government. The entrepreneur's decision is affected by expected value of these variables but there still remain factors unexplained fully. It may be associated with his educational background and width of his business horizon. Yamazawa (1984, ch.6) analyses the CPC of trading companies, a service industry handling foreign transactions, and it reveals that the Japanese trading companies advised their manufacturers as to which directions their comparative advantage would shift.

Third, forward and backward linkage effects assisted the spread of CPC from the first to other industries. In the forward linkage industries inputting the first industry's output is assisted to follow CPC, while in the backward linkage industries supplying input to the first industry is encouraged by the increase of demand. Yamazawa (1984, ch.4) provides two econometric estimations of the backward linkage effects of cotton textile's CPC on the CPC development of synthetic dyestuff and textile machinery. On the other hand, Japan's silk reeling industry, although being the first modern manufacturing industry established and the biggest earner of foreign exchanges for the first few decades of Japan's economic development, neither followed the CPC development nor had much linkage effects, another contrast with the cotton textile industry. (Yamazawa 1984, ch.3)

Fourth, the learning effect helped the spread of one industry's CPC to the other. That is, it is easier to master the technology of standardised production than that of sophisticated ones, and the CPC development is achieved first in the standardised production and then followed by that of sophisticated ones. It is observed most clearly between low-count and high-count cotton yarns and between black- and white-TVs and color TVs. However, thanks to more common elements in production and marketing technology within each pair, the CPC of the sophisticated products can be cut short, omitting trial and errors at both introductory and import substitution phases and start an export phase from the beginning.

The development of synthetic textile industry in Japan followed this pattern typically in the post World War Two period. After having acquired the basic technology of synthetic fiber production both through own R & D and through technology transfer, Japanese textile firms could start exporting synthetic yarns and fabrics without experiencing import substitution phase based on their earlier experience in cotton and rayon production. (Yamazawa 1984, ch.4)

## I nternational transmission of CPC : Variation 2

The spread of CPC from one country to another is explained by the basic type of CPC repeated by late-starting countries with less capital endowment. (Fig. 3 Panel B) And it is affected significantly by the transfer of managerial resources from the former to the latter. Managerial resources can be imported from abroad rather than generated and accumulated locally so that the CPC development can be accelerated.

In many industries in Japan, indigenous firms accumulated own managerial resources, using domestic capital but relying on imported machines, equipment, and intermediate material through trial and errors. In an industry like electric appliances, however, they could cut short the CPC development by introducing managerial resources from abroad. They introduced new technology under licencing agreements (technology transfer TT) or, if foreign suppliers of technology insisted, through investment in kind under joint venture.