Industry has a tendency to concentrate in a rather localized area. This phenomenon is now attracting the interest of many people and can be explained from two sides. From the negative side, the local concentrations of industries are now in a difficult situation, because of the competition mainly from Asian countries, and these industries are now targets of a revitalization policy. From the positive side, the concentrations offer a chance to create new high tech industries, upon which Japan is obliged to rely on in the future. This paper first analyses how a localized concentration begins and proceeds using a simple model of increasing returns. The model reveals that there is a threshold beyond which a concentration has an advantage over a non-concentrated area. The concentration proceeds until a certain amount of capacity has accumlated in the region. The saturation point differs much according to whether the concentration is derived by an internal economy or an external economy. In an internal economy, it is quite probable that a single big firm monopolies the industry. In an external economy, many small firms accumulate until extra profit rate is nullified. In a numerical example given in the paper, the internal economy case ceases to accumulate at about half the volume of the external economy case. In later sections, the concept “external economy” is examined. There is no such a case that can be called “external economy” in the sense that it only benefits small firms and not big firms. The external economy should be understood as a situation where economies of scale, as a function of total volume of productions, prevail and firms are prevented to grow beyond a certain size due to the existence of other reasons that increase the internal cost of the firm. In the last part of the paper, an advantage of the diversity is discussed and some policy implications are indicated.

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During the period of high economic growth that began in 1955 the economic structure of Shiga Prefecture changed from being agriculturally focussed to being centred around a large industrial zone.
Generally speaking, contracting in Japan is typically organised in a pyramid fashion with large enterprises at the top being supplied by small and medium enterprises (SMEs). Large companies have pressured the SMEs to make continuous improvements in costs, quality and precisely timed delivery. This constant pressure has resulted in improved products, in investment in workforce skills and also in the introduction of numerically controlled machines. Japanese SMEs make more innovative use of numerically controlled machines than their American counterparts. The technological improvements furthered by the SMEs are valuable agents of overall economic development.
Since the 1991 collaps of the “bubble economy” and with the rise in the value of the yen on the international currency market, Japanese SMEs, including those in Shiga prefecture have been hard hit. Hundreds of thousands of SMEs have had to respond to structural changes in manufacturing systems. They have reappraised their machine tools, technology, business links and strategies. One result is that the recession has convinced many SMEs not to rely so closely on a single buyer. They have also continued to introduce into the manufacturing process more innovative tools, such as the machining centre, the numerically controlled machine and the robot. This technological upgrading being carried out by the SMEs constitutes an important strategic response to the problems of the recession both at national and local level.
The fact that SMEs are a source of high quality input and of technical enhancement for larger companies should make clear the importance of giving support to SMEs in their efforts to overcome technical difficulties and to implement innovative technologies. The US government provides extensive support for small and medium enterprises. There exist, for example, the SBIR (Small Business Innovation Research Program) and the ATP (Advanced Technology Program), the resources of which are readily accessible to SMEs.
There is a need for the Japanese government to establish new policies that will be of help to small and medium enterprises.

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Research consortia are cooperative research and development involving a large number of firms in the same industry. Since the early 1980s, the U. S. electronics industry has been interested in forming research consortia as a strategy to compete with Japan, in which, the U. S. believes, research consortia are an important measure of industrial policy. The paper has analyzed four research consortia in the U. S. electronics industry: Microelectronics and Computer Technology Corporation (MCC), Semiconductor Manufacturing Technology (SEMATECH), U. S. Memories, and High Definition Television (HDTV). The first two consortia were actually formed and the other two were planned but failed to organize.
The paper has found that, in the cases of MCC and SEMATECH, without a strong threat from foreign competitors firms are unwilling to support long-term R & D for drastic product innovation even at R & D consortia in which costs and risk of R & D are shared. Research goal and approach must be clear for research consortia to be successful, so that research consortia are an effective strategy to seek technological “catch-up” rather the expansion of the technological frontier.
U. S. electronics firms could not establish research consortia for HDTV, but several U. S. firms successfully developed digital HDTV, which indicates that a drastic innovation often results from competition among cooperative research groups, each of which consists of a small number of firms. It may be unwise for industry-wide research consortia to focus on the specific research approach when technology is still in an infant stage. Although research goal and approach should be clear, the failure of U. S. Memories indicates that firms do not want to cooperate with each other in R & D which is too close to their marketing strategies or factory-level know-how.
Government subsidies, which reduce the financial burden of participant firms, would be helpful for research consortia to be organized; however, there have been political and ideological disagreements in the United States regarding whether government should subsidize private sector's research consortia.

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We are all familiar with the negotiations that are carried out with sales persons when purchasing a new car at dealers. However, what is less known are the effects of these negotiations on the decline of the automobile franchise system. This paper discusses the negative aspects of these negotiations and their effects on the decline of the automobile franchise system.
(1) Because of the big discrepancies between list prices and the final sale prices, it is difficult for the customers to estimate the final sale prices. In addition, it could be considered unfair that dealers intentionally hide the real sale prices with false list prices.
(2) There are often big purchasing price differences between the same cars even for the same dealer and date of sale. This suggests that some customers are being discriminated against and may be the target of unfair sales practices.
(3) Final sales prices are dropping due to excess discounting during these negotiations. Many of these discount may not be needed.
(4) Because auto manufacturers often expect the auto dealers to take most of the risk in terms of the market price fluctuations, auto dealers often get stuck with unsold inventory. This excess inventory often causes a decline in market prices and thus lowers the profit of the dealers.
(5) Unilateral decision making by auto manufacturers and ex post report regarding how to pay rebates to dealers and customers have increases the complexity of car negotiations. Accordingly auto dealers have been suffering low profitability for so many years.
(6) Long negotiation period from initial contact to the closing of the sale increases the transaction costs of both dealers and customers.

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Since the begining of the 1980s global markets have been characterized by a wave of global strategic alliances, used with increasing frequency, not without excepting the commercial aircraft industry, to restructure industries. The aim of my research has been to investigate the logic of this practice and its embodiment, with reference to the changes of business environment in the commercial aircraft industry.
In my research, I have shown that there are two forces for the aircraft makers to enhance the global strategic alliances in the commercial industry as their strategic tools.
First of all, the reason why the companies accelerate the global strategic alliance in due to the globalization of demand. Because the Cold War is over, the demand for commercial aircrafts has been shifting overseas, with the importance of foreign markets increasing as the aircraft makers search for new customers to compensate for shrinking sales in their home market or for defense procurement. This shift is also under way because new markets in Russia and China have recently opened up and growth rates in Asia have become stronger. Under this sort of globalized business environment, the aircraft makers could no longer meet their demand by their own resources without turning to global strategic alliances.
The Second reason is due to the globalization of supply. Because of the increasing technology parity among growing numbers of nations and technological innovations over telecommunication system, the aircraft makers could deploy thier activities across national frontiers easily. This has increased their capacity in other nations to absorb competitive technology with global strategic alliances. Hence, those who seeking a supply of goods, components and parts need no longer cofine itself within their borders.
To remain competitive, the aircraft makers should be outsourcing their work to foreign suppliers, initiating international joint ventures and using offset programs. These tools allow the makers to exploit opportunities in technology, capital and cost reduction that exist overseas.

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The purpose of this paper is to compare the characteristics and problems of production system of the K motor company in Korea with those of Toyota. The K motor company tried to introduce Toyota Production System which is lean and flexible into its system through Mazda indirectly. For example, The K motor company made some efforts to improve the work method by handing over some part of authorization for standard work designization to the shop floor. And the K company also moved functions of quality check from quality control department to production department in other to built-in quality within production process.
This paper, however, showed that the system K company introduced is not functioned well. At first, concerning job control, job analysis and standard work designization was not done by the shop floor workers but by the production engineers. But the standard work was not understood and accepted by the shop floor workers, so this results in various problems on the production control. For example, as there were many disputes between workers and managers about deciding the standard work, the flexible job rotation in accordance with the change of vehicle volume was not realized at all. And the cost-down based on man-hour reduction is faced with the limitation. Second, concerning quality control, as check-up of quality problems and repair were not done timely by the workers, many repair men should be attached to each inspection process to ensure quality. As a result, built-in quality within production process is not successful.
Another point that lied behind these problems is that the K motor company historically put much more weight to the cost-down of material than to reduction of man hour. This is the biggest difference between the Toyota and the K motor company. The reason why the standard work is not rooted in the K motor company is related to the fact that the K motor company hasn't emphasized on the importance of man hour management.

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The main industries in the Hamamatsu-area are the textile industry, the musical instrument manufacturing industry and the motorcycle manufacturing industry. Recently, due to intensification of the international competition and the structural change of the social circumstances, the industries in this area are pressed to change their economic system and management style. In fact, the sluggishness of the textile and the musical instrument manufacturing industry has become a serious problem to this area. The musical instrument manufacturing industry is a representative industry of the Hamamatsu-area. As the subject of our research we took up the piano manufacturing industry and tried to make clear why the piano manufacturers have gathered in the Hamamatsu-area and what difficulties they face at the turning point of the Japanese economy. We also touched future perspective and problem on this industry.
The results of our study are summed up as follows.
(1) The piano manufacturing industry came into existence, based on the local, historical accumulation of skill, as other local industries.
(2) The accidental factors as the success of domestic production of the organ by T. Yamaha, had a big effect on the development of this industry.
(3) The competition between enterprises in the area hastened the growth of this industry.
(4) Now at the end of the 20th century this industry approaches the turning point, facing stagnant demand and international competition.

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