The Controllability of the Profit Structure of a Product: A Case Study of the Canon Inkjet Printer Business

Implementing innovations is important for firms to grow, but appropriating the returns from the innovations is also important. The ability to appropriate the returns from innovations is said to vary between industries, and yet it can also vary between firms in the same industry. This study is interested in inter-firm differences in the appropriability. Some firms in the same industry may enjoy a higher appropriability, but others may suffer from a lower one. Canon, a Japanese corporation, seems to be the former case. Why Canon's appropriability is higher than its competitors is answered via analyses of their inkjet printer business practices. In the analyses, Canon's inkjet printers which were sold mainly in the 1990s come under discussion. The study suggests and uses the idea "profit profile." This is a concept of grouping the product architecture with the profit allocation of the product. Based on a profit profile, product architecture can be used as the framework for analyzing the profit structure of the product. The study shows that Canon used 3 types of architectures and they change them flexibly, according to their competitive environment. Through the concept of "profit profile," it is explainable why Canon's appropriability is higher than its competitors.