Technological Change and Competitive Advantage : Existing Research and its Application to Japanese Companies(<Special Report>New Trend of Product Development Management)

Abstract

Proper understanding of the effects of technological changes on firm competitiveness has become important both for academia and practitioners. To achieve this, the paper first reviews several studies that attempt to answer the question : why established firms decline by technological changes? Those studies are based on different assumptions on firm behavior, ranging from a standard model in economics to models based on organization theory. The paper also introduces the recent studies that deal with an opposite question : why established enterprises continue to dominate the market in spite of technological changes? The paper next shows that these theories have not necessarily succeeded in predicting actual behavior of Japanese firms, and explores reasons of this failure. It examines possible revision of the theories or their boundary conditions, by drawing examples on the hard disk drive, the microlithography and the digital still camera industries. The author points out the possibility of that, under the condition of low labor mobility, existing firms may be more adaptive to competence-destroying innovation than competence-enhancing innovation. The author also indicates that promoting high degree of division of labor may lead to the successful response to architectural change especially when technology become complex, and that technological changes at the different levels of the product architecture may have different impact on the existing firms.