21COE, University of Tokyo

MMRC Discussion Paper No. 71

MMRC
DISCUSSION PAPER SERIES

MMRC-F-71

Empirical Analysis of the Hypothesis ofArchitecture-based Competitive Advantage
and International Trade Theory
Manufacturing Management Research Center,
University of Tokyo
Takahiro Fujimoto
Takashi Oshika
March 2006

21COE, University of Tokyo

MMRC Discussion Paper No. 71

Empirical Analysis of the Hypothesis ofArchitecture-based Competitive Advantage
and International Trade Theory

Manufacturing Management Research Center,
University of Tokyo
Takahiro Fujimoto
Takashi Oshika

March 2006
Abstract: In this paper, we propose an architecture-based hypothesis of comparative advantage,
which predicts that a good “fit” between “organizational capacities of manufacturing” thatcompanies have built up over their histories and product-process architecture (i.e., basic designconcepts for product function, structures and processes), tends to result in international
competitiveness. Therefore, we attempt an empirical analysis that the net exports of Japan are
relatively "Integral type".
Concretely, we make an architecture spectrum indicator by the principal component
analysis based on the answers to a corporate questionnaire (33 companies and 254 products)
executed in cooperation with the Ministry of Economy, Trade and Industry. We also show the
integral degree and the modular degree of each product
Next, we performed regression analysis of the export ratio and the architecture spectrum
indicator by the assembly-industry products, and by the process-industry products. The result
supported the above-mentioned proposition. Moreover, for assembly-industry products astatistically significant result is obtained even by the regression analysis that includes the labor
intensity variable. These results show that "The export ratio tended to rise both as the integral
architecture indicator increases and as the labor intensity levels rise for the assembly-industry
products, where global competitiveness is strong". These results have the possibility ofsuggesting a new development direction in international trade theory.
Keywords: Architecture, comparative advantage, integral architecture indicator, export
competitiveness, labor intensity

1Takahiro Fujimoto, Takashi Oshika

1. Introduction
In this brief memo, we examine an architecture-based comparative advantage hypothesis which
predicts that, for Japanese manufacturing firms, “integral architecture” products with more complex
function-structure relationships tend to result in higher export ratios.

These products tend to be

manufactured by exploiting integration-oriented (i.e., integrative) organizational capability of
manufacturing, which relies on teamwork of multi-skilled workers, a traditional strength of the
post-war Japanese manufacturing firms compared with those other countries.

Our data analysis

indicates that, in the area of assembled products in particular, production bases located in Japan are
still enjoying export competitiveness in labor-intensive integral architecture products.

2. A New Approach to Explain Industrial Competitiveness
What industries will survive in 21st-Century Japan, and what will the country import and export?
For Japanese industrialists and policy makers, this is simultaneously an old and new question.

Infact, Japan saw the following gravity shifts in its industrial structure from the Meiji Period into theShowa Period:

agriculture → manufacturing → service industries;
light industries → heavy industries;
materials → processing and assembly;
low added-value industries → high added-value industries;
labor-intensive → capital-intensive → knowledge/technology-intensive industries.

Since the 1990s, however, Japan has entered a phase of its history that is marked by a declining
population. This situation begs the following questions: Which types of goods and services should
Japan see at its “strengths” and how should it invest its limited human resources amid fierce
industrial competition in East Asia?

Surprisingly, there have been no clear answers.

Althoughthere are vague suggestions that Japan should move toward technology-intensive industries, IT-basedindustries, or high service industries, the reality is that digital-network goods and services(particularly software) have largely been dominated by the United States. Besides, certain
technology-intensive products—such as memory semiconductors and DVD players, for which Japan
has been expected to have competitive advantage, are seeing larger shares taken by such countries as
South Korea, Taiwan, and China.

As a result, Japanese industrialists tended to be unsure which
2

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theory

industrial sectors will maintain competitive advantages in the future.

This situation is leading to theemergence of pessimistic views that smack of overreaction, including opinions that “China poses athreat to Japan” and that “most of Japan’s industries are hollowing out.”
In order break out of this bind, Japan will need to revisit its development and production sites
and discuss “a shop-floor-based view of industries” as a way of reorganizing its competitive
strategies with an open mind.

This process will involve reconfirmation of Japan’s strengths andweaknesses without adhering excessively to existing industrial classifications.
From this standpoint, the University of Tokyo’s Manufacturing Management Research Centerattempted to engage in analysis of “manufacturing in a broad sense,” which reinterprets companies’
development and production activities as the flow of “creation and transfer of design information”
toward the customers. Furthermore, we propose an architecture-based hypothesis of comparativeadvantage, which predicts that a good “fit” between “organizational capacities of manufacturing”
that companies have built up over their histories and product-process architecture (i.e., basic designconcepts for product function, structures and processes), tends to result in international
competitiveness.
In general, when there is good fit between a nation’s characteristics and an industry’s
characteristics, the industry tends to enjoy competitive advantages in that country.

Ricardo’s Theoryof Comparative Advantage implied that “good fit” is translated into relatively high labor productivity
vis-a-vis other countries.

Neoclassicists such as Heckscher, Ohlin and Samuelson advocated thatcountries having larger endowment of a certain production resource (for example, labor-richcountries) will have better fit with industries that use this particular resource (for example
labor-intensive industries) assuming that productivity is identical across the countries.
However, as was stated above, various phenomena that are difficult to explain using existing
theoretical frameworks have been emerging in recent years.

These phenomena include Japan’s

being surpassed apparently by East Asian countries in some technology-intensive product sectors.

3. Export Competitiveness of Japan’s Integral Architecture Products
Here, we take note of “fit between organizational capacity and architecture” as seen from ourobservations of manufacturing activities on the shop floor.

Specifically, it is thought that Japanesemanufacturing firms, facing high economic growth amid shortages of work force, materials andmoney, tended to engage in economically rational long-term transaction/long-term employment.

Asa result, they built organizational capability that emphasizes teamwork among stable multi-skilled
3

Takahiro Fujimoto, Takashi Oshika

workforce, or “integrative organizational capability of manufacturing,” which raised theirproductivity and quality simultaneously.
On the other hand, it was thought that there are two basic types of product-process architecture:・ “Integral architecture” with complex interdependence between product functions and productstructures (such as automobiles, etc.);・ “Modular architecture” in which the relationship between a product’s functional and structuralelements have a simple and clear one-to-one correspondence (such as personal computers, etc.).

It was also thought that Japan, which is a country with a high endowment of “integrative
organizational capability” among its firms, tends to have a competitive advantage in “integral
architecture” products – a prediction based on our “architecture-based comparative” hypothesis.
So then, can this new approach to industrial competitiveness demonstrate additional explanatory
power for the reality of Japan’s industrial competitiveness?

Although our research is still at the

exploratory stage, Manufacturing Management Research Center (MMRC) at Tokyo University
conducted a survey analysis of selected Japanese manufacturing firms in cooperation with the
Ministry of Economy, Trade and Industry (METI).

The survey targeted both assembled products

and processed products (chemicals, etc.), including automobiles, household appliances, electronics,
parts, industrial machines, chemicals, iron and steel, fibers, and food and drink（Refer the appendix 1
about industrial division and the size of the sample）Although a portion of this analysis was includedin the 2005 “White Paper on Manufacturing,” this memo will present some of our newer results of
our analyses at MMRC.

4. Outline of the Survey on Architecture-based Competitive Advantage
The survey analysis gained responses based on five-step Likert-scale evaluation by employees
who are in charge of those products in question.

It asked those company personnel in charge of

products for their subjective evaluations of 12 items as elements of “integrative/modular architecture
indicators”; these items included “Is part design conducted specially for the specific product?” and“Do inter-component interfaces use company-specific designs?”
The 12 question, plus 1 (overall evaluation 13) items are shown as follows.
＜Questionnaire＞

4

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theory

1. This product mainly consists of parts or materials with customized (product-specific) design.
2. Interfaces that link the components of this product are custom-designed (product- specific).
3. Interfaces that link the components of this product are firm-specific (used only in thiscompany).
4. In order to achieve total performance of this product, design parameter of its components
must be precisely fine-tuned (mutually adjusted).
5. Total quality of this product cannot be achieved by mix-and-match of pre-designed
components (e.g. generic parts, common parts, carry-over parts).
6. The product faces strict constrains in terms of size and weight, which results ininter-dependence between design parameter of the components, (e.g. parts interference andweight balance).
7. The product requires close collaboration of component design or material design between theassembler and the suppliers.
8. In order to satisfy its customers, the product needs to achieve more than one performancerequirement at the same time.
9. The product needs precise adjustment of process design parameters to the change andvariance of its materials or upstream products.
10. The product cannot achieve high total product quality by mix-and-match of the standard
production equipment (it requires customization of the equipment).
11. The main production process of this product is designed or manufactured by this company(in-house equipment).
12. In order to achieve the required performance, this product needs precise mutual adjustmentof control parameters between its production processes.
13. Overall evaluation of product/process architecture based on questions 1-12

（Note.1)

Scale 5: Very true, 4: Rather true, 3: Neutral, 2: Not so true, 1: Not true at all（Note.2)

Assembly-industry products are answered from Questionnaire1 to Questionnaire13,

Process-industry products are answered from Questionnaire7 to Questionnaire13.
The results were aggregated by multi-variable statistical analysis (e.g., principal component
analysis), then indicators that express the level of “integral-ness” (or, conversely, level of modularity)of the products’ architecture were prepared.
Next, the procedure and the result are shown.
5

Takahiro Fujimoto, Takashi Oshika

Table 1

Principal Components Analysis（1）(Assembly Products : 173 Samples）
Table 1 Principal Component
First

Analysis(1)SecondPrincipal

Principal

Component

Component

0.39

0.51

1(1)

0.786

0.113

1(2)

0.630

0.210

1(3)

0.576

0.056

1(4)

0.698

0.244

1(5)

0.675

0.203

1(6)

0.503

0.293

1(7)

0.540

0.238

1(8)

0.663

0.201

Cumulative
Contribution
Ratio
Question

1(9)

0.252

0.672

1(10)

0.238

0.776

1(11)

0.266

0.664

1(12)

0.071

0.869

（assembly-industry products case）
It is a result of the principal component analysis on 173 assembly-industry products productsthat shows in Table 1. Two principal components have been extracted at the stage of cumulative
contribution ratio 0.51.
The first principal component is composed by (1) - (8).

The second principal component iscomposed by (9) - (12). The lower 1(1) -1(12) of the cumulative contribution ratio shows the element
procession of the question vote of (1) - (12) (After Varimax rotation). In question (1) - (8), the value
with the first principal component is higher, and it can be thought the question item that depends onthe first principal component. When the questions are summarized, the first principal component isthought to be a factor of "Architecture of the product design".
Question (9) - (12) indicates the value with higher second principal component, and is thought
to be a question item that depends on the second principal component. It is thought "Architecture of
the production process" factor from the content of the question.
The correlation analysis result of the overall evaluation (13) and the principal component factor
6

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theoryis the following.
Correlation coefficient of the first principal component factor and overall evaluation: 0.721
Correlation coefficient of the second principal component factor and overall evaluation: 0.452.
Therefore, the first principal component is thought the factor of "Architecture of the productdesign", and a suitable factor for showing the characteristic of the integral modular degree of theassembly-industry products. Moreover, because the correlation of the principal component factor andthe overall evaluation is the highest, the first principal component factor is defined (In the meaningthat the integral degree rises when the numerical value rises), "Integral architecture indicator". In
addition, sets of these first principal component factors (173 products) are defined as the architecture
spectrum of the assembly-industry products.
The architecture spectrum of the assembly-industry products (173 products) is as shown in
Figure 1 and Table 2.

7

Takahiro Fujimoto, Takashi Oshika

FigureArchitectural Spectrum (173
Assembly products)
図１ 1.アーキテクチャ・スペクトル(組立製品；173製品）
169

Steel vessel
Separates
type air conditioner

163
157

Personal
Personal computers
computers

151

Separates
Car stereostype air conditioner

145
139
133
127
121
115
109

製品ＮＯ
Item No.

103
97
91
85
79
73
67
61
55
49
43
37

Engine parts (auto-parts)

31
Passenger cars

25
19

Medical equipment’s

13
71-5.000Playback robots-4.000
弱い
Low-3.000-2.000-1.0000.000
インテグラル・アーキテクチャ度

1.000

Integral architectural degree■ Main 主成分１Component (1)

8

2.000
強い
High

3.000

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theory

Table 2 Integral architecture indicator and Item name(assembly-industry products)
Item
NumberItem Name

Integral Archtecture
Degree（１）High Degreed Integral Archtectyure Products
1-5

Playback robot, Cellular telephones,Color rolled film, Automobile air
conditioners,Electric switching systems

2.290

-

1.309

6-10

Liquid crystal televisions,othersIC,Chassis and Body parts（Automobile parts）,
Large passenger cars,Small passenger cars

1.303

-

1.207

11-15 Motorcycles(More than 125ml),Medical equipment's,Medical equipment's,Smallpassenger cars,Large passenger cars

1.207

-

1.124

16-20 Precision measuring machines and instruments,Magnetic tapes,Other
semiconductor parts,Switches,External storage

1.110

-

1.032

21-25 Automobile air conditioners,Engine parts（Automobile parts）,Bearings,Industrial
use equipment,Plate making machinery

1.016

-

1.016

26-30 Engine generators for general use,Engine parts（Automobile parts）,Terminal
equipment,Steam turbines for industry,Small capacity motors

0.959

-

0.908

31-35 Injection molding machinery,Other electronics parts,Diesel engines formarine,Internal combustion engines for industry,Chassis and Body parts（Automobile parts）
36-40 Engine parts（Automobile parts）, Color televisions(FPD),Other electronics
parts,Engine parts（Automobile parts）,Car navigation systems

0.845

-

0.825

0.820

-

0.733

41-45 Semiconductor characteristic measuring equipment,Internal combustion engines 0.728
for industry,Connectors,Small passenger cars,Large passenger cars

-

0.703

46-50 Large trucks,Small trucks, Engine parts（Automobile parts）,Small passenger
cars,Large passenger cars

0.703

-

0.703

51-55 Bearings,Looms,Airplane,Other batteries,Other photographic film

0.703

-

0.677

56-60 Cranes,Engine parts（Automobile parts）,Fork lift trucks,Other Fine ceramics

0.648

-

0.592

61-65 Refrigerators with freezer,Quarts crystal units,Engine parts（Automobile
parts）,Industrial rubber products,Drive, transmission and Control parts（Automobile parts）

0.587

-

0.530

66-70 Printing machinery,Electro magnetic relays,Steam turbines for industry,Other
Fine ceramics,Other photographic film

0.502

-

0.479

71-75 Software products,Polyurethane foam,Engine parts,Oil hydraulicequipment's,Suspension and Brake parts（Automobile parts）

0.440

-

0.371

76-80 Suspension and Brake parts（Automobile parts）,transportation system,Other
electronis parts,Cellular telephones,Electric test and measuring equipment

0.359

-

0.277

81-85 Industrial rubber products,Input-output units,Water tube boilers,Steelbridge,Automobile air conditioners

0.271

-

0.187

86-90 Suspension and Brake parts（Automobile parts）,Plastic film and plastic
sheets,Electronic circuit boards,Microwave ovens,Other Wrapping and packing
paper
91-95 Color televisions,Plastic pipes,Synthetic fiber fabrics (Filament),Other
baterries,Washing machines

0.143

-

0.069

0.065

-

0.048

96-100 Compressor,Elevators,Reaction vessels,Other chemical machines,Other airplane 0.046
parts

-

-0.013101-105 Plastic plates,Drive, transmission and Control parts（Automobile parts）,Shovel
type excavators,Battery driven type watch (Complete),Color sensitized paper-0.040 --0.114106-110 Mechanical presses,Special purpose machinery,Other chemicalmachines,Software products-0.122 --0.192（２）Midium Degreed Integral Archtectyure Products

9Takahiro Fujimoto, Takashi Oshika

Table 2 Integral architecture indicator and Item name(assembly-industry products) (continue)
Item
NumberIntegral Archtecture
DegreeItem Name（3）Low Degreed Integral Archtectyure Products111-115 DVD-Videos,Chassis and Body parts（Automobile parts）,Digital
cameras,Motorcycles(Less than 125ml),Facsimile machines-0.208 --0.241

116-120 Packaged type air conditioners,Steel vessel,Steel vessel,Modular installation
machine,Separate type air conditioners-0.304 --0.389121-125 Flat-panel display manufacturing equipment,Grinding machinery,Engine parts（Automobile parts,Other household electrical appliances,Color rolled film

-0.390 --0.455-0.462 126-130 Stamping dies,Engine parts（Automobile parts),Chassis and Body parts（Automobile parts),Chassis and Body parts（Automobile parts),Other Color film
materials
131-135 Automatic highrised warehouses,Fork lift trucks,Separators,Rubber hoses,Water -0.504 tube boilers-0.485136-140 Video cameras,Industrial rubber products,Programmable controllers,Rubber tires -0.593 for automobiles,Rubber tires for automobiles-0.698141-145 Personal handy phone system,,Chassis and Body parts（Automobile
parts）,General purpose computers,Other foods,Other electronics parts-0.739 --0.849146-150 Quarts crystal units,Other foods,Machining centers,Plastic reinforced
products,Software products-0.868 --1.077151-155 Car navigation systems,Pumps,Other Seasoning,Frozen cooking food,Mechanical -1.148 parkings-1.386156-160 Electronic circuit boards,Safety glass,Car stereos,Steam turbines forindustry,Electric test and measuring equipment-1.475 --1.735161-165 Personal computers,Steel bridge,Personal computers,Fixed capacitors,Software -1.790 products-2.064166-170 Power conversion equipment,Weekly magazine,Condensing units,Separate typeair conditioners,Rubber beltings-2.071 --2.673

171-173 Sheet glass, Steel vessel,Other Machine tool

-2.747 --3.469-0.586（process-industry products case）
It is a result of the principal component analysis on 81 process-industry products that shows inTable 3. Two principal components have been extracted at the stage of accumulation contribution rate
0.71.
The first principal component is composed by (10) - (12).

The second principal component iscomposed by (7) - (9). The lower 1(7) -1(12) of the cumulative contribution ratio shows the element
procession of the question vote of (7) - (12) (After Varimax rotation).
It is question (12) that it is the nearest "Function and structural definition" as the question on"Production process architecture" of the process-industry products. In question (12), it is a question
item of "Mutual adjustment between in-house processes for the function achievement" of having to10

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theory

Table3 Principal Components Analysis（2）（Process: 81 Samples）
Table 2 Industry
Principal ProductComponent
Analysis(2)First

SecondPrincipal

Principal

Component Component
Cumulative
Contribution

0.43

0.71

1(7)

－0.037

0.711

1(8)

0.033

0.850

1(9)

0.497

0.629

1(10)

0.887

0.117

1(11)

0.818

－0.331

1(12)

0.833

0.307

Ratio
Questionadjust the parameter mutually between equipment and to design best, and it is the first principal
component for the function demonstrating. Moreover, manufacturing facilities are not the mixtures(question (10)) but in-house production or equipment (question (11)) to apply. They are the firstprincipal component for that. This might be appropriate points.
The second principal component is composed of question. Question (7) is a joint developmentwith the supplier. Question (8) is a complexity of the demand performance. Question (9) is a material
and process synchronization. If these common features are said, it is "There is a possibility that thefactor of mutual adjustment between the processes of the material mixes".
It is named "Mutual adjustment between the processes and the material for the function
achievement" factor if forced to say with the second principal component of the process-industry
product. However, the element procession of question (9) can point out a high numerical value of
0.497 it and the considerable synchronization with the first principal component.
In the process-industry products, even the character of single purpose products produced as theone (solid and liquid, etc) the first principal component is a suitable factors for showing thecharacteristic of the integral modular degree.
Moreover, the first principal component factor is defined from correlate about the principal
component factor and the overall evaluation the highest, it is "Integral architecture indicator" of theprocess-industry products (In the meaning that the integral degree rises when the numerical value
rises).
11

Takahiro Fujimoto, Takashi Oshika

Sets of these first principal component factors (81 products) are defined as the architecture
spectrum of the process-industry products.

The architecture spectrum of the process-industry products (81 products) is as shown in Figure 2
and Table 4.

Figure2. Architectural Spectrum (81 process products)
アーキテクチャ・スペクトル（主成分ファクター：プロセス製品：81)
79

Carbonated drink

76

Body cleaner

73

Tin free steel

70
67
64
61
58
55
52

Item No.
製品ＮＯ

49
46
43
40
37
34
31
28
25
22
19
16
13

Polystyrene (Heatproof film resin)

10

Ordinary steel sheets and plates(for automobiles)

7
4

Carbon fiber

1-2.500 -2.000 -1.500 -1.000 -0.500 0.000 0.500
アーキテクチャ・スペクトル
Low
Architectural
spectrum
インテグラル度■ Integral
degree

12

1.000

1.500

2.000

High

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theory

Table 4 Integral architecture indicator and Item name(process-industry products)
Item
NumberItem Name

Integral-ArchitecturalFrequency（１）Items with high Integreal-Architectual-frequency
1-5

Copper electric wires, Carbon Fiber, Synthetic fiber fabrics(Filament), Glass products, Synthetic rubbers

1.503

-

1.325

6-10

Ordinary steel sheets and plates, Other foods, High speed steel
cutting tools, Sheet glass

1.323

-

1.291

11-15

Plastic material for building Glass products, Polystyrene, Special
hot rolled steel products, Other IC parts

1.263

-

1.049

16-20

Chassis and Body parts, Cemented carbide tips, Plastic formed
products, Other Fine ceramics, Suspension and Brake parts

1.038

-

0.671

21-25

Epoxy resin, Refractory brick, Other Plastic, Aluminum rolling
products, Electrolytic copper

0.665

-

0.565

0.543

-

0.459

0.459

-

0.343

0.343

-

0.293

0.221

-

-0.035-0.035--0.228-0.258--0.423-0.491--0.533（２）Items with medium Integreal-Architectual-frequency
26-30 Tin plates, Non-woven fabrics, Glass fiber wool products, High
speed steel cutting tools, Medical products
31-35 Medical products, Synthetic fiber fabrics (Filament), Other nonsteel metal, Parts and accessories of boilers, Suspension and
36-40 Engine parts, Drive, transmission and Control parts, Polyamides
resin(Molding materials), Polyfluorocarbon resin, Plastic film andplastic sheets
41-45
46-50

Cement, Synthetic fiber fabrics (Filament), Other IC parts, Glass
products, Sodium hydroxide
Polyvinyl chloride, Other IC parts, Polystyrene, Whisky, Medical
products（３）Items with low Integreal-Architectual-frequency
51-55 High speed steel cutting tools, Whisky, Electronic circuit boards,
Powder metallurgical products (Machinery materials), Sodiumhydroxide
56-60 Skin cream products, Powder metallurgical products (Machinerymaterials), bear, Copper electric wires, Phenol-formaldehyde resin
61-65

Sparkling Liqueur, Small capacity motors, Phenol-formaldehyde
resin,Other Liqueur（fruit wine）, Medical products-0.561--0.79566-70

Ordinary steel sheets and plates, Coffee・Tea type Beverage, Body
cleaner, Coffee・Tea type Beverage, Food oil-0.798--1.10971-75

Other Liqueur（fruit wine）, Body cleaner, Tin free steel, Aluminium
cans for beverage-1.199--1.69076-81

Liqueur, Spirits, Spirits, Liqueur, Phenol-formaldehyde resin,
Carbon Fiber-1.988--2.21813

Takahiro Fujimoto, Takashi Oshika(regression analysis)
At the same time, the level of labor intensity (i.e., labor distribution rate)—which is a standard
in conventional trade theory—was also observed.
The survey also inquired about export ratios as an indicator of international competitiveness.
Furthermore, the “integral architecture indicators” and labor intensity were statistically examined,
through regression analysis, both separately and simultaneously to determine any correlation with
export ratios.

The results are as shown in the Table5.
Table5 Summary of regression analysis of export ratio(Integral architecture indicator and labor intensity )Independennt Variable（X)Integral
Adjusted
SampleArchitecture
Labor Intensity
Constant
RSize
Indicator
squaredExport Ratio
0.1221
0.358
0.091
52
(8.94)(2.48)*
assembly Export Ratio
0.702
0.267
0.062
52
product(4.04)(2.01)*
Export Ratio
0.1310
0.770
0.236
0.178
52
(3.75)(2.78)**(2.43)*
Export Ratio
0.11840.18880.324
43**(6.84)(4.06)
process
Export Ratio
0.20560.12680.005
43
industry(0.88)(6.84)
product
Export Ratio
0.1195-0.03140.19440.307
43**(0.16)(4.31)(4.42)
Note:t-value in parenteses. * Statisticaliy significant at 5% level. ** Statisticaliy significant at 1% level

The type Dependentof product Variable（Ｙ）

The export ratio was dependent variable (Y), the integral architecture indicator, and the labor
intensity were independent variable (X) and the regression analysis was executed. However, there
were 31 products that there are no answers in the amount of production and exports of 173 productsin the assembly-industry products. 14 per 81 products did not have the answer in the process-industry
products. These were removed from the sample of the regression analysis (Refer to appendix 2 forthe regression analysis of this sample size).
The data of t the level of the labor intensity was defined from four question items of thefollowing question groups that prepared it by a corporate questionnaire.
(1) Product sales
product(2) Purchase raw material expense of product（3) Subcontract expense of(4) Total employer payment of product

The amount of the additional value and the level of the labor intensity (i.e., labor distributionrate) were defined from the following calculation.
The result of the correlation analysis of the overall evaluation question (13) and the principal
14

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theory

component factor of the process-industry products is following.
Correlation coefficient of the first principal component factor and overall evaluation: 0.678
Correlation coefficient of the second principal component factor and overall evaluation: 0.521
Therefore, the first principal component is "Architecture of the production process" factor as forthe process-industry products.
Additional value amount = sales-purchase raw material expense-subcontract expense
The level of the labor intensity (i.e., labor distribution rate) = total employer payment/additional
value amountThe regression analysis of Table5 was executed by 43 samples in the process-industry products
and 52 samples in the assembly-industry products because there wasno answer in total employer

payment.

First, the level of the integral architecture indicators showed a positive correlation with export
ratio for both assembled and processed products, and had a high level of statistical significance(estimated error rate of 1% or less).

This result is consistent with our hypothesis that, for Japan

manufacturing firms with team-oriented organizational capability, the more integral their products are,the higher their export competitiveness.

Furthermore, it was recognized that there is a positive

correlation in the area of assembled products even in simultaneous analysis with level of labor
intensity, indicating robustness of the explanatory power of the architectural indicators.
Secondly, although the labor intensity indicator did not show a clear trend in the area ofprocessed products, it did have a positive correlation in assembled products with a reasonably highlevel of statistical significance (5% level).

This means that, in the area of assembled products,

export competitiveness is high when labor intensity is high.
In the following, the scatter chart of the export ratio and the integral architecture indicator of theassembly-industry products and the process-industry products are shown.

15

Takahiro Fujimoto, Takashi Oshika

Figure 3 Export Ratio and Integral Architecture Indicator Scatter chart (1)Export Ratio and Integral Architecture Idicator Scatter chart（assembly products：52sample）（assembly-industry products：52sample）
100.0%
90.0%
80.0%

Export Ratio

70.0%
60.0%
50.0%
40.0%
30.0%

Regression Curve

20.0%
10.0%
0.0%
-3.000-2.500Low-2.000-1.500-1.000-0.5000.000
Integral Architecture Indicator

0.500

1.000
High

1.500

Export Ratio

Figure Export
4 Export
Ratio
andIntegralIndicator
Architecture
IndicatorIndustry
Scatter
chart (2)Ratio andIntegralArchitecture
Scatter chart（Process
Products：
43sample）（Process-Industry products：43sample）
100.0%
90.0%
80.0%

Ratio of Export

70.0%
60.0%
50.0%
40.0%
30.0%
20.0%

Regression Curve

10.0%
0.0%
-2.500-2.000Low-1.500-1.000-0.5000.000
Integral Architecture Index

0.500

1.000

1.500
High

2.000

Export Ratio

5. Japan’s Strength Based on Multi-skilled Labor Force
Because Japan’s labor endowment is obviously lower than that of its largest trading partner,
China, the finding that Japan’s assembled products have higher export competitiveness when they are
16

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theory

more labor-intensive may come as a surprise.

However, it should be noted that “labor forces” mayinclude both multi-skilled labor forces that are fostered by long-term employment on the one hand,and single-skilled labor forces with short-term employment on the other hand.

The above statement

gains thus coherence if it is remembered that Japan may have a rich supply of people belonging to themulti-skilled type of labor force, compared even with China.

In fact, as is typified by the Toyota

Production System, workplaces in Japan’s assembly industries that foster multi-skilled workers andeconomize capital equipment are indeed highly competitive.
The above conclusions are still provisional.

It will be necessary to make comparisons withvarious research projects conducted in the past, to elaborate observation methods, and to conduct
additional tests with more samples.

However, at the very least, the conclusions appear to support

the idea that shop-floor-based theory of the industry—i.e., “competitive advantage based on the fit
between organizational capacity and architecture”—which had rather been overlooked heretofore,
can be added to theories that explain industrial competitiveness of nations.
Finally, we would like to discuss the practical implications of these results.

First, when acountry’s industries tend to have integrative organizational capability of manufacturing that istempered through capability-building competition based on long-term employment/transaction,
locating integral architecture products domestically gives the relevant location export
competitiveness and facilitates sustainability within the country.

Of course, overseas production of

integral architecture products will increase from the additional principle of “producing products
wherever their market exists.”

However, even when looking at overseas sales ratios that include

such overseas production, our statistical analysis indicates that the more integral the products’architecture, the higher the ratio of overseas sales.
Second, Japanese companies must not be lax in fostering a multi-skilled workforce.

Even ifcompanies are forced to increase their non-fulltime personnel as a response to sales volume
fluctuations caused by Japan’s recession and low growth throughout the 1990s, they must make a full
effort to ensure that these non-fulltime employees are at least multi-skilled to a certain extent.
Of course, actual industrial structure is a joint result made up of the capability-building efforts
of manufacturing firms, their strategic choices, environmental changes, and other inside and outside
factors. Thus, the above-mentioned results point only to one of many factors influencing industrial
competitiveness.

However, in answer to the question “What products does Japan tend to have an

advantage in?” it is likely appropriate to say architecture-based theory of international competitive
advantage must be established when companies make decisions regarding decent factory locations.
17

Takahiro Fujimoto, Takashi Oshika

Appendix 1: Industrial division and product items
254 Products of 33 Companies., 10 Industries.
・Steel and Steel Products, Non-ferrous metals and products, Other metal products（18 items）
・General machinery （40 items）
・Household electrical appliances, Electronic and communication equipment, Other
electric machinery （41 items）
・ Parts and accessories of electric and electronic equipment （19 items）
・ Cars and auto parts （39 items

including 10 auto items ）・ Other transportation equipment and repairing （12・ Other machines and instruments （2 items）

items）(Other machines and instruments :Precise

machine Office machinery, Optical instruments Watch and Clocks)
・ Chemical products, Ceramic, stone and clay products （48 items）
・ Foodstuffs and feeds for animal poultry, Fabricated textile products, Pulp, paper,and paperproducts （32items）・ Other manufactured products and Software products（5items）

Appendix 2: Regression Analysis of the export ratio and the integral architecture indicat
or.
In the regression analysis, independent variable (Y) is the export ratio and dependent variable(X) is an integral architecture indicator. However, the product that there are no answers in the amountof production and exports included 31 products of 173 products in the assembly-industry products,
14 products in 81 products in the process-industry products. So, we removed these from the sampleof the regression analysis.

18

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theory

Export ratio and Integral Architecture Indicator Scatter chart(1)（Regression Analysis
Assembly-industry products：133sample）

Y = 0.0739∗ X + 0.336( 2.89 )**(13.1)**(N=133Adjusted R-squared:0.052)(t-value in parentheses. **Statistically significant at 1% level)

Export Ratio and Integral Architecture Indicator Scatter chart（Assembly products：133sample）
100.0%
90.0%
80.0%

Export Ratio

70.0%
60.0%

Regression Curve

50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-4.000-3.000Low-2.000-1.0000.000
1.000
Integral Architecture Indicator
Export Ratio

19

2.000

3.000
High

of

Takahiro Fujimoto, Takashi Oshika

Ratio of Export and Integral Architecture Indicator Scatter chart(2)（Regression Analysis ofProcess-industry products：67sample）

Y = 0.0871∗ X + 0.186( 3.33)**(N=67 Adjusted R-squared:0.133)( 7.05 )**(t-value in parentheses. **Statistically significant at 1% level)

Export Ratio and Integral Architecture Indicatorx Scatter chart（Process Industry products：
67sample）
100.0%
90.0%
80.0%

Export Ratio

70.0%
60.0%
50.0%
Regresion Curve

40.0%
30.0%
20.0%
10.0%
0.0%
-2.500-2.000Low-1.500-1.000-0.5000.000
0.500
Integral Architecture Indicator
Export Ratio

20

1.000

1.500
High

2.000

Empirical Analysis of the Hypothesis of Architecture-based Competitive Advantage
and International Trade Theory

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