Technological Development, Corporate Strategies and Market Competition

Abstract

Efficiency in each company’s internal operations is the primary source for explaining the Japanese semiconductor industry development. But competitive-cum-cooperative (CCC) interfirm relations add incomparable advantages to the efficiency and flexibility of semiconductor companies’ operations. One important factor influencing a semiconductor company’s choice of CCC interfirm relations is the condition of the product market. There are three aspects of the market to consider. First, severe competition in the semiconductor market has significantly contributed to the dynamic development of the industry. Secondly, milder competition in parts, materials, and semiconductor equipment markets provided a favorable environment for developing interfirm cooperation and CCC interfirm relations. And finally, cooperative networks and relations led to some radical innovations, even if they did not prompt major breakthroughs. Innovation occurs when companies have chosen corporate strategies suitable to each stage of their development and when they accumulate high-level technological capability. The historical relationships among these factors—product market conditions, technological capability, and corporate strategies—have been vital in the development of the Japanese semiconductor industry. As a background to understanding the dynamics of the industry, I shall trace the historical relationships among the three factors.