Modularization in the Auto Industry: Interlinked Multiple Hierarchies of Product, Production, and Supplier Systems

This paper analyzes the modularization in the world auto industry. The modularization in the industry has involved architectural changes in product, production, and supplier systems with each region (Japan, Europe and the U.S.A.) emphasizing different purposes and aspects. As an attempt to understand such multi-faceted, complex processes coherently, this paper proposes a conceptual framework that sees development / production activities as interlinked, multiple hierarchies of products, processes, and inter-firm boundaries. With this framework, drawing on case studies and questionnaire survey data, the paper examines the on-going processes of modularization in the industry. It is argued that tensions exist among the three hierarchies, and such tensions may lead to further changes in product, production and supplier-system architectures in the auto industry, in a dynamic and path-dependent manner.Automotive industry, modularization, product architecture, production system, supplier system, hierarchies

Mobile Innovation and the Music Business in Japan: The Case of Ringing Tone Melody ("Chaku-Mero") (Research Note)

This paper examines the development process and successful factors of the ringing tone melody downloading service, or "Chaku-Mero," in Japan. Chaku-Mero is a mobile Internet service in which a subscriber could download from a wide selection of music melodies his/her favorite with some fee to get it ring when the mobile phone receives a call message. This service is arguably the most successful m-commerce business in the world. According to three major mobile communication carriers, NTT DoCoMo, KDDI, and J-Phone, Chaku-Mero accounts for 40 to 60% of their paid service sales on the mobile Internet. Industry sources estimate that annual payment for Chaku-Mero reached approximately 80-90 billion yen in 2002 (currently US$1=120yen). Also, it has been argued that the Japanese Chaku-Mero service is the sole example of Internet cultural content business, be it fixed or mobile, in the world that has successfully overcome complicated conflicts and concerns of copyrights among different parties and created a significant market. The paper describes the process of how this business has evolved. It traces back the pre-mobile-Internet phase of related services such as the "Sky Melody" service by J-Phone and the wireless Karaoke business, which served as precursors of Chaku-Mero. Then the paper examines the business structure: the parties involved in the business, their relations, and how values are created and distributed among them. Also, the paper analyzes why some content providers have been more successful than others. A leading Chaku-Mero provider, for example, maintains more than 6.5 million subscribers and annual sales of 12 billion yen. Over all, the paper provides a preliminary study of mobile innovation in the music business, which is a part of a larger study of the history of interactions between technologies to create, record, distribute, and promote music and the music business. It would give some implications for the prospects of mobile Internet businesses for music and other cultural contents.

Reasons for Innovation: Legitimizing Resource Mobilization for Innovation in the Case of Okochi Memorial Prize Winners

This paper addresses reasons for innovation. Innovation requires resources to transform new ideas into products/services to be sold in the market and diffused in society. Yet in the earlier stage of innovation process uncertainty always prevails both technologically and economically. There is no objective consensus that the new idea will succeed in the end. It is thus necessary for those people who want to realize the innovation to show others both inside and outside the firm legitimate reasons for mobilizing their precious resources, including people, materials, facilities, and money, throughout the process toward commercialization. How do firms legitimize the resource mobilization for innovation? Drawing on 18 case studies on Okochi Memorial Prize winners, which our joint research project has carried out over last five years, and building upon the existing literature on internal corporate venturing, new ventures, and other related issues, this paper examines the innovation process of established Japanese firms from idea generation to commercialization with a primary focus on the process by which resource mobilization was legitimized.

Determinants of Firm Boundaries: Empirical Analysis of the Japanese Auto Industry from 1984 to 2002

We have assessed the determinants of the choice of integration, relational contracting (keiretsu sourcing) and market sourcing by seven Japanese automobile manufacturers (OEMs) with respect to 54 components in light of contract economics. Our major findings are the following. First, the specificity and interdependency of a component significantly promotes vertical integration over keiretsu and keiretsu over market, consistent with transaction cost economics. Second, interdependency is a more important consideration for the former choice than for the latter choice, and the reverse is the case for specificity. This suggests that the hold-up risk due to specific investment can be often effectively controlled by a relational contracting based on keiretsu sourcing, while accommodating non-contractible design changes may often require vertical integration. Third, while higher testability of a component makes the effects of specificity significantly smaller, it also promotes the choice of keiretsu sourcing over market sourcing. One interpretation of this last result is that while higher testability improves the contractibility of the component with high specificity, it simultaneously enhances the advantage of keiretsu sourcing since it provides more opportunities for the supplier to explore new information for a collaborative exploitation with an OEM.