Book Review: The Market and Beyond: Cooperation and Competition in Information Technology in the Japanese System

There are many things which commend this book to those interested in the role of markets in stimulating technological change. I t is extremely well researched, and it illuminates several features of the Japanese technology-creating system which have been the subject of controversy and misunderstanding. Its greatest strength is that it tries to explain as well as to describe, and in doing so offers a historically wellgrounded account of technical and economic development in modern Japan. Fransrnan argues that new forms of organization have been a significant influence on the development of the 'Japanese system', and that this system developed a highly innovative response to the challenges and uncertainties which emerged as the post-war period unfolded. Japanese technological development is divided into three periods. First, the 'early catchingup' period lasting from 1945 to 1965; second, a 'late catching-up' period lasting from 1966 to 1979, and finally a 'frontier leading' period from 1980 to the present. This historical framework is used in conjunction with Williamson's theory oftransaction costs, allowing the author to examine the ways in which different combinations of private and public enterprise can be used to tackle the uncertainties associated with technological research and development. Two main types of uncertainty are identified. 'Type I' uncertainty refers to the technical uncertainties inherent in pre-competitive R +D. 'Type II' uncertainties derive from the ability of competitor firms to emulate newly commercialized innovations as these appear in the marketplace. The existence of these uncertainties deterred even the largest Japanese corporations from entering the computer market in the first part of the early catching up period. It was government research institutes and universities, rather than the corporations, which took the lead in the Japanese system, acquiring, further developing and diffusing the new technologies. The Ministry ofIntemational Trade and Industry (MITI) also played an important role in protecting the nascent computer industries from international competition. This had the effect of reducing commercial 'Type II' uncertainty. In the early 1960s MITI took steps to reduce technical uncertainties by means of licensing agreements with major American companies. By 1966 the locus of research activity in the area of computing and electronic devices had shifted to five of the best-known Japanese corporations. Fujitsu, Hitachi, NEC, Toshiba, and Mitsubishi Electric were all committed to the new information technologies. However, the government-sponsored ElectroTechnical Laboratory (ELT) made a significant contribution by serving as the 'technical antennae' for MITI, making independent assessments of company strengths and weaknesses. It was the ELT who first identified the memory area as the critical bottleneck in the immediate development ofcomputer technology. Having identified the main features of the Japanese system, Fransman goes on to shed light on the ways in which various elements ofthe system were realigned to match the qualitatively different uncertainties of the 1980s: