International Production Networks in Asia: Rivalry or Riches

By Michael Borrus; Dieter Ernst et al. | Go to book overview

4

Evolutionary aspects

The Asian production networks of Japanese electronics firms

Dieter Ernst


Introduction

Like their American counterparts, Japanese electronics firms have developed substantial international production networks (IPNs) in Asia. 1 This chapter examines how far Japanese firms have cloned key features of American IPNs or developed substantially different international production activities. As we shall see, there have been substantial differences that mirror important characteristics of the respective national political economies. Those differences have had significant competitive effects.

I proceed in four steps. First, I provide an overview of the internationalization of the Japanese electronics industry up to 1991, i.e. before the bursting of the bubble economy. I briefly describe two peculiar features of Japanese IPNs that distinguish them from the networks established by American firms-their closed and Japan-centered governance structures and their asymmetric trade relations. Second, I discuss some of the causes for these differences. Although nationality is only one factor determining the nature of Japan's IPNs, aspects of domestic industrial organization do spill over into foreign operations.

In the third section, I describe the factors that are gradually forcing Japanese firms to open up their Asian production networks. While the "bursting of the bubble economy" and the yen appreciation have acted as powerful catalysts, more fundamental forces are also at work. The closed and Japan-centered nature of the country's production networks originally was a great strength. It enabled Japanese electronics firms to rapidly ramp up export platform production in Asia and to sustain international market share expansion. Yet it also came at a heavy cost. Far-reaching changes in the domestic production system associated with yen appreciation and recession forced rapid changes in IPNs. Of equal importance, however, were changes within East Asia. As the region improved its production and innovation capabilities and became a leading growth market for electronics products and services, Japanese firms needed to exploit these opportunities.

I conclude with a brief review of some recent changes in the organization of Japanese production networks in Asia. Overall, the Japanese case suggests that changes in the organization of international production are path-

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