Silviase/jgov_v1.4_full_ann huggingface dataset:
Table 1: Number of DSC manufacturers that introduced at least one new DSC model annually, 1997-2005

Year	No. of Manufacturers	Avg. MP
1997	23	0.48
1998	17	1.11
1999	17	1.68
2000	20	2.23
2001	22	2.31
2002	19	2.77
2003	21	3.45
2004	21	4.42
2005	17	5.68

Note: A total of 40 DSC manufactures introduced at least one new model between 1997 and 2005; 777 new models were introduced over that period.

Data Sources: Digital CAPA (various year).

### 2.2 Continuous Upgrading of Image Resolutions

Table 1 also gives the average number of pixels in new DSC models which were introduced between 1997 and 2005. The annual average number of MPs increased rapidly every year except in 2001 when the average number of pixels surpassed two million (i.e. 2 MP) and there was a temporary lull. It should be noted that image resolutions of more than 2 MP in a standard photo size are not distinguishable to the naked eye. Logically, it would appear that new models of more than 2 MP—or image resolutions that cannot be recognized by an ordinary person’s eye—would be of little interest to consumers. Nonetheless, partly due to the cunning of marketers, consumers quickly became accustomed to rapid pixel count upgrades and actively sought out DSCs with higher MP counts.

The image resolution via MP upgrading, we believe, provides a key to clarifying price dynamics in the Japanese DSC industry. We agree with Aoshima and others that a myth of higher pixels (i.e. a higher pixel model represents a higher-end model) prevailed in Japan in the late 1990s. We will discuss this issue further in the following sections.

### 2.3 Pixel Upgrading and Product Generations

Regular image resolution upgrades enabled high initial market prices for new models in the late 1990s. In Table 2, we classified new compact DSC model introductions from 1997 to 2005 in terms of product generations and pixel upgrading. We identified nine product generations (G1, G2, etc. to G9) based on MP counts from less than one MP to eight MPs or more. We tallied up the total number of new compact DSC models introduced each year and calculated the average price at introduction of the compact DSCs to the market. It is clear from Table 2 that pixel upgrading over product generations is a key feature of
the compact DSC market during the period we studied.

We observed two salient features regarding the relationship between the price at introduction and product generation over the 1997 to 2005 period. First, we observed a downward price trend within one product generation and this can be observed in every single generation over the entire observation period. In G4, for example, compact DSCs were introduced at an average price of ¥83,353 in 2000 and then fell to an average price of ¥15,663 in 2005. Each time a new model was introduced in a new product generation (i.e. a higher pixel count) the price was set higher than in earlier product generations. This can be very clearly seen by comparing the initial DSC introductory price in G5 and G6, ¥136,500 and ¥144,333 respectively, and looking down the column to compare those with the average prices of DSC introductions in subsequent years. It follows from this data that the industry-leading manufacturer was likely to set a high DSC price upon introduction to the market, whereas the followers of that generation were likely to set lower prices.

Second, we noticed that price differentials between product generations decreased markedly from 2001 to 2005. In 2004, 31 new DSCs were introduced in G5 averaging ¥44,142 each while 34 DSCs were introduced in G6 at an average price of ¥50,303. The most price differential between G5 and G6 was only ¥6,161. In other years, a similar trend can be observed.

### 2.4 Rapid Miniaturization After 2001

Rapid miniaturization was the second significant aspect of DSC product development after 2001. Before 2000, horizontal differentiation added optional functions, which tended to increase the overall weight of the DSCs. After 2001, however, high-end models became significantly lighter in weight, which translated directly to the thickness of the DSC. In this paper, we take the weight and thickness to be directly correlated and therefore interchangeable.

Table 3 shows that the number of new models introduced into the market with a thickness of less than 30mm, the so-called 'thin models,' rose sharply in 2001. In May 2001, Canon broke through the 30mm thickness barrier with the introduction of the IXY Digital at a depth of only 26.9mm $ ^{3} $ . Intense competition to minimize the depth (and weight) of DSCs ensued with the number of new thin DSC camera models reaching nearly 50 percent of the total in 2005.

There has also been a rapid decrease in weight since 2001. Figure 1 depicts the average weight and the average thickness of new models introduced from 1997 to 2005. The average product weight decreased markedly as shown in the rapidly dropping curve between 2001 and 2003. The average product thickness decreased sharply after 2001. The drop in weight mirrors the drop in thickness.
Table 2: Pixel upgrading and DSC product generations, 1997-2005

Generation	G1	G2	G3	G4	G5	G6	G7	G8	G9
MP	MP < 1	1 \leq MP < 2	2 \leq MP < 3	3 \leq MP < 4	4 \leq MP < 5	5 \leq MP < 6	6 \leq MP < 7	7 \leq MP < 8	8 \leq MP
1997	29	56,910	4	91,750	0	0	0	0	0	0	0
1998	7	47,857	24	80,125	0	0	0	0	0	0	0
1999	3	32,533	12	63,233	19	81,737	0	0	0	0	0	0
2000	7	12,080	10	53,880	18	67,056	17	83,353	2	136,500	0	0	0	0
2001	11	11,160	12	34,717	26	51,731	21	74,381	11	82,909	3	144,333	0	0	0
2002	5	15,188	9	27,200	22	41,355	24	59,792	11	67,727	7	101,429	0	0	0
2003	1	20,000	4	18,500	11	27,871	39	42,738	13	50,154	14	79,286	2	75,000	0	1	130,000
2004	0	0	2	25,000	24	39,808	31	44,142	34	50,303	8	63,875	6	74,167	6	123,333
2005	0	0	0	3	15,663	6	28,432	40	43,940	16	43,813	10	54,880	14	67,929

Note: The left is the number of new DSC models each generation. The right is average prices (¥). Data Sources: Digital CAPA (various year).
Table 3: Number and share of new models of a thickness of less than 30mm, 1997-2005

Year of Introduction	No. of New Models (A)	No. of New Models of a Thickness of less than 30mm (B)	Share (B/A)
1997	52	2	3.85
1998	50	0	0
1999	50	0	0
2000	70	5	7.14
2001	100	14	14.00
2002	99	25	25.25
2003	109	29	26.61
2004	139	53	38.13
2005	108	53	49.07

Note: A total of 777 new models were introduced in total from 1997 to 2005. Data Sources: Digital CAPA (various year).

Figure 1: The average weight and the average thickness of DSCs, 1997-2005

Note: A total of 777 new models were introduced from 1997 to 2005. Data Sources: Digital CAPA (various year).
## 3 Hypothesis Formulations

### 3.1 Vertical/Horizontal Differentiation, Miniaturization, and Pricing

In this section, we summarize our key findings from the previous section to facilitate the formulation of our hypotheses. First, as discussed above, there was a myth of higher pixels among DSC consumers in Japan (and elsewhere), which offers a clue to clarifying price dynamics in the Japanese DSC industry. The pace of upgrading pixel counts was quite rapid in the late 1990s, and vertical differentiation by manufacturers accounted for this upgrading in the main. However, in the 2000s, although pixel count upgrading continued, price differentials between DSC generations gradually declined.

Second, the increase in the number of horizontally competing models produced by one manufacturer lowered the price of each new model introduced on the market in the late 1990s. Since 2001, however, a similar product development strategy led to a pattern of high prices when a new model of a new generation was introduced to the market. Finally, we confirmed that rapid miniaturization started around 2001 in the Japanese DSC industry reducing the average thickness of the DSC to below 30mm. In a similar and related trend, the average weight of DSCs decreased rapidly especially between 2001 and 2003 (from 280 grams to 197 grams). The evidence suggests that the pattern of innovation and product development changed drastically in or around 2001. This coincided with a major increase in the volume of production of all digital cameras including compact DSCs.

### 3.2 Hypothesis

Reflecting upon these findings, we hypothesize that the vertical differentiation of image resolution was the main source of price dynamics in the late 1990s. The increase in the number of competing models drives down DSC prices. However, since 2001, price differentials are mainly explained by miniaturization with horizontal differentiation. Accordingly, the increase in the number of horizontally competing models introduced by one manufacturer raises significantly the price of each newly introduced high-end model.

If we can confirm this hypothesis, the product development strategy of the Japanese DSC industry would have shifted from simple vertical differentiation (upgrading the pixel count) to a complicated mix of vertical and horizontal differentiation.

## 4 Empirical Analysis

### 4.1 Data

We obtained data on transaction prices and technological specifications from the monthly trade journal Digital CAPA. This trade journal provides not only
technical profiles on new DSC models, but also transaction prices for new models based on the editors' independent surveys of mass retail stores in and around Tokyo, Japan's largest market for DSCs and a convenient testing ground for DSCs before launching new models globally. Transaction prices for 68 models, however, are reported only in special issues of Digital CAPA. This means that there may be up to a 6-month time lag between the date when the special issue appears and actual date of the new model's introduction. It should be noted that the price data with such a time lag may be lower than the prices at the date of introduction. We adjust for this possible measurement bias by using a dummy variable in hedonic regressions. We also utilized manufacturers' catalogs to supplement the data on product specifications.

The resulting dataset constitutes 562 new compact DSC models introduced by 31 manufacturers over the years 1997 to 2005. The variable names and definitions used in our analysis are summarized in Table 4 and the basic statistics are shown in Table 5.

### 4.2 Basic Specifications

The basic specification of the hedonic function is based on a Box-Cox regression model. The specification that we employ is:

$$ \begin{aligned}price_{i}^{(\theta)}=&\alpha+M_{i}\beta_{1}\times(Period1+Period2)\\&+X_{i}^{(\lambda)}\beta_{2}+Z_{i}\beta_{3}+\beta_{4}\sum_{f}D_{i}^{f}+\beta_{5}\sum_{t}D_{i}^{t}+\beta_{6}pld_{i}+u_{i}\end{aligned} $$

where $u \sim N(0, \sigma^{2})$.

The explained variable (price) is an introductory transaction price at the date of introduction of a new model. This is subject to a Box-Cox transform with parameter $ \theta $ .

We incorporated not only technological specifications but also product development strategies in the hedonic regressions as hypothesized above. That is, we constructed three types of strategic variables regarding: (i) vertical differentiation in pixel counts, (ii) horizontal differentiation, and (iii) miniaturization.

The first strategic variable (vertical differentiation in pixel counts) is defined by the absolute difference in pixels between a standard model and a cutting-edge model introduced within the same year. That is, the larger the value of this variable, the lower the level of the technology employed in the model by a particular manufacturer in the same year. The second strategic variable (horizontal differentiation) is defined as a dummy variable for each model which takes on the value of unity if the model is a manufacturer's second or later model introduction within a certain pixel generation within one year. The third strategic variable (miniaturization) is defined by the absolute difference in weight between a standard model and the lightest model introduced within the same year. That is, the larger the value of this variable, the lower the technology employed in the model by a particular firm in the same year.
Table 4: Variable definitions

price Transaction price on the date of introduction

pixel Image resolution (0.01 MP)

zoom Optical zoom factor (magnification ratio)

lcd Dummy variable that takes on the value of unity if the liquid crystal display size is more than two inches.

fstop Dummy variable that takes on the value of unity if the lens takes a wide f-stop value under 2.8, otherwise zero.

fd Dummy variable that takes on the value of unity if the lens takes a focal distance under 35mm, otherwise zero.

cpd Closest photograph distance (cm).

weight Weight without battery (gr).

depth Dummy variable that takes on the value of unity if the thickness of a model is less than 30mm, otherwise zero.

power Dummy variable that takes on the value of unity if a disposable battery can be used, otherwise zero.

vr Dummy variable that takes on the value of unity if vibration reduction mechanism is installed, otherwise zero.

water Dummy variable that takes on the value of unity if the model is waterproof, otherwise zero.

pld Dummy variable that takes on the value of unity if the transaction price is observed with no less than six-month
Note: Standard errors are in parentheses.

Table 5: Basic statistics

Year	1997	1998	1999	2000	2001	2002	2003	2004	2005	1997-2005
price	62057.14	71724.14	70864.71	69712.00	60522.82	53007.20	49913.58	53298.96	48044.44	56927.42
(31983.55)	(29416.83)	(22860.25)	(36429.95)	(31884.08)	(27529.54)	(22493.44)	(25563.04)	(14767.50)	(27711.84)
pixel	55.82	119.10	176.06	238.28	258.31	291.67	355.44	471.29	593.00	341.14
(35.09)	(36.74)	(53.85)	(96.38)	(124.70)	(126.90)	(120.25)	(135.27)	(134.84)	(190.59)
zoom	1.54	2.34	2.31	2.97	2.94	2.93	3.39	4.06	4.39	3.29
(0.88)	(1.83)	(1.45)	(2.24)	(2.08)	(2.00)	(2.25)	(2.54)	(2.70)	(2.33)
lcd	0.29	0.66	0.32	0.30	0.21	0.03	0.07	0.33	0.81	0.32
(0.46)	(0.48)	(0.47)	(0.46)	(0.41)	(0.16)	(0.26)	(0.47)	(0.39)	(0.47)
fstop	0.14	0.34	0.32	0.30	0.27	0.23	0.19	0.23	0.16	0.23
(0.36)	(0.48)	(0.47)	(0.46)	(0.45)	(0.42)	(0.39)	(0.42)	(0.37)	(0.42)
fd	0.11	0.24	0.09	0.18	0.14	0.09	0.16	0.23	0.14	0.16
(0.31)	(0.44)	(0.29)	(0.39)	(0.35)	(0.29)	(0.37)	(0.42)	(0.34)	(0.36)
cpd	25.00	16.52	17.59	12.02	13.97	20.31	13.20	7.24	6.09	13.03
(20.93)	(10.48)	(16.94)	(10.74)	(13.17)	(30.61)	(21.94)	(5.51)	(6.46)	(17.63)
weight	320.29	322.59	304.69	326.86	280.31	218.15	197.64	212.86	198.36	245.36
(131.37)	(143.34)	(119.40)	(175.74)	(170.61)	(113.74)	(120.44)	(122.93)	(137.41)	(145.58)
depth	0	0	0	0.08	0.13	0.28	0.31	0.40	0.53	0.26
—	—	—	(0.27)	(0.34)	(0.45)	(0.46)	(0.49)	(0.50)	(0.44)
power	0.18	0.14	0.29	0.32	0.50	0.56	0.58	0.70	0.67	0.52
(0.39)	(0.35)	(0.46)	(0.47)	(0.50)	(0.50)	(0.50)	(0.46)	(0.47)	(0.50)
vr	0	0	0	0.04	0	0	0.05	0.08	0.25	0.06
—	—	—	(0.20)	—	—	(0.22)	(0.27)	(0.43)	(0.24)
water	0	0.03	0.03	0.02	0	0.05	0.01	0.02	0	0.02
—	(0.19)	(0.17)	(0.14)	—	(0.23)	(0.11)	(0.14)	—	(0.13)
obs.	28	29	34	50	78	75	81	106	81	562
Table 6: Hedonic regression results

Variables	Coefficient	Variables	Coefficient
Product development strategies	Firm dummies
Vertical differentiation in pixel counts, 1997-2000	-0.004**	Agfa	1.393
Vertical differentiation in pixel counts, 2001-2005	0.005***	Axia	-2.561***
Horizontal differentiation, 1997-2000	-0.750**	Bandai	-3.125**
Horizontal differentiation, 2001-2005	1.044***	Canon	0.005
Miniaturization, 1997-2000	0.002	Casio	0.256
Miniaturization, 2001-2005	-0.003***	Chinon	-0.725
Technical profiles	Concord	-3.899***
pixel	0.465***	Epson	-0.147
zoom	0.294***	Fujifilm	-0.103
cpd	0.007	Hitachi	1.340
weight	0.503***	Kodak	-1.106***
Technical profile dummies	Konica	-0.432
lcd	0.305**	Konica-Minolta	-0.105
depth	0.801***	Kyocera	0.965**
fstop	0.160	Leica	-0.045
fd	0.331**	Maxell	-0.586
power	1.147***	Minolta	0.750**
vr	0.199	Muji	-2.895**
water	2.495***	Nhj	-2.253***
Year dummies	Nikon	0.362
1998	-0.635*	Olympus	0.062
1999	-1.456***	Panasonic	0.238
2000	-2.852***	Pentax	0.852***
2001	-4.117***	Polaroid	-0.600
2002	-4.937***	Ricoh	0.473
2003	-5.884***	Sanyo	0.445
2004	-7.018***	Sharp	1.571
2005	-8.556***	Tomy	-6.291***
pld	-0.798***	Toshiba	-0.645
constant	20.508	Victor	0.702

Notes: ***, **, * denote significance at 0.01, 0.05, 0.10 levels respectively. The number of observations is 562. The log-likelihood is -5894.09. The estimated parameter $ \theta $ is 0.178 where the explained variable, price, is transformed by a Box-Cox transform. The estimated parameter $ \lambda $ is 0.346 where the explanatory variables, $ X_{i} $ , is transformed by a Box-Cox transform. They are statistically significant.
sign as expected. These results indicate that rapid miniaturization with horizontal as well as vertical product differentiation facilitated higher introductory prices from 2001.

We obtained virtually significant coefficients regarding quality-related variables and other controls. First, pixel and depth are significant and positive, and they had relatively large impact upon prices. Second, the positive sign of cpd appears to be rather puzzling since a closer photographic distance is a desirable function for DSCs. However, the coefficient is not statistically significant at a 10% significance level. Third, year dummies are decreasingly negative and significant. Since the base year is 1997, our result suggests that DSC prices consistently declined throughout our observation period. Finally, several firm dummies are negative and significant.

### 4.4 Robustness Check

For the purpose of a robustness check, we employed regressions using several different specifications. The estimation results are summarized in Table 7.

Equation (8.1) excludes Period1 and Period2 from the basic model. The three variables on product development (i.e., vertical differentiation in pixel counts, horizontal differentiation, and miniaturization) have no significant coefficients without the cross terms of period dummies. This suggests that no particular strategic variable has any explanatory power consistently throughout the entire observation period. In other words, product development strategies qualitatively changed around the turn of the new millennium.

Equation (8.2) defines Period1 (1997-1999) and Period2 (2000-2005) using a different breakpoint from the basic model. The first period (1997-1999) produces negative effect of the first and the second strategic variables on prices, whereas the second period (2000-2005) induces a positive effect of the first and the second variables on prices. Hence the basic estimation results on vertical differentiation (i.e., pixel upgrading) and horizontal differentiation (i.e. the increase in competitive models) are robust. However, the third strategic variable (i.e., miniaturization) has no significant impact on prices. A possible reason would be that rapid miniaturization started from 2001, and prices of new models introduced in 2000 confounded the effect of miniaturization on prices in the estimation.

Finally, Equation (8.3) excludes firm dummies from the basic specification. We obtained virtually the same results regarding the three strategic variables.

## 5 Discussion

### 5.1 Does Fluid Technical Advance Restrain Modularization?

Modularization of parts and components does not prevail in the Japanese DSC industry. Most developments regarding key components such as imaging devices,
Notes: Equation (8.1) excludes cross terms of Period1 and Period2. Equation (8.2) defines Period1 (1997-1999) and Period2 (2000-2005) differently from the basic model. Equation (8.3) excludes firm dummies. ***, **, * denote significance at 0.01, 0.05, 0.10 levels respectively. The number of observations is 562.

Table 7: Robustness of regression results: alternative specification

Product development strategies	(8.1)	(8.2)	(8.3)
Without the cross terms of Period1 and Period2	Period1	Period2	Without firm dummies
Observations:	1997-2005	1997-1999	2000-2005	1997-2000	2001-2005
Vertical differentiation in pixel counts	0.000	$ -0.006^{*} $	0.006***	$ -0.017^{**} $	0.023***
Horizontal differentiation	-0.010	$ -0.516^{**} $	0.629***	$ -3.249^{***} $	4.395***
Miniaturization	-0.000	0.000	-0.001	0.010	$ -0.016^{***} $
Log-likelihood	-5909.01	-5960.37	-5960.37
batteries, and lenses, to name a few, occurred sporadically and in unexpected ways. Furthermore, Japanese manufacturers have vastly different origins and industry backgrounds some excelling in optical technologies and others in electronics technologies. Accordingly, very fluid technological advances are likely to induce most Japanese manufacturers to incorporate few modular components into their products (Aoshima, 2003, 2007). This appears to be in stark contrast to other electronics products.

There are two main types of product development architectures: modular architecture and integral architecture (Clark and Fujimoto, 1990; Henderson and Clark, 1990; Ulrich, 1995; Baldwin and Clark, 2000, among others). Modular architecture includes a one-to-one mapping from functional elements to physical components and specifies decoupled interfaces between components. On the other hand, integral architecture includes a complex (non-one-to-one) mapping from functional elements to physical components and/or coupled interfaces between components (Ulrich, 1995, p. 422).

Aoshima (2007) suggests that product development strategies in the Japanese DSC industry have evolved historically on the basis of integral architecture. On the other hand, Itoh (2004) emphasized a different view, that modular architecture has played a role in the Japanese DSC industry. Our findings are consistent with Aoshima (2007). We believe it is unlikely that modularization has dictated the innovative pattern of the Japanese DSC industry. The main source of competitive advantage, arguably, is the firms' organizational capability to integrate swiftly various technological advances into new DSC models which can then command high introductory prices.

### 5.2 Modular or Integral Architecture?

As noted above, modularization of parts and components did not prevail in the Japanese DSC industry to 2005. Most technological development in the DSC key components (e.g. imaging devices such as image sensors and image processors, batteries such as lithium-ion batteries, and lenses such as zoom and telephoto lenses), occurred sporadically and in unexpected ways. Instead, integral architecture has tended to characterize the Japanese DSC industry. Table 8 shows some of the standards-setting activities of the industry association comprised of DSC and other manufactures of imaging products, the Japan Camera Industry Association (JCIA) and its successor the Camera & Imaging Products Association (CIPA) established in July 2002 $ ^{4} $ .

As is shown in Table 8, the most active period of standards setting for DSCs began in 2003 not long after the formation of the CIPA $ ^{5} $ . All previous activity