A New Competitive Model and Innovations: The Development of the Industry

Abstract

In the late 1950s and 1960s, Japan entered an era of high economic growth and transformed itself from a defeated, small state-controlled economy in the Far East to one of the most powerful economic nations in the world. The iron and steel industry led this transformation by providing competitive steel for both domestic and overseas markets and helping the other heavy industries achieve high growth. This quick recovery and strong competitiveness was gained through the competitive model established by Nishiyama Yataro at Kawasaki Steel’s Chiba Works and which spread throughout the iron and steel industry. His competitive model, which was to compete for market share by constructing state-of-the-art works with loans and company bonds, had self-expansion and fierce competition built into it. Within the model, once a new innovation was introduced, it begot another innovation. These innovations, based on a higher minimum efficiency scale, made competition to expand all the more fierce. The government had, therefore, to coordinate the cut-throat competition. Contrary to the conventional view, we will see that the postwar involvement of the Japanese government in the industry was not its initiative but was the result of the fierce competition brought about by the industry’s competitive model. In 1970, therefore, the industry had to reorganise its competitive and market structure. This chapter will examine the new competitive model set by Nishiyama and its development until 1970.