The role of knowledge and organization in the competitiveness of Japanese high-tech industry

In the 1980s Japan was viewed as the world leader in high technology. Its superiority in electronics and other manufacturing sectors created the enigma of the Japanese management system and trade friction with the USA. Today the sharp decline in Japan's competitiveness has become another enigma and even a trouble in the world economy, This paper addresses the contrast between Japan's high-tech industry in the 1980s and that in the 1990s. The ascendance of Japanese high-tech industry up until the 1980s has been attributed to tacit knowledge and the organization of Japanese firms based on shared knowledge. The competitive decline during the 1990s has been viewed as a failure of the Japanese assembly industry to adapt to the change in explicit knowledge embodied in the digital revolution. In this paper the author produces a more comprehensive explanation for the decline in the competitiveness of the Japanese high-tech industry by introducing a comparison between science-driven sectors, which rely on the sharing of tacit knowledge, and engineering-driven sectors, which should rely more on explicit knowledge such as is found in strategic components. The author argues that different forms of organization are appropriate to different types of knowledge exchange. He concludes that current changes in the organization of Japanese firms and research will stimulate the science-driven sector of the country's high-tech industry.