Recasting the agglomeration benefits for innovation in a hits-based cultural industry: evidence from the Japanese console videogame industry.

Literature on the videogame industry has to date revealed the importance of pre-existing cultural and technological foundations, firm-level innovation management strategies, interactive innovation with end-users, and uniqueness of national production/innovation systems. There are few theoretically informed empirical studies, however, that investigate geographical dimensions of innovation dynamics, particularly the role of spatial agglomerations, in this ‘hits-based’ cultural industry. This paper focuses on the console videogame industry in Japan, drawing on the extensive research on secondary data, corporate questionnaire surveys and semi-structured interviews with representatives from videogame firms and organizations in the country. Our premise is that redundancy – a diverse range of often indistinguishably similar outputs, most of which end up as commercial failures – is critically important for innovation in industries that are characterized by fundamental demand uncertainties. We then argue that agglomeration (in the sense of both industrial and urban agglomerations) can play a vital role in accommodating, or ‘tolerating’, such redundancy by allowing constituent firms, whose practice may seem inefficient in the short run, to remain in business. The findings of our study lead us to be cautious about policy initiatives to identify and implement ‘best practices’ for innovation, which may end up replacing critical redundancy with increasing efficiency. [ABSTRACT FROM PUBLISHER]