design was developed based largely onexisting technology, the SLR design. As they shared the same tech-nological path, the DSLR camera could be described as a predictableextension of the SLR camera. One major difference was that film-related parts were substituted by the image sensor. For incumbentSLR camera makers, however, this substitution was not costly ordifficult to adopt technically. Therefore, incumbent leaders still hadsignificant advantages in dealing with new demand and made gooduse of technological and institutional windows of opportunity.

Second, barriers to entry arising from cross-brand lens incom-patibility were preserved even after the change to digitaltechnologies. The cross-brand incompatibility of lenses served asa particularly strong entry barrier to latecomers, because exist-ing consumers were forced to continue to buy the same brand inorder to retain the value of their previous investments in photo-graphic equipment. In addition, as the consumer base increased,suppliers of complementary goods – including third-party lens pro-ducers – had greater incentives to develop additional lenses andaccessories compatible with the expanding brand. The result wasa large direct network effect. Furthermore, the after-sales servicenetwork in the camera industry generated strong indirect net-work effects. These direct and indirect network effects made Canonand Nikon oligopolistic leaders in this industry for decades. In thissense, the technological change from SLR to DSLR cameras was acompetence-enhancing discontinuity that allowed leading firmsto exploit existing competence, thereby consolidating their lead-ership positions.

Interestingly enough, previous studies have consistently takenthe view that digitization was a competence-destroying discon-tinuity in the camera industry (e.g., Tripsas and Gavetti, 2000;Benner and Tripsas, 2012; Miranda and Lima, 2013). This discrep-ancy in perspective results from differences in the way researchersdefine the market of interest. Tripsas and Gavetti (2000) exclusivelyfocused on the compact camera, where the transition to digital


technologies may understandably be considered a competence-destroying discontinuity. Miranda and Lima (2013) viewed thecamera industry as a whole, making no distinction betweenbuilt-in lens and interchangeable-lens cameras. However, in the




1.4%3.8%

8.5%

1.6%

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13.0%

4.0%

37.0%38.0%

0%

10%

20%

30%

Pana sonic (1) Olympus (1) Son y (3) Pentax (4) Nikon (5) Canon (6)

Japan

Global

Fig. 3. 2008 Interchangeable-lens Camera Market Share in Japan.N thesess

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penta-prism, which solved the problems of the rangefinder cam-era, were completely removed; instead, an electronic display andelectronic viewfinder were developed. This path of technologicaldevelopment was adopted by firms that had hitherto been minor

ote: The order of the entry to the Mirrorless camera market is presented in parenell cameras in the Japanese market.

ource: BCN Japan and Slashgear.com (Japan), photoscala (Global).

nterchangeable-lens camera market, the “digital revolution” wasore like a mere component substitution from film to digital image

ensors.

.3. Windows of opportunity: demand and policy

A demand-side window of opportunity arose when the Nationaleronautics and Space Administration (NASA) in the U.S. desired tohotograph and send digital images in outer space back to Earth inhe early 1970s. NASA thus supported the development of digitalameras. Photographers in the news industry also wanted digi-al cameras for tele-photography (i.e., immediate transmission ofmages over telephone wires).

On the institutional and policy side, the trend toward digitiza-ion and relevant policy-related support began in the 1980s (Leet al., 2005). Adoption of digital imaging technology was largelyetermined by changes in the information technology infrastruc-ure as a whole (Teisberg and Leonard, 1996), not at the discretion ofndividual firms. Many companies found it relatively easy to obtainunding and relevant knowledge from adjacent technological areas,aking advantage of network externalities. Industrial environmentsnd government policies have also supported R&D efforts in digi-al technologies since the 1980s (Lee et al., 2005). This support hasften come from government or multinational consortia.

An important feature of these demand and policy windows washat they did not asymmetrically favor latecomer firms or newntrants to the industry. In fact, as incumbent firms have supe-ior resources and technologies, institutions and policies tendedo support the incumbent leaders. Governments usually supportedndustry leaders in order to secure a dominant position in thenternational competition for digital technologies. For example,he aforementioned NASA projects favored leaders in the cam-ra market; NASA co-developed an early digital camera, the NASA4 (1987–1991), with Nikon. From the perspective of latecomers’atch-up, policy and institutional windows of opportunity played

minimal role.

.4. Capabilities and strategies of latecomers and leaders

The technological discontinuity from SLR to DSLR cameras main-


ained the competences of incumbent leaders. Unlike the Germanangefinder camera manufacturers responding to the emergence ofLR cameras, therefore, Canon and Nikon made a smooth transitiono DSLR cameras. They continued along the competence-enhancing

following the company name. Samsung is omitted in the figure because it did not

technological trajectory, leveraging their superior resources andcapabilities.

From the perspective of latecomers, on the other hand, theadoption of digital technology was a path-following strategy. Bothlatecomer SLR manufacturers and new entrants developed DSLRcameras very similar to those of incumbent leaders. As a conse-quence, the gaps in resources and capabilities between leaders andlatecomer firms were well preserved, and there was little opportu-nity for latecomer firms to squeeze into the interchangeable-lenscamera market.

This second case differs from the other two successful catch-upcases in the following ways. Digitization was not an endogenouschange that latecomers implemented based on their own initia-tive. It was rather an exogenous pressure – a widely accepted globaltrend – imposed on all firms in the market. Facing this emergingand predictable transition, both incumbent leaders and latecomersshifted their attention to the change in paradigm from analog todigital technology. As a consequence, an important strategic pat-tern observable in the other two successful cases of catch-up – thatis, incumbent leaders exploiting their existing competences whilelatecomer challengers pioneer a new technological or strategic path– was not present in this second case.

6. The Leadership shift to latecomer Japanese and Koreanfirms (mid-2010s)

6.1. Catch-up story

Since taking over industrial leadership in the 1950s, Canonand Nikon had developed formidable technological capabilities,an excellent market reputation, and a secure customer base forabout 60 years. In the late 2000s, a threat to the long-standingdominance of these Japanese firms eventually began to emerge.Second-tier Japanese firms and a Korean camera manufacturerturned their attention to a new technology and product, the Mir-rorless camera.1 In the Mirrorless camera, the mirror box and


1 In June 2015, the Consumer Electronics Association (CEA) officially recognized“Mirrorless” as the industry standard name for this camera system.




0%

10%

20%

30%

40%

50%

60%

70%

Korea

Japan

Global

Fig. 4. Mirrorless Camera Share in Interchangeable-lens Camera Markets (by unit).N CIPAw

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ote: The Mirrorless camera share in the global market is underestimated becauseas linearly projected between September 2009 and January 2012.

ource: CIPA (Camera & Imaging Products Association) for Japan and global shares;

layers in the interchangeable-lens camera industry or absent fromt altogether. Because they were both Japanese and Korean firms,his path of change involves not only (partial) leadership shiftsetween national industries, but also shifts between (a group of)ndividual firms within Japan. Although these changes and conse-uent market turnover are considered to be still in progress, thevidence for changes in industrial leadership and technologicaltandards are sufficiently strong to be included here.

The Mirrorless camera was first introduced in mid-2008 by theecond-tier Japanese firms, Olympus and Panasonic. Then, Sam-ung (January 2010), Sony (June 2010), and Fujifilm (January 2012)oined the Mirrorless camp. The Mirrorless camera, which is muchmaller and lighter than the DSLR camera, initially appealed to lightsers, and then to professional users of the DSLR camera as well.he industry leaders, Canon and Nikon, looked down on this new,ascent technology and retained the mirror-based technology in allameras. As a result, Canon and Nikon lost their edge, especially inhe East Asian market, where consumers were among the earliestdopters of the new technology.

The Mirrorless camera rapidly came into wide use, and its mar-et share was close to or even exceeded that of the DSLR camera inapan and Korea, as shown in Fig. 4. Globally, the Mirrorless cam-ra market has since grown rapidly worldwide, albeit at a slowerace than in the East Asian market. The share of the former leaders

n the interchangeable-lens camera market had already declinedo less than 50% in Japan and Korea by 2011. Although Canon andikon had expanded their share in the Japanese DSLR market toround 90% in 2013 (BCN Ranking, 2014), the whole DSLR cam-ra segment had lost its competitive edge against the Mirrorlessamera. Fig. 5 shows that challengers in Japan and Korea becamehe leaders in the rapidly expanding Mirrorless camera markets inapan and Korea. Sony, in particular, became the top supplier ofoth the interchangeable-lens camera market as a whole and itsirrorless camera submarket in Korea in 2015.

.2. Windows of opportunity: technology

The DSLR camera, with its embedded mirror box and penta-


rism, had inherent disadvantages; it had reached a technologicalimit in terms of miniaturization and lightening. Mirrorless cam-ra technology addressed the two critical drawbacks of the DSLRamera, just as the SLR camera did for the rangefinder camera. The

statistics do not count Samsung’s sales. The share in Japan and the global market

nd Sony Korea for Korean shares.

complicated inner structures of the DSLR camera are shown in Panel(A) of Fig. 2. When light enters the lens, the mirror box reflects it tothe penta-prism. The penta-prism then reflects it back to the opticalviewfinder and our eyes. If a photographer presses the shutter but-ton, the mirror box goes up, allowing the light to reach the imagesensor, which then records it. This great invention solved the paral-lax problem of the rangefinder camera. However, the penta-prismand mirror box made the camera heavy and bulky. To make thecamera body smaller and lighter, makers of the Mirrorless cameraremoved the penta-prism, mirror box, and optical viewfinder.

At the time of development of the Mirrorless camera, latecom-ers confronted two important challenges: to replace the opticalviewfinder, and to replace the phase detection auto-focus (PDAF)system. First, since the mirror box and penta-prism were elim-inated in the Mirrorless camera system, the product had thesame problem as the rangefinder camera: inferiority of the opti-cal viewfinder. To cope with this problem, the very first Mirrorlesscamera model featured a large electronic display that only partiallyreplaced the optical viewfinder. Although this was a reasonablestrategy for early entry models aiming at beginner-level users,a viewfinder was necessary for stable shooting and for daytimeshooting in strong sunlight. Moreover, most photographers whohad been using DSLR cameras were well acquainted with theviewfinder and found the compact camera-like large screens incon-venient for shooting. Second, Mirrorless cameras lacked a PDAFmodule due to the elimination of the penta-prism and mirror box.Early Mirrorless cameras featured the contrast detection auto-focus(CDAF) system which had been used for compact cameras. This wasinitially inferior to the PDAF system in terms of focusing speed.

Around August 2008, when the very first Mirrorless cameraswere introduced on the market, most of the above-mentionedtechnological issues had already been addressed due to significanttechnological advances in camera-related industries. First, takingadvantage of rapid advancements in electronic display technology,Mirrorless camera manufacturers could use electronic viewfinders.Panel (B) of Fig. 2 depicts the mechanism of the Mirrorless camera.Light goes directly to the image sensor, and an electronic viewfinderwith a small high-definition electronic display shows the image.


Electronic viewfinders provided perfect support for all lenses on themarket with 100% frame coverage, replacing the heavy and bulkymirror box and penta-prism. Moreover, while an optical viewfindershows what we see through the glass, an electronic viewfinder




53.0%

30.0%

6.0% 5.0% 6.0%

0%

10%

20%

30%

40%

50%

60%

Sony Samsun g Nikon Olympus Etc

28.9%26.5%

14.2%

9.9% 9.3% 9.2%

0%

5%

10%

15%

20%

25%

30%

35%

Olympus Sony Panasonic Ricoh Canon Nikon

(A) Japan (2013) (B) Kore a (2013)

arkeS

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Fig. 5. Mirrorless Camera Mource: BCN Ranking (Japan), GfK (Korea)

isplays exactly what the camera sees through the digital imageensor. In other words, Mirrorless camera users can preview andnspect the exact image that will be taken even before shooting.djustments of exposure, color impressions, and ISO numbers are

mmediately reflected in the electronic viewfinder. This is a greatdvantage, especially for beginners.

Second, the challengers to industry incumbents invested heavilyn R&D to improve the speed and accuracy of the CDAF sys-em. Panasonic and Olympus succeeded in developing a fast,ccurate CDAF system comparable to the PDAF one. Other firmsuch as Samsung, Sony, and Fujifilm even introduced a so-calledhybrid AF system” that combined the merits of PDAF and CDAFystems. In addition, Mirrorless camera manufacturers furtherdopted cutting-edge functionalities. Samsung and Sony, for exam-le, developed a 180◦ “flip display”, which helped significantly inhe taking of self-portrait photographs. Samsung even loaded thendroid mobile operating system, enabling retouching and photoploading online via a camera device. Remote shooting, in which

smartphone screen is used as a viewfinder, has also been intro-uced. A technological comparison of a compact camera, a DSLRamera, and a Mirrorless camera is provided in Table 2.

.3. Windows of opportunity: demand

Significant changes in the market environment occurred dur-ng the period of Canon and Nikon’s domination. Consumer needs,n particular, changed for both professional and amateur photogra-hers. Ever-changing demand may mean an opportunity to provide

detour from the current strategic/technological path.The SLR camera was inherently heavy and bulky due to the

irror box and penta-prism. Although these are exactly the com-onents that solved the problems of the rangefinder camera, asime went on, the market demanded smaller and lighter camerasithout sacrificing photo quality and camera functionality. Being

ensitive to changing consumer demands, Olympus and Pana-onic conducted comprehensive market research. They found thatotential consumers, especially women, strongly desired a smaller,

ighter, and more stylish camera. However, many users of then-xisting light cameras were unsatisfied with low-end compactameras. As televisions, laptops, and mobile devices featured muchigher-definition displays, moreover, consumers began to expect


ore advanced cameras also to take high-resolution photos. As result, the camera market became specialized to larger-sensorameras with interchangeable lenses for which smart devices orompact cameras cannot substitute.

t Share in Japan and Korea.

However, the entry-level DSLR camera could hardly be an alter-native. This professional-looking, heavy camera was burdensomefor a casual user to carry everywhere. Furthermore, consumersurveys revealed that even professional photographers demandedlighter cameras either as substitutes for their main cameras, or forsupplementary purposes.

It should also be emphasized that consumers in markets in Japanand Korea were early adopters of new technologies compared toconsumers in any other markets; they were more willing to adoptand test the new type of camera. As their domestic markets wereessentially “test bed” markets, latecomers in Japan and Korea tookadvantage of another demand-related window of opportunity.

6.4. Windows of opportunity: policy and institutions

In direct contrast to the first leadership shift, in which policyand institution played a crucial role, demand- and technology-sidewindows of opportunity were the critical driving forces in this thirdcase (along with various firm strategies that will be discussed inSections 6.5 and 6.6). Not much can be said about the policies andinstitutions in the third leadership shift, which makes this casemuch more interesting.

The third shift in leadership can be examined in two parts: (1)shifts within Japan, and (2) the emergence of Korea. For the lead-ership shifts within Japan, we can hardly attribute the Japaneselatecomers’ catch-up with Japanese leaders (Canon and Nikon) toJapan’s government policy unless such policy exclusively affectedeither of the two parties. This is primarily because, in general,policies have an influence on all firms in an industry. As for theleapfrogging by Samsung of Korea, we previously mentioned thatSamsung attempted to produce DSLR cameras in the mid-2000s,an effort which ended in failure. Accordingly, if we are to attributethe successful catch-up by Samsung in the late 2000s to policy andinstitutional windows of opportunity, we would need to identifya drastic change in government policy or institutional governancebetween Samsung’s failure in the DSLR camera market and its suc-cess in the Mirrorless camera market. To the best of our knowledge,however, very few policy or institutional changes were imple-mented between the mid-2000s and early 2010s.


This discrepancy in government or macroeconomic rolesbetween the two successful catch-up cases provides us with strongevidence that different windows of opportunity play different rolesin catch-up cycles.




Table 2Comparison of Cameras by Type.

Compact Camera DSLR Camera Mirrorless Camera

Sensor Size 1/2.3”–1/1.7” 4/3”—Medium Format 4/3”–35 mmAF system CDAF PDAF CDAF or Hybrid (CDAF + PDAF)View Finder – OVF EVF or Hybrid (OVF + EVF)Complementary Display AF Speed – Slower than viewfinder mode Fast (same as viewfinder mode)

6

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ful catch-up stories along with an aborted catch-up case based onthe framework of Lee and Malerba (2016), who identified win-dows of opportunity and firm capabilities/strategies as essential

Flange Back –

Weight Approx. 150 g

Color and Design Varied

.5. Latecomer capabilities and strategies

Firm strategies were arguably the most important success fac-ors in this third phase of leadership. Latecomers wanted to changehe rules of the game and therefore pioneered a new technologicalath, implementing a path-creating catch-up strategy. Shiro Kita-

ima, head of Panasonic’s consumer marketing division in Northmerica, commented that “Nikon and Canon have a long legacy

or SLRs. We don’t want to play on the same ground. We tried tolay it on our ground” (Wakabayashi, 2012). Samsung executiveslso acknowledged that the company moved into the Mirrorlessamera market because its DSLR camera could not compete withhe products of Canon and Nikon (Demolder, 2011). The emer-ence and proliferation of Mirrorless cameras may have been theiggest shift in technology in the interchangeable-lens camera mar-et in six decades (Yasu and Amano, 2011). This introduced aompetence-destroying discontinuity in the market that favoredatecomer firms. Fig. 5 shows that, in both the Japanese and Korean

irrorless camera markets, challengers in the Mirrorless camp suchs Olympus, Sony, and Samsung outperformed the former Japaneseeaders, Canon and Nikon.

The first Mirrorless camera was released into the market ineptember 2008. The sensitivity to market changes and the strate-ic agility of the Olympus and Panasonic coalition allowed theirevelopment of the Mirrorless camera. As an important strategy

or market entry, Olympus and Panasonic cooperated when devel-ping and marketing the Mirrorless camera, just like Canon andikon did when they released SLR cameras. Olympus had an advan-

age in optics, whereas Panasonic had an advantage in electronics.urthermore, to overcome the disadvantages of the lack of brandwareness and complementary assets (e.g., lenses), these two mak-rs co-developed and shared the new Mirrorless camera mounttandard, the Micro Four Thirds. Olympus and Panasonic adoptedhe same standard so that their camera bodies and lenses couldnterchange signals. This obviously was a great advantage for pro-

oting the new system and expanding their lens bases, especiallyn the early stages of its introduction.

It is noteworthy that the Mirrorless camera penetrated thenterchangeable-lens camera market from the bottom in terms ofensor sizes. In the early days, Mirrorless cameras were equippedith sensors of the same size as entry-level DSLR cameras. The first

ioneers, Olympus and Panasonic, adopted the Micro Four Thirdsensor in 2008. Second entrants, Samsung and Sony, then devel-ped their Mirrorless cameras with an Advanced Photo Systemype-C (APS-C) sensor, which is most common in DSLR camerasnd larger than the (Micro) Four Thirds sensor, and which appearedn 2010. As the market for Mirrorless cameras began to growapidly, Sony further expanded to the Full Frame sensor Mirror-ess camera in 2013. This market segment is especially important,s it appeals to photography experts who have the greatest influ-nce on brand reputation. Consistent with Christensen’s (1997)


isruptive innovation model, Mirrorless camera manufacturers’ntry into the market from the lowest-end segment made incum-ent leaders in the traditional market facile and pushed them toevelop higher-end products. As Mirrorless cameras expanded to

Long ShortMore than 500 g 200–350 gRelatively uniform Varied

higher-end products, the incumbent leaders lost their footing in themarket.

Interestingly enough, Samsung, which previously had a hardtime penetrating the DSLR camera market with its path-followingstrategy in the mid-2000s, performed much better in the Mirror-less camera market with a path-creating strategy. Being a secondentrant into the market, Samsung was the first manufacturer tointroduce a Mirrorless camera with the APS-C format sensor.2

6.6. Industry leaders’ response

If the incumbent leaders had invested in the Mirrorless camerasearly on, the latecomer firms would have had a much harder timecatching up with the leaders. This happened when a competence-enhancing discontinuity from the SLR to DSLR camera took place inthe 1980s and 1990s. In this third phase, however, the new technol-ogy was brought endogenously by latecomers, and its future washighly uncertain. Canon and Nikon did not consider the Mirrorlesscamera to be a serious threat. Rainer Fuehres, head of Canon Con-sumer Imaging Europe, said in 2011 that “Mirrorless cameras havebeen introduced by manufacturers that find it difficult to competein the DSLR market” (Demolder, 2011). Although they recognizedthat consumers desired lighter cameras, Canon and Nikon chose toimprove their products within the boundaries of the DSLR design.These former leaders built on their existing DSLR-related resources,capabilities, and product lines, which had brought them success inthe past (similar to the way that Leica responded to the advent ofthe SLR camera). It is thus not surprising that the order of entry intothe Mirrorless camera market was almost opposite to the marketshare rank in the DSLR camera market, as Fig. 3 illustrates.

Although the incumbents’ sustaining innovation makes sensegiven that their DSLR camera business was still highly lucrative(Yasu and Amano, 2011), the power of competence-destroying dis-continuity overwhelmed their status quo strategies. The result ofsticking to a current technology/strategy that had become mis-aligned to the changing market environment was painful (“successtrap”). Although Canon and Nikon belatedly and reluctantly enteredthe Mirrorless camera market in 2013, their main product line wasstill the DSLR camera, which was already losing ground to the Mir-rorless camera.

7. Implications and conclusions

In this study, we identified three phases of change or persistenceof industry leadership (or catch-up cycles) across nations/firms inthe interchangeable-lens camera market. We examined success-


2 After launching NX models in 2015, Samsung did not release any other Mirror-less camera. We believe that this decision was based on Samsung’s classification ofthe camera business as a non-core business in its corporate-wide restructuring.




Table 3Explanatory Factors Affecting the Three Phases of Industrial Leadership.

First Phase: Leadership shift(mid-1960s)

Second Phase: Sustained leadership(1980s)

Third Phase: Leadership shift(mid-2010s)

Windows of opportunityTechnology *** (SLR camera:

competence-destroying)** (DSLR camera:competence-enhancing)

*** (Mirrorless camera:competence-destroying)

Demand *** (demanded lens interchangeabilityand parallax-free camera)

** (demanded tele-transmission,digital retouch, reusable memory)

*** (demanded smaller and lightercamera with high image quality)

Policy & Institution *** (WWII and Japan’s promotion ofoptics industry)

*** (worldwide support for digitaltechnologies)

* (no policy specifically favoringlatecomers)

Firm Capabilities & StrategiesLatecomer challengers *** (path creating strategies) * (path following strategies) *** (path creating strategies)Incumbent leaders *** (incumbent trap) *** (rapidly adopted the new digital

chno*** (incumbent trap)

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sterisks indicate the importance of each explanatory factor. ***: significant, **: fac

omponents of catch-up. Table 3 provides a summary of the threeases.

The common element in the successful catch-up cases examinedn this study is that innovation and path-creation were initiatedy latecomer firms. In the first case, although the SLR mecha-ism was not a Japanese invention, Japanese challengers activelydopted and improved this new technology (i.e. exogenous inven-ion and endogenous adoption). In the third case, latecomers inapan and Korea developed their own new technologies to com-ete with strong incumbent leaders (i.e. endogenous inventionnd endogenous adoption). These path-creating strategies intro-uced a competence-destroying discontinuity to the market. The

mportance of active initiatives on the part of latecomers is furtherupported when we consider the aborted catch-up case, in whichidely accepted trends resulting from the worldwide digital revo-

ution brought a competence-enhancing discontinuity that favoredhe incumbent leaders (exogenous invention and exogenous adop-ion). These three phases of the history of the interchangeable-lensamera market strongly highlight the importance of latecomers’echnological initiatives and the dangers of incumbent leaders’hort-sighted or delayed responses.

In addition, the rigid response of incumbent leaders expeditedhe leadership turnovers described herein. In the two successfulatch-up cases, the industry leaders underestimated the latecom-rs’ new, disruptive innovations, which later developed into theew standard. The ever-changing nature of consumer preferencebserved in these cases implies a major discrepancy betweenhanging consumer demand and the unidirectionally accumulat-ng technological competence of incumbents. Incumbents with atrong competitive edge will be in danger if challengers target thever-increasing gap between industrial environments (demand,echnology, and policy/institutional influence) and incumbentesponses.

Another important commonality of the success stories share ishat latecomers require adequate knowledge bases or capabilitiesn order to initiate path-creating strategies. In the first leadershiphift, Japanese firms initially produced rangefinder cameras, imi-ating their German competitors. Similarly, in the third shift, allhe firms in the Mirrorless camp had considerable experience withSLR cameras and lenses. No single firm suddenly appeared in thearket and succeeded in catch-up. Thus, we conclude that a cer-

ain depth of historically accumulated capabilities and knowledges required for successful catch-up.

Similarly, coordination of efforts among latecomers was impor-ant in both successful catch-up cases. In the first case, Canon andikon cooperated to catch up with German leaders, complementing


ach other’s weaknesses. When Olympus and Panasonic introducedhe brand-new Mirrorless cameras in the third catch-up case, theyorked together to develop a common mount standard. This coop-

logy)

g, and *: minimal.

eration allowed them to release as many lenses as possible into themarket, thus aiding them in overcoming second-mover disadvan-tages.

We also note that neither latecomer initiative nor path creationalone may be sufficient to cause changes in industry leadership.Each of the successful leadership shifts entailed significant changesin multiple windows of opportunity (see Table 3). In the first case,technology transfer from Germany to Japan during World War II,along with Japan’s protective trade policy and promotion of thecamera industry, proved to be crucial to the change in industryleadership. Consumers’ desire for a more flexible camera systemwithout parallax also played an important role. In the third lead-ership shift, changes in demand for lighter, high-quality camerasand technological advances in the electronics field facilitated thelatecomers’ path-creating catch-up. Our contrasting case to the suc-cessful cases of catch-up also indicates that incumbents’ negligenceor lack of response is another necessary condition for successfulcatch-up. Thus, no single, individual factor (sufficient condition)can be exclusively identified as the cause of the successive leader-ship shifts in the three cases.

However, not all the factors involved in these cases are equallyimportant. The key factors influencing successful catch-up differand carry different weight in different cases. The impact of WorldWar II and the policies of the Japanese government and militarywere instrumental in the first leadership shift. In contrast, policyand institutional windows had little influence in the third, Mirror-less camera case. On the other hand, in the second case of sustainedleadership, incumbents’ agile response to emerging digital tech-nologies was a crucial factor, whereas demand and latecomers’capabilities were less influential.

Lastly, we find an interesting peculiarity of catch-up whencarefully examining the third phase of the history of theinterchangeable-lens camera. With the advent of Mirrorless cam-eras, business declined for traditional optical manufacturers, whilefor electronics companies, it increased. Samsung Electronics, Sony,and Panasonic had been engaged in various electronics businessesbefore developing Mirrorless cameras. Contemporary cameras fea-ture Wi-Fi-based photo transmission, mobile application-basedphoto retouching, remote operation of cameras using smartphones,and unified user experience with smart televisions or tablets. Thus,capabilities other than optical technique have become increasinglyimportant. This feature of the third shift may provide an importantindication of what future changes may be in store for this industry;it is certainly worth further research.

Catch-up cases are rare and highly specific to firms, countries,and industries; a cycle of catch-up is even less common. A catch-


up cycle is a complex combination of demand and technologyconditions, a country’s public policies/institutional influence, andrelevant firms’ strategic choices. Nonetheless, there are still some


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Wu, B., Wan, Z., Levinthal, D.A., 2014. Complementary assets as pipes and prisms:innovation incentives and trajectory choices. Strateg. Manage. J. 35 (9),


2 H. Kang, J. Song / Resear

arkets that are interesting and merit investigation. Thus, we callor in-depth studies on successive changes in industrial leadershiphat occur concurrently or discordantly at the firm and countryevels. We hope our study has contributed to this research stream.

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