The New Competitive Advantage: The Renewal of American Industry

305 Pages·2001·1.94 MB·English

by  Michael H. Best

The New Competitive Advantage
The Renewal of American Industry
Michael H. Best
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Best,MichaelH.
Thenewcompetitiveadvantage:therenewalof
Americanindustry/MichaelH.Best.
p.cm.
Includesbibliographicalreferencesandindex.
1. Competition—UnitedStates.2. Industrialmanagement—United
States.
3.Comparativeorganization.I.Title.
[HD41.B382 2001]338.6′048′0973–dc212001021559
ISBN0–19–829744–0
ISBN0–19–829745–9 (pbk.)
Acknowledgements
Conversationsabouttechnologicalchangeare‘intheair’attheUniversityofMassachusettsLowell.ChancellorWilliam
HoganandVice-ChancellorFrederickSperounishaveledthewayinadvancingamodelofhowatechnology-oriented
universitycan playa leadership role inregional development. I am fortunate.Feweconomistshavesuch opportunities
for ongoing discussions with engineers, scientists, and entrepreneurs on links between innovation, technology,
production, and the creation and diffusion of knowledge. These discussions form the background for the concern
with regional economic growth at the heart of this book. But even in this congenial institutional environment, the
influence of one individual stands out.
I have gained enormously over the years from conversations and shared endeavors with Professor Sukant Tripathy.
Sukant was a gifted advanced materials scientist. I worked with Sukant on a wide range of issues. These included
diversification of the jute industry of East Bengal; the search for ‘clean energy’ solutions that address simultaneously
thechallenges of thetechnologicaldivide betweenrich and poor regions and global warming;the pursuit of analogies
between self-assembly processes amongst molecules in laser impacted nanostructures and networked business
enterprises; and the role of ‘systems integration’ as a source of competitive advantage in Silicon Valley and Boston's
Route 128. Tragically, Sukant died in a swimming accident just after this manuscript was completed. The void is
permanent in the lives of the many that he touched.
TheUnitedNationsIndustrialDevelopmentOrganizationinViennaistheother institutionwithwhichIhaveworked
closely over many years. Frederic Richard, Cristian Gillen, and Giovanna Ceglie, in particular, have been allies in
searching for new understandings of local
iv ACKNOWLEDGEMENTS
capability development, technology management, and approaches to technology assistance.
Involvementinindustrialcompetitivenessprojectsovernearlytwodecadeshasresultedinintellectualpartnershipsthat
have shaped the emerging methodology and content of the ‘capabilities and innovation’ perspective developedin this
book. These include Robin Murray in North London and Cyprus; Tea Petrin and Ales Vahčič in Slovenia; Cristian
Gillenand RobertForrantinJamaicaand Honduras; Vlado Kreačič and David Ellerman inMoldova; Rajah Rasiahin
Malaysia; Aidan Gough in Northern Ireland; and Robert Forrant and William Lazonick in Massachusetts. The
methodology involves a constant back and forth between guiding concepts and primary research as change strategies
and programs are designed, debated, and implemented. This has involved, as well, the study of hundreds of business
enterprises, and numerous educationalinstitutions, researchcenters, and industrialpolicyagencies indifferentparts of
the world. The debts to individuals who have shared their time, experiences, and expertise in interviews can only be
acknowledged collectively.
Manyhaveparticipateddirectlyinthepreparationofthismanuscript.JaneHumphrieshascommentedonandlistened
to many of the ideas. Aidan Gough, too, of the Northern Ireland Economic Council has left a major imprint on the
conceptual contours. Christos Pitelis suggested the title.John Bradley, Steve Landau, Eric Martin,Sir George Quigley,
Arthur Francis, Alan McGarvey, Merritt Roe Smith, Gianni Lorenzoni, Ben Fine, Steven Sass, and Stan Engerman
have offered helpful suggestions. David Musson gave wise advice on the introduction and first chapter. Urska Cvek
and Marjan Trutschl provided technical assistance. Urska and Richard Sherburne helped with the graphics and
Gregory DeLaurier, Ann Newton, Sarah Dobson, and Lynn Childress with editing. Fred Sperounis provided
intellectual and institutional support.
ElizabethGarnseyandBrianLoasbyhelpedshapemyideasonEdithPenroseandtheideaoftheentrepreneurialfirm.
IbenefitedfromdiscussionswithMark HarveyonPolanyi'sconceptofinstitutedprocesses. Ihavedrawnfrom Bruce
Tull's unpublished work on the ‘precision corridor’ of the Connecticut River Valley. I have gained from projects with
colleagues in the University of Massachusetts Lowell community including Robert Forrant, Krishna Vedula, Steve
McCarthy, Robert Wagner, Ken Gieser, Larry Gross, Chris Tilly, Phil Moss, Aldo Crugnola, Nick Schott, Sammy
Shina, Fran Eagle, William Mass, and Michael Fiddy. William Lazonick and Mary O'Sullivan's dining room has
ACKNOWLEDGEMENTS v
been the site of countless conversations with friends from all corners of the globe in the ‘Chandlerian school’ of
organizational capabilities. The Judge Institute of Management Studies, Cambridge University proved to be a
stimulating environment to try out many of the themes while I was the Arthur Andersen Visiting Fellow in 1999.
I have learned from a group of students who have written dissertations under my direction on topics related to
‘industrial districts’ in different contexts. These include Rich Parkin, Bruce Tull, Marcela Miozza, Roman Habtu, José
Tavara, Curtis Haynes, Maribel Aponte, Ron Caplan, and Alison Dean. Other former students who have influenced
mythinkingincludeDavidLubin,TonyGuglielmi,FrankJohnson,AlRuthazer,FrankStathas,PeterUngaro,andJack
Plaistek.
Finally, my son Lawrence has generously consented to interruptions in my soccer-training program to work on my
book. But perhaps my potential as a goalie has not suffered greatly.
It goes without saying that responsibility for errors and omissions rests with the author alone.
M.H.B.
Cambridge, Massachusetts and Oxford
January 2001
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Contents
List of Figures ix
List of Tables x
List of Boxes x
Preface xi
1. Introduction 1
Growth Anomalies 1
Competing Perspectives 2
Porter's Cluster 7
The Productivity Triad 9
Chapter Outline 15
2. Production Systems 20
The Idea of Technology Management 20
The American System and Interchangeability 25
Henry Ford and Single-Product Flow 28
Toyota and Multi-Product Flow 36
Canon and New Product Development 40
Intel and Systems Integration 46
Conclusion: Production Capabilities and Industrial
Structure 54
Appendix 2.1.Throughput Efficiency and Waste 58
3. Cluster Dynamics 60
The Principle of Increasing Specialization 61
Open System Dynamics 69
Conclusion 85
4. Innovation Capabilities and Skill Formation 90
Business Models and Innovation Capabilities 91
viii CONTENTS
Technology Manpower Development 105
Conclusion 114
5. The Resurgence of Route 128: The Triumph of Open Systems 117
The Argument in Brief 117
Industrial History 119
Regional Technology Capabilities 131
Skill Formation 149
Conclusion 158
6. Cluster Dynamics in Malaysian Electronics 163
Challenge: Growth with Low Value Added 163
Industrial Policy 164
The Singapore/Johor Region 166
Penang 171
Summary 187
7. The Case of Northern Ireland 191
Business Model 192
Production Capabilities 204
Skill Formation 209
Conclusion: The Lack of Growth Engines 214
8. Policy Implications 216
The Productivity Triad and Growth Anomalies 216
Capability Development Processes 219
Conclusion 241
9. The Sustainable Growth Challenge 243
Beyond the Growth or Environment Tradeoff 243
Design for Sustainability 244
Technology Design 245
Manufacturing Design for Energy Efficiency 250
Conclusion: Sustainability and the Red Queen Effect 254
Glossary 257
References 264
Index 279
List of Figures
1.1.Productivity Triad 10
2.1.Evolution of industrial structure 57
3.1.Model of cluster dynamics 70
4.1.Laboratory-push innovation: US big business 95
4.2.Incremental innovation: Japan PS 4 98
4.3.Systems integration innovation: US PS 5 100
4.4.Regional growth and skill formation dynamics 107
4.5.Plastics industrial food chain 112
5.1.Competing business models 124
5.2.The law of diminishing sizes 133
5.3.Genealogy of two regional production systems 135
5.4.Electrical engineering graduates in Massachusetts 155
6.1.Design capabilities and skills integration 177
6.2.International comparison of science and engineer graduates 188
7.1.Multi-disciplinary R&D group 197
9.1.Biodegradable Polymer Research Center 247