American Scientist

Inventing the Electronic Century: The Epic Story of the Consumer Electronics and Computer Industries. Alfred D. Chandler, Jr. xiv + 321 pp. The Free Press, 2001. $35.

The Japanese electronics industry came of age in the 1980s. As firms based in the United States were driven by their Japanese competitors from product markets they had once dominated, such as color television and computer memory, many prominent analysts came to the conclusion that the structure of corporate America was fatally flawed. The scale and scope of Japanese firms, their capacity to take the long-term view, and their close linkages with banks and suppliers provided, it was said, insuperable advantages in international competition. Yet in the 1990s both the competitive situation and—not coincidentally—the conventional wisdom flip-flopped. Nimble, innovative American start-ups, fed by booming venture capital and equity markets, became the envy of the world.

Alfred D. Chandler, Jr., whose new book traces the course of the two biggest segments of the global electronics industry over the past hundred years, is no slave to fashion. His reading of the historical record is that Japanese firms have "strong advantages" moving forward into the new century. The "Big Nine" Japanese companies (Matsushita, Sanyo, Sharp and Sony in consumer electronics and Fujitsu, Hitachi, Mitsubishi, NEC and Toshiba in computers) benefit from their diverse product portfolios, their deep experience and their intense interaction, both competitive and cooperative, with one another and with the many firms that cluster around them in the Tokyo-Osaka corridor. Their American competitors do not measure up on these critical dimensions, in Chandler's view, and their European competitors are no more.

Chandler's tilting at the contemporary orthodoxy will not surprise readers familiar with earlier work in his long and distinguished career at the Harvard Business School. Monumental contributions like Strategy and Structure (1962), The Visible Hand (1977) and Scale and Scope (1990) established him as the dean of the field of business history; indeed, it would be only a slight overstatement to say that Chandler created the field. Inventing the Electronic Century follows Chandler's well-established approach, providing capsule histories of the largest firms in the industries he studies and analyzing the strategic choices made by their leaders.

He describes, for instance, the rise and fall of RCA, the American pioneer and longtime leader in consumer electronics, which fell prey in the 1960s to "the lure of the computer" and the "curse of the conglomerate." RCA lacked the technological wherewithal to challenge IBM, the computer industry's dominant firm at the time, and the management skill to profit in businesses far from its core capabilities, such as real estate and carpet manufacturing. Matsushita and Sony, neither lured nor cursed, quickly conquered RCA (to use a military metaphor of the sort that peppers Chandler's prose).

Inventing the Electronic Century does not rank among Chandler's best books. In fact, readers who are not already acquainted with his mode of analysis may find it rather cryptic. Much importance is attributed to a few key causal factors, such as "integrated learning base," "technological competencies," and "functional capabilities," without much explanation of what these terms mean and how they influence outcomes. The reader seeking colorful tales of managerial leadership and technological derring-do that give life to these abstractions will not find them here. Factors outside the control of management, such as the enthusiasm of users, who stunned managers by rapidly adopting such innovations as radio broadcasting and electronic mail, are glossed over entirely.

What is most innovative here is Chandler's extension of his approach to Japanese firms. Inventing the Electronic Century provides a valuable antidote to the "Japan, Inc." mythology propagated by many writers in the 1980s when the old conventional wisdom held sway. Each of the Big Nine companies is unique, and Chandler gives the reader a sense of how each developed and how they differ from one another. Moreover, Chandler's reminder of the continued strength of these firms is welcome in an age that lionizes the Silicon Valley start-up. A decade of macroeconomic malaise in their home country may have made the Big Nine even more vigorous competitors in global markets.

That said, Chandler risks reading history too literally as a guide to the future. The world has changed more than he is willing to admit. Big businesses have a tendency to stagnate, and the financial, managerial and technological capabilities required to challenge incumbents gone soft are easier to assemble today than ever before, the present slowdown in the venture capital market notwithstanding. The claims of writers like Chandler's Harvard colleague Clayton Christensen, who has popularized the idea of "disruptive technology," are no more exaggerated than Chandler's. Readers of Inventing the Electronic Century (and the promised companion volume on chemicals and pharmaceuticals) are advised to balance the two extremes.—David M. Hart, Kennedy School of Government, Harvard University