An Elucidation of the Role of Institutional Systems in Characterizing Technology Development Trajectories - A Global Comparative Analysis of Manufacturing Technology and Information Technology in the Enhancement of Business Practice

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I.Background and Objectives1.Japan ranks far below the level of the USA with respect to the development and utilization of information technology (IT) in the information society that emerged in the 1990s.2.This can be attributed to a vicious cycle between Japan's non-elastic institutions, insufficient utilization of the potential benefits of IT, and economic stagnation.3.The source of such a vicious cycle can be derived from the fundamental differences of the characterizing process of technology between manufacturing technology (MT) and IT during their diffusion processes. This investigation attempted to elucidate this mechanism.II.New Findings1.MT has been developed largely by the supply side and its functionality is established during the stage of its supply to the market. In contrast, IT is strongly driven by the demand side and its functionality is created through diffusion in a self-propagating way. This contrast can be clearly observed in the dramatic advancement of Japan's mobil … More e phone industry in the late 1990s.2.In fact, induced by strong market learning aiming at higher functionality and accomplishing a full utilization of the benefit of network externalities, Japan's mobile phone industry has demonstrated co-evolutional development with institutional systems through the creation of functionality and the changing of characteristics in a self-propagating way during its diffusion process.3.This can also be attributed to co-evolution between operators and vendors amidst severe competition in their new variety of functionalities, leading to construction of Japan's unique dual co-evolutional dynamism.4.Mobile phone driven innovation triggered reactivation of Japan's economy through its catalytic role in restructuring industry production, diffusion, consumption and innovation systems by disseminating core technologies and renovating the conventional production style.5.However, as a consequence of Japan's unique supply structure in a closed system, Japan's mobile phone industry failed to conform to the demand for functionality variety in the global market.6.In addition, innovation resulted in differentiating the domestication of the characterization process of technology between firms sticking to Not Invented Here syndrome and those that succeeded in fusing indigenous strength and learning effects by means of the hybrid management of technology. Consequently, the innovation trajectory of firms was bi-polarized, resulting in heterogeneous Japanese firms that were previously homogenous. Less