National Culture and National Competitiveness: A Study of the Microcomputer Component Industry (1999)

INTRODUCTION The competitiveness of US, Japanese, Taiwanese and Korean' multinational enterprises (MNEs) in different aspects of microcomputer2 component markets can be analyzed from the perspectives of economics or organizational studies. Economists such as Ricardo (1817) as well as Heckscher-Ohlin's (1933) theory of comparative advantage suggested that MNEs specialized in microcomputer components in which they could produce most efficiently. Vernon's (1966) product cycle model, on the other hand, proposed a sequential process where new microcomputer components would be first manufactured in the USA, then in other advanced economies such as Japan, and eventually in less developed countries such as the Philippines. Organizational theorists Lieberman and Montgomery's (1988) first-mover advantage furnished a rationale for the competitiveness of microcomputer component MNEs in terms of preemption of product space. Furthermore, Wernerfelt (1984), as well as Prahalad and Hamel (1990), proposed that competitiveness among microcomputer component MNEs arose from individual organizational capabilities. Finally, Porter's (1990) diamond theory explained that MNEs' international success was a result of the competitive advantages embedded in their homebases. Figure 1 provides an overview of static competitiveness3 in relation to microcomputer components of high monetary value. A typology of components incorporated in microcomputers as differentiated by conceptintensity, capital-intensity and labor-intensity is shown in Table 1. Conceptintensive components encompass the designs of microprocessors and software. Capital-intensive components refer to the assembly of dynamic random access memories (D-rams) and printer engines while labor-intensive components include monitors, keyboards, and printed circuit boards. The highest demand for skilled labor is in the concept-intensive components. For example, it took IBM, Motorola, and Apple designers in the Somerset Joint Design Center, Texas, nearly two years to complete the Power PC Architecture, which was implemented in the Power PC601, 603, 604, and 620 microprocessors. The critical feature of capital-intensive components, on the other hand, is that they contained the highest level of minimum efficient scale and initial capital investment. For instance, the minimum efficient scale for hard disk drives as estimated from IBM's Thailand facility in 1997 was approximately 1,000,000 per month, whereas the capital requirement for building a 256-megabit semiconductor plant was estimated to be about US$3 billion in 1998. (Financial Times, 1128/1996:4 and 6/231998:35). Finally, labor-intensive components have the longest product life cycle. Figure I shows that in the mid-1990s US MNEs captured phenomenal market shares of over 70% of concept-intensive components whereas Japanese and Korean MNEs had comparable market positions in capitalintensive components. Similarly, Taiwanese and Korean MNEs had market shares of approximately 70% in labor-intensive components. This figure demonstrates the fact that organizational capabilities are unequally distributed among the 4-nation microcomputer component MNEs and suggests the weaknesses of the aforementioned perspectives. The mobility of MNEs' manufacturing operations through the deployment of foreign direct investment means that they can extract the comparative advantages or competitive advantages of different localities, hence highlighting the inadequacy of applying these perspectives as means to explain the competitiveness of microcomputer component MNEs. Similarly, the MNEs' abilities to relocate their manufacturing activities to the most appropriate sites in accordance with the stages of the component product development cycle also indicates the incompleteness of Vernon's model. In addition, the concepts of first-mover advantage and organizational capabilities failed to capture the national pattern of microcomputer component production. …