Technological discontinuities and flexible production networks: The case of Switzerland and the world watch industry

Abstract

The twentieth-century history of the Swiss watch industry illustrates how cultures and industrial production systems experience great difficulty adapting to external change at different points in time. The current emphasis on production networks - unique reservoirs of potential technological innovation realized through cooperation rather than competition among firms - lacks a detailed appreciation of historic networks, and in particular their fragile character in times of economic turmoil. While networks can and do promote innovation within an existing technological framework, historical experience suggests their fragmented, atomistic structure is subject to disorganization and disintegration during periods of technological change. An exclusive focus on “production” ignores other constraints that are powerful forces governing the reaction abilities of regions. Previous research has largely relied on a model of oligopolistic competition to explain how the Swiss lost control of the world watch industry. I conclude, on the contrary, that the Swiss experience must be understood from the standpoint of how technological change challenges previous ways of organizing production, industry, culture, and society. Technology shifts present a series of strategic turning points that industrial leaders must navigate during a period of technological change.