Product Development Strategy and Organizational Learning: A Tale of Two PC Makers

The personal computer (PC) marketplace in the US presents a dizzying array of component suppliers and products. No single firm dominates the industry with a complete package of hardware and software components. Although one company's operating systems and general-purpose applications are installed on most PCs in the US, the other system components—processors, memory, storage devices, display adapters, monitors, specialized applications, and so on—come from any number of sources. David T. Methe, Ryoko Toyama, and Junichiro Miyabe point out that the PC industry in Japan also exhibits this decentralized nature. However, they also note that despite the decentralized network structure of the Japanese PC industry, one company—NEC—was able to achieve a dominant market share. To provide insight into the key issues involved in the management of complex technology, they contrast NEC's strategic approach to product development and organizational learning with the approaches taken by Fujitsu—the firm that placed a distant second in this market. Despite matching NEC in terms of technological capabilities, financial resources, and managerial talent, Fujitsu never managed to threaten NEC's dominance of the PC market in Japan. Fujitsu continually emphasized technological leadership, even at the expense of protecting its installed base. Poor coordination of resources and product development efforts resulted in incompatibilities among Fujitsu's various products, and the company failed to foster close relationships with suppliers of such key technologies as software and peripherals. NEC's PCs did not enjoy the advantages of first-to-market status or technological leadership. Instead, NEC achieved market dominance by finding the combination of product technologies that met the needs of the greatest number of consumers. Throughout almost 20 years of competition in the PC industry, NEC successfully maintained consistency and backward compatibility across its product lines. NEC also recognized the importance of third-party software developers, and carefully cultivated relations with these firms as a source of competitive advantage. In other words, NEC struck the right balance between three key factors: technological innovation, motivation of third-party developers of software and peripherals, and service to its installed base of customers.     

International Borrowing, Specialization, and Unemployment in a Small Open Economy

The authors show that an increase in international borrowing increases specialization and unemployment in a small open economy that is subject to terms‐of‐trade risks. The economy has a production advantage in the export sector. However, the size of the export sector is limited by the available funds. To insure workers against income fluctuations arising from terms‐of‐trade risks, firms in the export sector offer workers a stable wage rate with the possibility of unemployment. An increase in international borrowing increases specialization in the export sector, which leads to higher unemployment when the terms‐of‐trade shock is bad. A state‐contingent price subsidy can reduce unemployment without inefficiently reducing specialization. The results are robust to the introduction of risk‐averse firms.     

Multiple regimes and cross-country growth behaviour

This paper provides some new evidence on the behaviour of cross-country growth rates. We reject the linear model commonly used to study cross-country growth behaviour in favour of a multiple regime alternative in which different economies obey different linear models when grouped according to initial conditions. Further, the marginal product of capital is shown to vary with the level of economic development. These results are consistent with growth models which exhibit multiple steady states. Our results call into question inferences that have been made in favour of the convergence hypothesis and further suggest that the explanatory power of the Solow growth model may be enhanced with a theory of aggregate production function differences.     

Around-the-clock medical coverage

Marrying workers' compensation and health insurance plans to reduce administrative workloads and get a firm grip on expenses. Can it work?     

Remarks on sequential estimation of a linear function of two means: The normal case

Asymptotic normality of the stopping time ofMukhopadhyay [1976] relating to the point estimation problem is proved. Also moderate sample size behaviour of this stopping time has been studied by Monte-Carlo methods.     

Health and development∗

The linkage between development and health is clearly spelt out in the definition of primary health care by the World Health Organisation. There is a widespread and growing disillusionment with the traditional Western approach to health care which fails to meet the real demands of the Third World situation.

This paper looks briefly at conditions in the developing world and the strategy proposed by the W H O to attempt to meet the objective of health for all by the year 2000 and refers to the South African situation.     

Book Reviews

Richard Robison, Indonesia: The Rise of Capital, Allen and Unwin, Sydney, 1986 pp. xxv + 425. Indexed. $19.95.

W.L. Korthals Altes, Changing Economy in Indonesia: Volume 7: Balance of Payments, 1822–1939, Amsterdam: The Royal Tropical Institute. pp. 167.

Trade Statistics, Java, 1823–73: Trade Statistics, Indonesia 1874–1937. Mededeelingen van het Centraal Kantoor voor de Statistiek nos 160 and 161

Om Prakash, The Dutch East India Company and the Economy of Bengal, 1630–1720, Princeton: Princeton University Press, 1985 pp. xii + 291, map, tables. graphs, glossary, index. Cloth $38.50.

Sediono M.P. Tjondronegoro, Social Organization and Planned Development in Rural Java, Singapore, Oxford University Press for the Institute of Southeast Asian Studies, 1984, pp. xv + 326.

A. Fujimoto and F. Matsuda (eds), An Economic Study of Rice Farming in West Java, Tokyo: NODAI Research Institute, Tokyo, University of Agriculture, 1986.

A. Fujimoto and T. Matsuda (eds), A Comparative Study of the Structure of Rice Productivity and Rural Society in Southeast Asta Two Village Studies in Indonesta and Thailand, Tokyo: University of Agriculture, 1985. Reviewed by C.L J. van der Meer (1986) Bulletin of Indanesian Economic Studies, 22(2) pp. 124–27

David Jenkins, Suharto and His Generals: Indonesian Military Politics, 1975–1983, Ithaca: Cornell Modern Indonesia Project, Monograph Series No. 64, 1984, pp. xiii + 280. US$12.50. David Bourchier, Dynamics of Dissent in Indonesia Sawito and the Phantom Coup, Ithaca: Cornell Modern Indonesia Project, Interim Reports Series, 1984, pp. 128. US$9.00.

Linda G. Martin (ed), The ASEAN Success Story: Social, Economic, and Political Dimensions, East-West Center, distributed by the University of Hawaii Press, Honolulu, 1987, pp. xviii + 253. $15.00.

Mubyarto and Edy Suandy Hamid (eds), Kredit Pedesaan di Indonesia, Badan Penerbit Fakultas Ekonomi, U.G.M., 1986 pp, 160.

Ron Hatley, et al., Other Javas Away from the Kraton, Melbourne: Monash University, 1984, pp. 60.

K.S. Nathan and M. Pathmanathan (eds), Trilateralism in Asia: Problems and Prospects in US-Japan-ASEAN Relations, Antara Book Company, Kuala Lumpur, 1986, pp. xviii + 205. $18.00 (cloth): $12.00 (paper).     

Income distribution,economic structure and employment in South Africa

This paper discusses the impact of a redistribution of current income from the White to the Black population on the distribution of sectoral output, and total employment by means of a semi‐closed input‐output model.

The results show that a redistribution of current income towards Black households — which no doubt will have positive social and political repercussions — has a non‐negative effect on GDP and a definite positive effect on the performance of sectors with a high private consumption expenditure component, as well as on total employment.     

The main findings of the district pilot project of labour‐intensive road construction and maintenance in Botswana and the implications for similar projects in South Africa

Unemployment has been identified as one of the main problems confronting South Africa. Recently, in order to improve rural infrastructure and create employment, several pilot projects of rural road construction have been initiated in South Africa. In such a context it is considered that attention should be drawn to a pilot project carried out some time ago in Botswana to examine the potential of labour‐intensive methods in the construction and maintenance of rural roads.

The main conclusion of the pilot project was that labour‐intensive methods were viable, although attention had to be paid to several critical factors. In 1982, following its evaluation of the pilot project, the Government of Botswana decided that over the next five years the technical and organisational methods developed during the pilot project should be replicated throughout Botswana.

After a brief survey of the background to the project, the paper summarises several important features of the pilot project and its main findings. The paper closes with some comments on the implications of this pilot project for those currently underway in South Africa.