Technological integration for imitation deterrence of new entrants : evidence from the Japanese digital imaging industry in 1990-2014

The sustainable competitive advantage of incumbent firms has been widely discussed, but its relation to the integral processes incorporated into product design and production remains poorly understood. This study investigates how differences in product architecture, that is, the presence of an integral process with new and old technology in new product design and production, are related to the intensity of market competition and the protection of incumbent firms from imitation. By comparing incumbent firms’ and new entrants’ levels of integral knowledge of old and new technologies, this study verifies that integral processes in new product development and production lead to incumbent firms’ sustainable competitive advantage. From a product architecture perspective in the context of the Japanese imaging industry, this study discusses why Japanese incumbent firms had been able to maintain a sustainable competitive advantage in an industry facing rapid digitalization. Findings indicate that the encapsulation of integral processes in incumbent firms’ product design and manufacturing, combining old and new technologies, can prevent the imitation of a product or technological development. This study also provides key insights into how product architecture affects the size of market entry barriers, the speed of manufacturing information leakage, and the intensity of market competition.