Page 150 - Global Political Economy_Understanding The International Economic Order

SIG NIFIC ANCE O F NEW T HEORI ES
spread to other countries, but Japanese industry, with its ability to
keep production costs low and the quality of its products high and to
shift product mix much more rapidly than its competitors, took a
decisive lead in manufacturing in many high-tech and other sectors.
Indeed, Japanese superiority in manufacturing processes rather than
in product innovation has been the key to Japan’s outstanding export
success. Even though many of Japan’s most successful exports had
been invented in the United States, Japan triumphed in manufacturing
these products in high volume, at low cost, and with superior quality.
After several years, however, as the Japanese system of lean produc-
tion diffused to other countries, the overwhelming Japanese produc-
18
tive advantage decreased. Indeed, during the 1990s, American cor-
porations, through downsizing, heavy investments in computers, and
development of new enterprises regained much of the competitiveness
they had lost in the mid-1980s.
Globalization, Intensified Competition, and Transnational Alliances
Many developments in the 1990s increased the globalization of the
world economy and also intensified international competition in a
number of ways. Reduced transportation and communication costs
contributed to growing globalization in the areas of trade, invest-
ment, and production. Gigantic multinational corporations became
even more central to the management of trade and the organization
of production around the world, and intrafirm or managed trade,
rather than arms-length or market-based transactions, expanded to a
much larger portion of international trade. Growing costs for re-
search and development as well as the increasing importance of scale
economies and the need for market access caused more and more
firms to enter international markets to capture the returns on their
investments. The ever-expanding scope of modern science and tech-
nology and the compression of time between innovation and commer-
cialization provided yet another impetus for intercorporate alliances.
Learning that no individual firm, nor even any single country, could
take a commanding lead in every industry, more and more firms be-
gan to seek partners in other countries.

Technological Developments and the International
Division of Labor
Technological developments affect significantly the comparative ad-
vantage of developed and developing countries; the impact is particu-
18
David J. Jeremy, ed., The Transfer of International Technology: Europe, Japan,
and the USA in the Twentieth Century (London: Edward Elgar, 1992).
137