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UGF Lecture 6Management > Global Firm > Kojima > Case A > Case B > Conclusive remarks > Further analysis > Real Cases
Real Case ACase A came from the first wave of Japanese FDI, i.e. into other Asian economies. The first industries to achieve strong competitiveness in Japan in the post-war years were those using low-cost labour and standardised labour-intensive technology to produce well-established mass-market consumer goods. The competitiveness of these industries were based on LAs (macro-level source of comparative advantage) and OAs (to enable these companies to make effective use of the available LAs). The OAs took forms reflecting the industry and the country in which they were developed. For example, Japanese firms' OAs included a strong mastery of the labour-intensive technology, managerial skills in organising an unskilled workforce and skills in marketing mass-market products. The extreme success which followed resulted in the change of employment structure, as wage levels rose, which caused the loss of LAs (subsequently they lost their comparative advantage to emerging high-technology capital-intensive industries that could afford the higher cost). However, the firms still retained their OAs, but now sought more efficient ways of capitalising upon them by looking outside Japan for alternate LAs. In the late 1960s there was much low-cost labour in other Asian economies, which had no OAs required to exploit their LAs to an internationally competitive level. Thus the Japanese companies took their OAs overseas (becoming MNEs for the first time) and turned these countries' resources into actual sources of comparative advantage. The Japanese MNEs' OAs complemented the Asian countries' LAs, allowing them to supply their markets more cost-efficiently, while providing the countries with a competitive development process based around their initial sources of comparative advantage. Another point about this case is that the industries expected to lose competitiveness are the standardised, low-technology ones. These processes are useful in utilising key attributes of C2's latent comparative advantages and are the easiest to learn in less developed countries. Once this first step has been taken, C2 can move up in technological evolution. Thus types of FDI implied by Case A provide the basis for orderly technology transfer, and a natural development process. This is known as the "Flying Geese" argument, where by the time the second most vulnerable industry is ready to engage in outward FDI, the LCDs are ready to absorb this next level of technology. It is a dynamic theory, where C1 and C2 are continually developing.
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