Cross-Pacific internationalization of R&D by U.S. and Japanese firms

Efforts by MNCs to develop coordinated international R&D networks have taken place from different historical bases of internationalization and in the context of differing trends in the role of R&D within the corporation, as the cross-Pacific R&D investment in leading U.S. and Japanese firms in the electronics industry shows. Japanese firms, although they espouse a strategy of 'localization', are establishing wholly-owned R&D centres in the U.S. with highly specialized technology mandates that to be used by the company must be networked with their parent organizations. U.S. firms rely on joint ventures or wholly-owned labs with a wider array of technologies that face strong pulls to a local orientation. The patterns are somewhat out of line with the models of internationalization each side is espousing.     

Comparing U.S. and Japanese corporate-level operating performance using financial statement data

This study uses financial statement data restated to a similar reporting basis to compare the operating performance of U.S. and Japanese companies, identifying possible strategic and environmental explanations for the differences observed. Comparisons are made for U.S. and Japanese samples as a whole, for groups of Japanese firms (keiretsu v. nonkeiretsu), and for 11 industries. The results show that neither country appears to generate systematically higher profit margins, but that U.S. firms turnover assets other than inventory more quickly and therefore have higher rates of return on assets. More intensive examination of these results suggests that environmental factors, such as cultural or structural differences, are the primary causes of the observed differences in the data analyzed.     

A comparative analysis of layoff announcements and stock price reactions in the United States and Japan

Downsizing and layoffs are an important mechanism for U.S. firms to cope with their strategic and economic environment. In contrast, the Japanese tradition of lifetime employment limits the ability of firms to employ layoffs as a strategic measure, relegating its use to conditions of financial distress. This paper provides the first comparison of layoffs in Japan and the United States and examines stock price reactions to layoff announcements in each country from 1990 to 1994. Agency theory and Aoki's cooperative game theory are employed to discuss differences in the governance structures of U.S. and Japanese firms and their implication for stock price reactions. Results show that layoff announcements trigger negative returns for both U.S. and Japanese firms. Specifically, layoff announcements of U.S. firms are associated with a negative 1.78 percent abnormal return, while layoff announcements for Japanese firms are associated with a negative 0.56 percent abnormal return. To better understand the impact of layoffs, this study examines the relationships between stock price reactions and various layoff characteristics (such as whether the layoff is proactive or reactive or whether the layoff is the first in the industry). Implications of the findings are discussed. © 1997 John Wiley & Sons, Ltd.     

Contingent Product Design and Marketing Strategies Influencing New Product Success and Failure in U.S. and Japanese Electronics Firms

The commercial success or failure of a product doesn't rest solely on the whims of the marketplace. The myriad, often interdependent, strategic trade-offs made throughout the product development process go a long way toward determining whether a product succeeds or fails. The key to success often rests in finding the right combination of product design and market choice decisions. Toward that end, William E. Souder and X. Michael Song examine the relationship between product success and several product design and market choice strategies. In particular, they explore the possibility that the correct strategy combination differs depending on a firm's perception of market uncertainty, which they measure in terms of the respondents' perceived familiarity with the market for a product, perceived understanding of customer needs, and perceived capability to translate those needs into product performance specifications. Recognizing that the correct combination of strategic choices may also depend on firm size, industry, and culture, the study focuses on small U.S. suppliers of electronics components. Fortune 500 producers of electronics final products, and Japanese producers of electronics final products. For the small U.S. firms in the study, an emphasis on performance superiority, technical superiority, or radically new products provides a recipe for failure under low market uncertainty. Even under high market uncertainty, these characteristics do not equate to success for the small U.S. firms in this study. The findings suggest that these firms should focus on design compatibility with a purchaser's installed base. The responses from Fortune 500 firms and Japanese companies indicate that under low market uncertainty these larger organizations should consider emphasizing compatibility and avoiding radical designs. For markets that the larger firms perceive to be highly uncertain, the results suggest that these companies should emphasize performance superiority, technical superiority, and radical designs. The findings related to market choice strategies also support the notion that the correct combination of strategic decisions depends on firm size, culture, and the perceived level of market uncertainty. However, the guidelines presented in this study should not be construed as hard-and-fast rules for formulating product strategy. Instead, the results presented here will be helpful for challenging assumptions and guiding actions, as one element in the effort to shape an effective product strategy.     

Supplier relations and management: A survey of Japanese,Japanese-transplant,and U.S. auto plants

This article presents the results of a questionnaire survey sent to a sample of automobile manufacturers in the United States and Japan (including Japanese-managed plants in the United States) during the spring of 1990. The data support observations that Japanese and U.S. practices tend to differ in key areas and Japanese suppliers perform better in dimensions such as quality (defects) and prices (meeting targets, reducing prices over time); and that Japanese-managed auto plants established in the United States have, in general, adopted Japanese practices and receive extremely high levels of quality from Japanese as well as U.S. suppliers. These findings provide evidence that Japanese practices and performance levels are transferable outside Japan and suggest that considerable improvements are possible for U.S. suppliers supplying U.S. auto plants. In addition, the survey indicates that U.S. firms have adopted at least some practices traditionally associated with Japanese firms, apparently reflecting some convergence toward Japanese practices and higher performance levels in supplier management.     

The effect of U.K. incentives on R&D activities in U.S.-owned electronics companies in Scotland

The British Government provides numerous financial assistance programmes to assist electronics companies in funding investment projects, R&D activities, and applications of new technology. Interviews were conducted at fifteen U.S. electronics subsidiaries in Scotland to determine the effect of these government incentives in promoting technology and innovation. Results indicate that capital investment grants were widely used, but that financial aid schemes to encourage R&D and the adoption of advanced technology have no bearing on technical characteristics and decisions at the affiliates.     

A financial comparison of Japanese and US manufacturers

This paper compares and contrasts the financial policies of Japanese and comparable U.S. manufacturing firms on the basis of 15 financial ratios. The findings indicate that there are significant differences between these two groups in 10 out of the 15 ratios investigated.Ali M. Fatemi is with the College of Business Administration at the Kansas State University. Hossein Safizadeh and Marna Jo Young are with the Wichita State University.     

Japanese buyers attitudes toward U.S. supply sources

This paper reports the findings of a mail survey of Japanese industrial buyers. Attitudes toward U.S. companies as supply sources were measured. Generally, Japanese buyers hold favorable attitudes but feel that U.S. firms do not practice the marketing concept in their international marketing efforts.     

Strategic action generation: A comparison of emphasis placed on generic competitive methods by U.S. And Japanese managers

The paper identifies similarities and differences in the emphases and patterns that U.S. and Japanese managers attribute to a set of 22 generic competitive methods. It highlights the different ways that Japanese and American managers combine these methods to form general business strategies. Using factor analyses and smallest space analyses, the study shows differences in business strategy patterns between managers in Japan and the U.S. Such differences reflect the organizing principles underlying the strategy approaches in U.S. and Japanese firms. The organizing principle underlying U.S. responses is the desire to find way to differentiate a firm from its competitors. In contrast, the organizing principle underlying Japanese responses is a desire to establish a comprehensive, stable and defensible position. The paper discusses the implications of these results for strategic management and suggests directions for future U.S. and Japanese comparative strategy research.     

Location,governance, and strategic determinants of japanese manufacturing investment in the united states

A firm's decision to manufacture abroad depends on location, governance, and strategic factors. Governance factors are firm-specific. In spite of this, most empirical studies of foreign direct investment (FDI) have been conducted at the industry level (making it impossible to look at firm-specific determinants), and only a handful have considered governance, location, and strategic factors simultaneously. This paper is the first large sample study of the determinants of foreign direct investment at the product and firm-level. It examines the impact of location and governance factors, and of four types of strategic interactions, on a Japanese firm's propensity to manufacture in the U.S. The results support the view that foreign direct investment is explained by location, governance, and strategic variables. Economies of scale and trade barriers encourage Japanese FDI in the U.S. The larger a Japanese firm's R & D expenditures, the greater the probability it will manufacture in the U.S., but this is not the case for advertising expenditures. Some strategic factors are also important: Japanese firms with medium domestic market shares have the highest propensity to invest in the U.S. There is evidence of follow-the-leader behavior between firms of rival enterprise groups, but none of ‘exchange-of-threat’ between American and Japanese firms. Japanese investors are also attracted by concentrated and high-growth U.S. industries.     

The Sources and Advantages of Japanese Industrial Organization

Using agency theory, this paper investigates advantages linked to Japanese industrial organization. Three variables theoretically linked to keiretsu organization, ownership structure, inter-firm investment, and financing flexibility were able to correctly classify U.S. and Japanese firms. We detect polarization of U.S. and Japanese firms in terms of performance and strategic decisions.     

U.S. Multinational Activity Abroad and U.S. Jobs: Substitutes or Complements?

Critics of globalization claim that firms are being driven by the prospects of cheaper labor and lower labor standards to shift employment abroad. Yet the evidence, beyond anecdotes, is slim. This paper reports stylized facts on the activities of U.S. multinationals at home and abroad for the years 1977 to 1999. We focus on firms in manufacturing and services, two sectors that have received extensive media attention for supposedly exporting jobs. Using firm‐level data collected by the Bureau of Economic Analysis (BEA) in Washington, D.C., we report correlations between U.S. multinational employment at home and abroad. Preliminary evidence based on the operations of these multinationals suggests that the sign of the correlation depends on the crucial distinction between affiliates in high‐income and low‐income countries. For affiliates in high‐income countries there is a positive correlation between jobs at home and abroad, suggesting that foreign employment of U.S. multinationals is complementary to domestic employment. For firms that operate in developing countries, employment has been cut in the United States, and affiliate employment has increased. To account for firm size, substitution across firms and entry and exit, we aggregate our data to the industry level. This exercise reveals that the observed “complementarity” between U.S. and foreign jobs has been driven largely by a contraction across all manufacturing sectors. It also reveals that foreign employment in developing countries has substituted for U.S. employment in several highly visible industries, including computers, electronics, and transportation. The fact that there were U.S. jobs lost to foreign affiliates in key sectors, despite broad complementarity in hiring and firing decisions between U.S. parents and their affiliates, helps explain why economists view the impact of globalization on U.S. jobs as benign despite negative news coverage for declining industries.     

The Determinants of Pharmaceutical R&D Expenditures: Evidence from Japan

During the past 20 years, the world pharmaceutical industry has experienced a dramatic increase in R&D intensity. We apply and extend a model developed by Grabowski and Vernon (2000, Journal of Evolutionary Economics, 10, 201–215) with a pooled data sample of the 15 publicly listed Japanese drug firms for the period 1987–1998. As in the original study, we find expected returns to be an important determinant of R&D spending in the Japanese drug industry, albeit considerably smaller than in the U.S., which is particularly obvious in the case of returns from newly introduced drugs. However, our results are sensitive to econometric model specification, in particular to controlling for serial correlation and to a dynamic specification of the baseline model. Likewise, estimates on financial constraints are sensitive to model specification, indicating that Japanese drug firms face small or no financial constraints. Our results are consistent with the general literature on R&D investment behaviour, yet raise some methodological questions with regard to the original study.     

Performance of Japanese firms in patented inventions; an analysis of patents granted in the U.S.

This paper addresses the relation between firm size and R&D activity for Japanese large manufacturing firms using patents granted in the U.S.. Japanese firms loom larger in world R&D agenda; therefore, the examination of the determinants of their R&D activity, in particular, the effects of firm size, may provide a suggestion of R&D activity. The firm size-patent count relationship varies across industry. In many industries, Japanese experience is not in favor of the assertion that there is a return to scale in R&D among large firms, indicating that Schumpeterian entrepreneurship is not likely to take place more than proportinately to firm size. This conclusion is not inconsistent with Schumpeter's theory.     

Firm and industry characteristics influencing publications of scientists in large American companies

This study examines the relationship between the volume of scientific and technical publications (papers) produced by industrial scientists, and the characteristics of the corporations in which they work. Specifically, the study examines 1. the relationship between several key financial characteristics of U. S. industrial firms and the production of scientific papers; 2. the relationship between the amount of scientific papers published by industrial scientists and the publication of patents; 3. the relationship between the quality of the scientists employed by U. S. industrial firms and the firms' output of papers and patents. Data from 225 U. S. corporations were collected for the years 1975 through 1983. The corporations chosen for the study all have a history of consistent R and D expenditure. There is a substantial correlation between patenting and the publication of scientific papers although controlling for the size of the corporation reduces the correlation. Large firms, as measured by their annual sales, produce proportionately fewer scientific papers than do small firms. The number of elite scientists in a corporation is more highly correlated with the publication of scientific papers than with patenting.     

Performance of U.S. FDI in Different World Regions

This study analyzes the risk-return performance of U.S. firms that emphasize investments in developing regions versus others that invest in their home market or other developed countries. The test results indicate that U.S. firms active in the Asia-Pacific region are likely to perform better than U.S. firms active in other world regions in both profitability and risk. This implies that Asia and the Pacific provide greater opportunities for U.S. firms to achieve a better risk-return performance when their ownership advantages are well integrated into a conducive environment     

Analyses of U.S. and Japanese Management Processes Associated with New Product Success and Failure in High and Low Familiarity Markets

As detailed in the pages of JPIM and other publications, considerable research effort has been devoted to identifying the preconditions for new product success. Studies of Japanese and U.S. new product development (NPD) practices have shown that such factors as sales and marketing expertise, technical expertise, decentralized decision making, R&D/marketing integration, project manager competency, and support from senior management can play key roles in influencing new product success. As William Souder and X. Michael Song point out, however, previous studies have not examined Japanese management practices across a range of environments. They also suggest that the similarities and differences between U.S. and Japanese NPD practices require more in-depth exploration. To help address these issues, they describe the results of a study involving 15 U.S. firms and 15 Japanese firms. Each participating firm provided information about two successful products and two unsuccessful products. Their conceptual model groups the various factors that influence new product success into three general classes: NPD climate, expertise, and management functions. In this model, a firm's level of familiarity with its target market moderates these influences. For example, greater expertise may be necessary to succeed in an unfamiliar market. Each participating firm in the study provided information about one successful product and one failure targeted for high familiarity markets; the other two products from each firm were targeted for low familiarity markets. The U.S. and Japanese models developed in this study exhibit some marked differences from one another. In a familiar market, the U.S. model emphasizes sales and marketing expertise and competent project managers. Under conditions of low market familiarity, this basic model is supplemented with high degrees of R&D/marketing integration, senior management involvement, and decentralization. In this way, the U.S. models reflect a degree of flexibility in adapting the approach to match the prevailing market conditions. In contrast, the two Japanese models of new product success (under low and high familiarity) point to a more invariant system. In other words, the findings from this study reinforce the notion that successful management of NPD requires careful consideration of the firm's environment. Practices that have been proven successful in a particular culture and market environment may not be directly transferable to another setting.     

The impact of industry environment on early market entry decisions by B2B managers in the U.S. and Japan

Managers form simplified mental models to cope with market environment uncertainties and to process information. A critical decision is whether to enter a high-potential market early. Large innovation and development investments involved in this decision increase uncertainty. We examine the importance ascribed by U.S. and Japanese managers to competitive forces when making early market entry decisions. We expect that the competitive forces will have different effects on the likelihood of early market entry in the U.S. versus Japan due to cultural and business environment differences, and we thereby develop several propositions. We develop a decision-making exercise simulating early market entry decisions, and tested our propositions with managers in medium to large business-to-business (B2B) firms from both countries. We assessed impacts of the competitive market forces on entry strategy selection via relative weights, repeated-measures analysis of variance, and frequency analysis. Our findings revealed differences in the mental models of Japanese and U.S. managers. Buyer power had a larger effect on the decision to make an early market entry for Japanese managers, while threat of new firm entry had a larger effect for U.S. managers; these findings were consistent with our propositions. We also found several areas of agreement between U.S. and Japanese managers. We conclude with theoretical implications and recommendations to B2B management.     

How national systems differ in their constraints on corporate executives: a study of CEO effects in three countries

Do CEOs matter more in some countries than in others? Based on a theoretical consideration of three fundamental national‐level institutions—national values, prevailing firm ownership structures, and board governance arrangements—we argue that CEOs in different countries face systematically different degrees of constraint on their latitudes of action, and hence they differ in how much effect they have on firm performance. To test these ideas, we apply a variance components analysis methodology to 15‐year matched samples of 100 U.S. firms, 100 German firms, and 100 Japanese firms. Results provide strong, robust evidence that the effect of CEOs on firm performance—for good and for ill—is substantially greater in U.S. firms than in German and Japanese firms. Copyright © 2007 John Wiley & Sons, Ltd.     

Manufacturing and firm performance in technology-intensive industries: U.S. and Japanese DRAM experience

Firm-specific limits on capacity development rates (rates at which firms are able to increase output rate to design capacity) can affect firm performance in important ways, especially for firms involved in technological competition which introduce products relatively early. A simple model in which capacity development rates act in this way is developed and tested using data from semiconductor memory products (DRAMs). These results are used to estimate the ex post impact of increasing U.S. capacity development limits to the higher Japanese levels in the important 64 K DRAM generation.