ABSTRACT
This chapter discusses the validity of Michael Porter’s framework in explaining Japanese industrial development. In The Competitive Advantage of Nations, Michael Porter attempts to establish a theoretical framework through the careful observation of various and extensive facts and, by this inductive method, he seeks to explain the international competitiveness of firms. Porter sees his task as the need ‘to explain the pattern of success and failure in industries and how this has been changing over time’, and the necessity of understanding the formation of a value chain in particular Japanese industries. The rise and decline of a series of industries from 1970 to the mid-1980s can be understood in terms of a shift of competition from lower production costs as a consequence of labour factors to that of lower costs gained through value chains, not necessarily as a shift from factor cost advantage to product differentiation.
