Our study of the evolution of Japanese and US production networks in theelectronics industry in East Asia in the 1990s has enabled us to identify how various forces that we associate with globalization—technological change, technology transfer, the shortening of product life cycles, trade liberalization, and the development of local centers of expertise—have shaped corporate decision-making. By focusing on change in one sector over a period of time, we were able to illustrate the dynamic process by which corporations of all nationalities have adapted to competitive forces.
Pressures arising from the forces of globalization produced convergence
insome firm strategies. Corporations not only learned from their own
experiences but also from those of their competitors. In some instances, they
attempted to emulate what they perceived as being industry best practice. The
areas in which convergence occurred include the mix of products that are now
produced in Asia and the increasing variety of value-chain activities that both
American and Japanese firms have relocated to the region. Whereas in the past
Japanese production in other parts of the region consisted overwhelmingly of
consumer electronics, by the mid-1990s Japanese firms had joined their US
counterparts in moving a substantial portion of PC production to the region.
Japanese firms have also jumped onto the bandwagon of OEM contracts. During the
early 1980s, when the US dollar appreciated rapidly, cash-strapped American
firms were the first to experiment with new forms of international production
that did not necessarily involve equity control. These provided substantial
competitive advantages to American computer companies. Similarly, American
firms were the first to take advantage of the growing concentrations of
expertise in various areas of electronics production in East Asia by
transferring increasing responsibility for R&D to subsidiaries. Again, this
has proved to be a cost-effective strategy that some Japanese firms are
beginning to emulate. The new responsibilities devolved to Japanese
subsidiaries have inevitably required changes in management practices that have
brought them closer to their American counterparts. Japanese electronics
networks have become more open—increasingly outsourcing components—and less
centralized in their R&D and management practices. The vintage effect appears
to have been important in the opening up of networks—but so, in addition, have some
of the forces of globalization. It is important to emphasize that the effects
observed have been in plants that have been predominantly exportoriented. In
other countries, where Japanese subsidiaries have produced primarily for the
local market, aided by various tariff and non-tariff barriers, the vintage effect
and an opening up of networks is far less evident.
Nationality of ownership continues to determine strategies in some areas.
One example is in personnel management. Because of an unwillingness to promote local
managers to top positions and because of the operation of a seniority system that
inhibits rapid promotion, Japanese companies have found it difficult to recruit
and retain quality managers and engineers in their Asian subsidiaries. Surveys
have shown that most managers consider working conditions and promotion
opportunities in US subsidiaries to be far more favorable, placing Japanese
subsidiaries at a competitive disadvantage. The rapid expansion of the electronics
industry in Southeast Asian has offered high-caliber personnel the opportunity
for movement among employers. Extensive “job-hopping” is the
name of the game, a phenomenon that Japanese corporations have found alien.
The strategy for the training of engineers that many Japanese firms have
adopted addresses this problem. Most of these engineers are hired internally.
Based on a careful selection process, each affiliate develops a pool of highly
motivated “technicians,” which they then train over a period of five to seven
years to become engineers. In this
manner, engineering skills are made firm-specific, reducing the likelihood of
job-hopping behavior.