Published by EH.NET (January 2001)
David C. Mowery and Richard R. Nelson, editors, Sources of Industrial Leadership: Studies of Seven Industries. Cambridge: Cambridge University Press, 1999. viii + 401 pp. $59.95 (hardback), ISBN: 0-521-64254-x; $22.95 (paperback), ISBN: 0-521-64520-4.
Reviewed for EH.NET by Paul L. Robertson, Department of Management, University of Wollongong.
The editors have brought together an international, although predominantly American, group of economists and management scholars to investigate the factors that have allowed industries at the national level to gain and retain supremacy in a selection of important manufacturing industries. For the purposes of the book, leadership is essentially determined by share of world markets, even though sales may not be distributed evenly across all regions. Indeed, one of the main findings is that the nature of domestic markets is a major factor in determining the course of industry development.
All of the industries discussed have recently undergone or are currently undergoing significant technological transformations. Most are also, for all practical purposes, industries that are relatively new, although in some cases their roots extend back to the late nineteenth and early twentieth centuries. In one grouping, Richard N. Langlois and W. Edward Steinmueller outline the history of the semiconductor industry from its inception in 1947, Timothy F. Bresnahan and Franco Malerba look at the world computer industry, and David C. Mowery traces developments in computer software. Although the pharmaceutical and diagnostic devices industries have been active for longer, the thrust of the two chapters covering their development is also on recent breakthroughs. Thus Rebecca Henderson, Luigi Orsenigo, and Gary P. Pisano emphasize the use of molecular biology by pharmaceutical firms, and Annetine C. Gelijns and Nathan Rosenberg concentrate on modern branches of diagnostic devices including the CT scan and MRI equipment and various forms of endoscopy. Longer periods of time are considered, however, in the chapters on the machine tool industry by Roberto Mazzoleni and on the chemical industry by Ashish Arora, Ralph Landau, and Rosenberg.
In the final chapter, Mowery and Nelson bring together the lessons in the various case studies. They conclude that national competences are often vital to success at the firm level. For example, the local availability of natural resources has not been of great importance but local access to highly-skilled labor and venture capital has been, as has the role played by national university systems. The size and nature of local markets have also been critical factors. The early adoption of computers in the large American market has given U.S. firms a lasting advantage in both the computer and software industries. Similarly, the relatively high incidence of gastic cancer in Japan and the importance of gastroenterology as a medical specialization have encouraged Japanese manufacturers of medical diagnostic devices to develop strengths in flexible endoscopy. Overall, however, Mowery and Nelson feel that it is the interaction of national environments and firm strategy that is important, rather than either taken in isolation.
The effects of public policy, although significant in all of the case studies, have varied from industry to industry and country to country. American defense goals spurred developments in semiconductors, computers, and software, and more recently the enormous funding provided by the National Institutes of Health has financed research in medical areas. Japanese and European policies to foster the growth of national and regional champions have also influenced the evolution of a number of industries, but not always very effectively. Less targeted policies such as competition legislation, intellectual property regimes, and the funding of universities are also discussed. In general, the authors and editors find that strong competition policies are of value, but that tight intellectual property enforcement can retard leadership at the industry level. General infrastructure expenditure, as for universities, is vital.
In practice, the book is about the ways in which technological developments have been received in the United States. Even when American firms have not achieved leadership, or have lost it as in the case of machine tools, the size and wealth of the U.S. market has been a magnet for technological leaders from all over. In part, this is a tribute to the willingness of Americans to take up new products as well as to the market-driven nature of many American institutions. The ability of pharmaceutical firms to pass on high development costs to consumers, for instance, has often made the U.S. market more attractive to research-oriented European and Japanese firms than their home markets have been. Nevertheless, the way in which overseas producers have been able to capture U.S. markets in industries such as machine tools does suggest possible failures in American entrepreneurship.
The individual case studies are all good short accounts of industrial change that can be recommended to economic historians and their students. In most cases, the provision of extensive references will also help those who want to research more extensively. The book also offers inspiration for further research. In particular, as it stands, the framework built around national systems of innovation remains quite loose. A more detailed mapping of the interaction of the many factors discussed could very valuable as a guide to the targeting of future public policies.
Paul Robertson is the co-author (with Sidney Pollard) of The British Shipbuilding Industry, 1870-1914 (Harvard, 1979) and (with Richard N. Langlois) of Firms, Markets and Economic Change: A Dynamic Theory of Business Institutions (Routledge, 1995).