Launched in 2009, League of Legends is always making efforts to maintain its vitality through continuous iterations and innovations. It reigns at the top of the revenue list of PC games, and its e-sports competition is also getting hotter every year. In terms of the hero characters it has introduced, it has expanded from the initial 40 characters to nearly 160 today, and the iterations of character skills and game rules during this period is countless.
The study of professor Zhang Pengxiang and co-authors leads to two main findings: First, If the GPIs are too frequent and disorderly, focusing only on the improvement of product features and neglecting the impact on user experience, it will be difficult to retain users even for excellent products. The introduction of a generational product innovation reduces customers’ adoption of the product in the near term. Second, the negative effect of GPI is less obvious for those mobile games that have attain a market-leading position and those that have only experienced fewer times of updates. The decrease in near-term customer adoption of the product in response to a generational product innovation will be weaker when the product has attained a market-leading position.
The past literature on GPI usually regards it as a useful enhancement and improvement of product features. Taking mobile games as an example, version updates usually include new game content, such as new characters and new maps, and will also include changes to existing game design, such as level settings and adjustments to values. Continuous version updates keep the game up to date with current trends, creating a new experience for players while attracting them to invest more time and money. Therefore, GPI is often seen as beneficial, especially for digital products or services, as an effective means for them to remain competitive in the market in the long run.
However, few scholars have noticed the dark side of GPI, which is not the more the better. Zhang Pengxiang’s study concluded that GPI is likely to cause user dissatisfaction in the short to medium term, which leads to a decline in usage. This is mainly caused by the increase of learning costs and the change of users’ using habits. On the one hand, newly added product content requires users to invest more time and effort to relearn the use of the product. On the other hand, changes to existing product designs require users to abandon long-established habits. Therefore, even if the updated content is helpful to improve the product functionality, it still leads to the loss of users.
To test these hypotheses about the effects of GPI on customers’ adoption of the product, the study examines the impact of mobile game updates on player activity based on a global mobile app database. A simple comparison of player usage before and after a handheld game update is not feasible because game makers have a strong incentive to update mobile games at key points in time, such as holidays, when they are prone to big sales, which can mask the negative effects of GPI. Therefore, the study takes advantage of the fact that some mobile games will operate the same game on both IOS and Android operating platforms, targeting the scenario where a new version is updated on one platform but not yet on the other for a difference-in-difference (DID) test.
The study suggests that mobile games that just experienced a GPI event will see a 9.2% drop in DAU, relative to apps that did not experience GPI events in the following week. This finding implies that these seemingly modest and beneficial innovations that take small steps have their own inherent risks. If a GPIs of mobile games are too frequent and disorganized, focusing only on improving product features while ignoring the impact on the user end, it will be difficult to retain users even for great products. In addition, the study also finds that the negative effects of GPI are less severe for those mobile games at the top of the charts and those that have only experienced fewer times of GPIs. These results partly explain why top games like League of Legends have survived GPIs, but they also reveal the serious challenges that such old games will face if they want to continue their success in the future.
The study makes three contributions to the literature. First, the analysis points to tension in pursuing generative appropriability. Researchers advise that firms create new innovations that build on their own existing innovations (Ahuja et al., 2013). However, while developing improved products incorporating features that build on a firm's current innovation can enhance generative appropriability, an emphasis on this form of product iteration and continual renewal could also destroy value for existing customers and damage the firm's primary appropriability, that is, the commercialization of the innovation. Second, we extend the literature on technology evolution. Prior research tends to link disruption with discontinuous technological transition or novel business models (Henderson & Clark, 1990), not with GPI. Moreover, research on technology evolution emphasizes that incumbent firms and industry structures are primarily disrupted by new entrants bringing about competence-destroying changes (Tushman & Anderson, 1986); yet it still begs the question of how successful firms get to the point where their products no longer appeal to customers. This study echoes but extends the idea that product failures arise from firms' inability to effectively manage customer relationships (Levinthal, 1991). Last, this study enriches the demand-side perspective on technology innovation. Since innovation outcomes are closely related to customers' adoption decisions, extant research examines extensively the role of the demand environment. To date demand-side research primarily focuses on preference heterogeneity in explicating why certain technology innovations are adopted (Danneels, 2004). The less noted fact is that the vast majority of new product ideas suf- fer commercial failure. One of the key reasons is the resistance from customers (Claudy, Garcia, & O'Driscoll, 2015), which has been documented in other fields such as information systems literature (Rivard & Lapointe, 2012).
Pengxiang Zhang (Ph.D. in International Business, University of South Carolina) is an Assistant Professor at the Department of Organization and Strategic Management, Guanghua School of Management, Peking University. His research interests lie at the intersection of strategy, innovation, and international business, with a particular focus on the context of digital economy. His work has been published in the Strategic Management Journaland in the Journal of Management Studies. He has also received nominations for several awards, including the AIB Alan M. Rugman Young Scholar Award and Best Paper in Emerging Economies Award. Pengxiang serves as ad-hoc reviewers for the Journal of Management and the Journal of International Business.