Carla I. Koen. Comparative International Management
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MANAGING RESOURCES: PRODUCTION MANAGEMENT 351
confront more firms which emphasize less organizational differentiation of work-
flow, requiring flexible but standard machine tools and favouring the socialization
and use of professionally autonomous setter-operators (ibid.).* Consequently,
German machine tool enterprises and plants are much larger than French ones;
work processes are characterized by less artisanal principles in production but,
as a result of societal influences, also by less overall lateral and hierarchical seg-
mentation of work careers and functions.
It seems, then, that machine tool making firms are almost the inverse of the
norm structures that apply in their clientele. A manufacturing industry dominated
by large batch or mass production firms and large concerns will be congenial to
manufacturers of customized machine-tools, which have a market strategy and
personnel structure that is opposed to that of their clients. A manufacturing
industry in which small-batch production of investment goods for more differen-
tiated markets is more typical will go together with a machine-tool industry that
makes more flexible but standard machines, and hence has a market orientation,
production systems and personnel structure of a more industrial kind, i.e. closer
to that of its clients (Sorge and Maurice, 149–50).*
During the immediate postwar period and until the early 1970s, the French
machine tool industry outpaced its German counterpart. During this period there
was no evidence of a technological gap between the two countries. If anything, the
French industry had benefited from its close relations with the aerospace client
industry which is strong in France, for an earlier adoption of NC (numerical
control) systems which had largely been pioneered by the aerospace and arma-
ments industries, first in the United States and then in Britain and France. This
innovation, the bases for which were laid during the 1950s, at first led to piece-
meal changes of machine-tool technology and a slow progression of NC machine
sales and utilization (Sorge and Maurice, 153).*
11
The then new technique
required substantial development of organizational, personnel and planning
capacities for programming machines largely away from the shop floor, and for
de-bugging and running in job and batch specific machining programmes. It was
therefore a technique more fitting for manufacturers with the capacity and will to
install substantial planning groups, i.e. larger enterprises and firms in “elite”
industries (Sorge and Maurice, 153).* The requirements of this NC technology
were one of the reasons why French machine tool producers outpaced their
German counterparts at that time. When automated machines for larger batches
are in demand in the domestic market, alongside the development of a slowly
increasing number of advanced NC machines for industries such as aerospace, it
seems that a ‘French’ type of societal environment is favourable.
This situation changed significantly after the mid-1970s. A worldwide crisis in
11
NC systems are the earliest forms of machine, using computerized machine tools. They became current in the
early 1950s and were dominant until the mid-1970s. The operations of machine tools were determined and con-
trolled first by an electronic plug-board and later by a simple computer. In this early form the sequence of
operations that the machine was meant to perform was contained on a paper or magnetic tape. The computer was
separate from the machine tool and usually not on the shop floor at all. To change the operations of the machine
tool – previously a complex and costly task – one now simply had to change the tape.
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352 COMPARATIVE INTERNATIONAL MANAGEMENT
machine tools started to develop just at that time, for slower growth of disposable
income and of goods markets reduced the need for additions to single-purpose
automation and investment goods on the whole (Sorge and Maurice, 153).* While
both Germany and France were hit by this crisis, it came at a different time for
each, and was dealt with differently in the two countries. But it is significant that
from roughly 1977 onwards, CNC machines which improved on the earlier NC
generations and became attractive for a wider clientele beyond the original core
of NC users, started to be sold more widely (Sorge and Maurice, 155).*
CNC was more quickly, more early and more widely seen in Germany as
offering the potential for an original improvement on previous NC techniques, and
was more in tune with the work organization and human resource patterns (see
Chapter 5) of large parts of the clientele of German machine tool producers. It
would appear that German machine-tool users jumped on CNC machines more
quickly since they saw them as breaking with the previous cumbersome division
of labour between planning, programming and machine operation (Sorge and
Maurice, 155).*
The distinctive factor is, as was shown in previous comparisons, the pro-
fessional continuity and propinquity between worker, technician and engineering
occupations in Germany, and the professional discontinuity and distance in
France, regarding status, education, remuneration and careers (Sorge and
Maurice, 158).*
The perpetuation of professional and organizational structures therefore
does not simply happen in response to the evolution of techniques or markets; it
also predisposes enterprises to go for particular variants of new techniques and
explore particular markets which have an affinity with these structures (Sorge
and Maurice, 158).*
German machine-tool producers were already previously more prepared to
manufacture universal, non-dedicated machines which can be operated flexibly,
and they continued along this way by entering more systematically the market for
universal CNC machines with operating flexibility, made in batches. Domestic
user concepts stressing flexibility in universal machines thus went hand in hand
with a more industrialized machine-tool industry which produced catalogue
machines on a larger scale (Sorge and Maurice, 163–4).*
It can be seen that the German industry explored new markets more quickly
because its own structure and user expectations prepared it better for entering
the new markets for CNC machines (Sorge and Maurice, 163–4).*
The German industry could apparently better afford backward integration
into CNC system design and manufacture, since it had much larger firm and plant
12
Computer numerically controlled machines operate along much the same lines as NC machines but with a
more advanced form of computer. The new micro-computer was built into the machine tool itself and had a ‘dia-
logue’ video display unit and keyboard. Thus, the process can be monitored and machines can be adjusted while
production is under way. Alternations or refinements dictated by production conditions at a given time can be
taken into consideration. The need for human intervention directly with the machine is still further reduced. The
more sophisticated computer allows the production of more complex and sophisticated parts with ever greater
precision.
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MANAGING RESOURCES: PRODUCTION MANAGEMENT 353
sizes, which provided for better opportunities to spread overhead and develop-
ment costs on the basis of greater economies of scale and larger development
departments (Sorge and Maurice, 164).*
Another important element in the explanation is that despite individually
greater backward integration into CNC system design and manufacture, there
was also greater co-operation between makers of machines, and between them
and electronics firms, software houses, non-industrial research and development
institutes and users of machines. Intensive collaboration alleviated problems with
which individually operating firms are confronted. However, not only the extent of
co-operation is important. Also, the better status of production engineering within
German industry and academia vis-à-vis other specialisms, and the higher status
of machine-tool firms vis-à-vis other reputed industrial manufacturers must be
considered (Sorge and Maurice, 164).*
Throughout the discussion of the German machine-tool industry, it became
clear that it has been closer in its profile to user industries, intertwined craft and
higher engineering functions, brought artisanal and research and development
work closer to each other, put manufacturers into more intimate collaboration
with reputed and technologically advanced institutions outside the industry,
bridged the gap between mechanical and electronic and software engineering
more comfortably (Sorge and Maurice, 168).*
The German machine-tool industry was favoured by the fact that institution-
alized social structures and relations are conducive to bridging gaps between
artisanal and industrial systems of production, between practices in small and
large firms, between craft and technological professions, between noble and less
noble branches of engineering (Sorge and Maurice, 168).*
It conforms with the more general argument: In this specific industrial case,
the German firms do better, because their existing markets and their less arti-
sanal profile in internal operations prepared them better for achieving a fit with
the requirements existing for the industrialized development and manufacture of
CNC machines to capture new markets for an innovation (Sorge and Maurice,
166–7).*
The opposite story emerges as we summarize the findings for French
machine-tool makers. These opened up new markets through CNC less quickly
and to a lesser extent. They were already previously less presented in these
markets but more successful in dedicated customized machines requiring less
flexibility of operation, installed with users in “high-tech” industries, larger
companies or plants with longer production runs.
The French industry entered the crisis later, and its reaction was negatively
prejudiced through this later start but also through its orientation towards market
segments and user interests different from those that provided latent new
demand for CNC machines. Furthermore, collaboration between makers to share
professionally novel (electronic and software) development efforts was much
more difficult to get off the ground, which was all the more serious in an industry
characterized much more than the German one by small firm and plant sizes,
enjoying less status vis-à-vis other industries and being more cut off from
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One of the few – if not the only – article to study manufacturing systems and man-
agement within the societal effect approach. It provides three excellent cases.
Takahiro Fujimoto (1999) The Evolution of a Manufacturing System at Toyota. Oxford:
Oxford University Press.
Excellent book describing how, in the early 1990s, Toyota had to change its assembly
lines to make them more worker-friendly.
Taylor, B. (1999) Japanese management style in China? Production practices in
Japanese manufacturing plants. New Technology, Work and Employment 14(2), 20
129–42.
Through an examination of 20 Japanese-owned manufacturing plants in China, this
article questions the usefulness of identifying Japanese competitive success as
being associated with specific Japanese production management techniques.
References
Berggren, C. (1992) Alternatives to Lean Production. New York: ILR Press.
Boyer, R. and Durand, J.P. (1997) After Fordism. London: Macmillan.
Boyer, R. and Hollingsworth, R. (1997) The variety of institutional arrangements and
their complementarity in modern economies, in Hollingsworth, J.R. and Boyer, R.
354 COMPARATIVE INTERNATIONAL MANAGEMENT
non-industrial research and development institutes and prestigious higher engin-
eering schools (Sorge and Maurice, 164–5).*
Because of these interconnected disadvantages, the backward integration of
machine tool makers into CNC systems and software development got stuck in
the beginning. However, the industry was not only less prepared to explore new
export markets, this being a disadvantage inherited from its industrial history, but
was also less able to tap the new domestic markets that became more profitable
in the drive towards differentiated quality production. Hence, the emerging
markets were more captured by the foreign, notably Japanese, competitor. But it
is again also true that demand for CNC machines was, in France, slower to take
off and assert itself in a wider scale as it did in Germany (Sorge and Maurice,
165).* As already suggested, this has something to do with the structure of the
industry in France, which has previously been weaker in investment goods manu-
facturing in mechanical engineering but stronger in precisely those sectors
where flexible universal machines were much less required than dedicated
purpose-specific machinery.
* Source: Sorge, A. and Maurice, M. (1990) ‘The societal effect in strategies and competitiveness of machine
tool manufacturers in France and West Germany’, International Journal of Human Resource Management 1,
Taylor & Francis Ltd, http://www.tandf.co.uk/journals.
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(eds) Contemporary Capitalism. Cambridge: Cambridge University Press.
Dankbaar, B. (1995) The crisis of Fordism: restructuring in the automobile industry,
in Van Ruysseveldt, J., Huiskamp, R. and Van Hoof, J. (eds) Comparative Industrial
and Employment Relations. London: Sage, 293–314.
Dohse, K., Jürgens, U. and Malsch, T. (1989) From ‘Fordism’ to ‘Toyotism’? The social
organization of the labor process in the Japanese automobile industry. East Asia 5.
Hollingsworth, R. (1997) Continuities and changes in social systems of production:
the cases of Japan, Germany, and the United States, in Hollingsworth, J. R. and
Boyer, R. (eds) Contemporary Capitalism: the Embeddedness of Institutions.
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Jürgens, U. (1995) Group work and the reception of Uddevalla in the German car
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Lane, C. (1989) Management and Labour in Europe. Aldershot: Edward Elgar.
Piore, M.J. and Sabel, C. (1984) The Second Industrial Divide. New York: Basic
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Sheldrake, J. (1996) Management Theory. London: International Thomson Business
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Sorge, A. (1995) New technologies, organizational change and employment prac-
tices, in Van Ruysseveldt, J., Huiskamp, R. and Van Hoof, J. (eds) Comparative
Industrial and Employment Relations. London: Sage, 266–314.
Sorge, A. and Maurice, M. (1990) The societal effect in strategies and competitive-
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Taylor, B. (1999) Japanese management style in China? Production practices in
Japanese manufacturing plants. New Technology, Work and Employment 14, 2.
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Systems. New York: Oxford University Press.
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Questions
1. Explain the relationships between organizational patterns and societal fea-
tures in the German and French machine tool industries.
2. Identify the link between the human resource practices and inter-organiz-
ational relationships in the French and German machine tool industries and
the rest of the domestic industry.
3. Explain comparative advantage in the French and German machine tool
sectors on the basis of human resources, organization patterns and the
embeddedness of firms in the societal structure.
4. Explain the concept of ‘fit’ in the context of the French and German machine
tool industry. In what sense can ‘fit’ help to explain the competitiveness
described in this case?
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Learning Objectives
By the end of this chapter you will be able to:
appreciate the difference between incremental and more radical types of
innovation
explore the link between the ‘techno-economic paradigm’ shift and dramatic
change in national institutions
identify the major institutions involved in innovation processes
assess the role of these different institutions in innovative systems
compare and explain the differences in the main features of the innovation
systems of the USA, Japan, Germany and France
explain how these divergencies help to understand differences in national
innovation trajectories.
Chapter
8
Managing Resources:
National Innovation
Systems
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Chapter Outline
8.1 Introduction
8.2 Technological Advancement: a Taxonomy
Incremental innovations
Radical innovations
Changes of ‘technology system’
Changes in ‘techno-economic’ paradigm
8.3 Innovation: Overview of the Major Institutions Involved
Institutional features affecting the stock of knowledge in research institutes
Institutional features affecting the flow of knowledge between research
Institutions and industry
Organizational practices affecting the stock of knowledge in industry
8.4 The American Innovation System
8.5 The Japanese Innovation System
8.6 The German Innovation System
8.7 The French Innovation System
8.8 Conclusions
Study Questions
Further Reading
Case: The German and Japanese Pharmaceutical Industries
References
MANAGING RESOURCES: NATIONAL INNOVATION SYSTEMS 359
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8.1 Introduction
The slowdown of growth in the 1970s and again from the late 1990s onwards in the
advanced industrial nations, the rise and fall of Japan as a major economic and techno-
logical power, the relative decline of the USA, and the widespread concerns in Europe
about lagging behind have induced research and policy concerned with supporting the
technical innovative competence of national firms. At the same time, the enhanced tech-
nical sophistication of firms from Korea, Taiwan and other newly industrializing
countries (NICs) has broadened the range of nations whose firms are competitive players
in fields that used to be the preserve of only a few, and has led other nations, who today
have a weak manufacturing sector, to wonder how they might emulate the performance
of the successful NICs (Nelson and Rosenberg, 1993: 3).
Against this background, a recent body of scholarship has underscored the import-
ance of the national institutional context as an explanation for differences in national
patterns of innovation (e.g. Dosi et al., 1990; Lundvall, 1992; Kogut, 1993; Nelson,
1993). From this perspective, technological development is rooted in the skills, capabili-
ties and knowledge that accumulate over time in the national innovation system.
Country-specific technological paths are argued to be shaped by the structural compo-
nents of society (such as political and educational systems) that influence the
accumulation and diffusion of knowledge required for industrial innovation.
Institutional perspectives highlight two ways in which the national institutional
context shapes specific country patterns of innovation. First, they show how the societal
institutions that support industrial innovation vary cross-nationally. For example, the
policies and practices of a nation’s universities and government research institutes are
shaped to a large extent by that nation’s singular historical development. Universities and
research institutes provide knowledge and human capital to firms in technology-driven
industries. As a consequence, the features of these institutions influence the technolog-
ical performance of a country’s firms (Ergas, 1987; Porter, 1990; Nelson, 1993).
Second, the national context influences the institutional arrangements and behav-
ioural patterns of firms themselves. For example, the organization of work and patterns of
communication within and between firms, or between firms and universities, reflects
broader societal characteristics that have been imprinted on firms and institutionalized
over time (Kogut, 1991; Powell and DiMaggio, 1991). Such institutionalized arrange-
ments are particularly important in emerging science-based technologies, such as
biotechnology, in which the relative success of different countries will depend on the suc-
cessful coordination of scientific infrastructure and industrial capabilities (Dosi et al.,
1990).
This chapter draws on these institutional arguments to explain how the national
institutional environments of different countries shape nationally specific innovation pat-
terns. Before that, it first provides some background information on the existing types of
innovation, in Section 8.2. In Section 8.3, it offers a brief discussion of the major institu-
tions that can be involved in innovation processes. Sections 8.4 to 8.7 discuss the
dominant features of the innovation systems of the USA, Japan, Germany and France.
This discussion should enable the reader to understand the link between the nationally
specific institutional features and technological trajectories of these countries. At the
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