Hardware Institutions for Software Technologies: The Japanese Model of Industrial Development in the Personal Computer Industry

Abstract

This paper attempts to explain why Japan has largely failed to meet unique technological challenges in the field of computer software while it has achieved remarkable success in its technological counterpart-s-computer hardware. What makes this research question puzzling is the fact that Japan has employed pretty much the same industrial policies and institutions for promoting both sectors, nevertheless producing divergent results. Existing neo-institutional approaches to industrial competitiveness are inadequate for explaining this puzzle with respect to sectoral variation in the effectiveness of industrial policies and institutions. I suggest that the theory of technological fitness is more useful for helping us to understand the relevance of industrial institutions-and further institutional adjustment strategies-in relation to the underlying technological conditions of industrial sectors. In this view, Japan has largely failed in computer software because it has continued to rely on its hardware institutions in competing for software technologies.