Strategy and Circumstance: the Response of American Firms to Japanese Competition in Semiconductors, 1980-1995

The transistor was an American invention, and American firms led the world in semiconductor production and innovation for the first three decades of that industry's existence. In the 1980s, however, Japanese producers began to challenge American dominance. Shrill cries arose from the literature of public policy, warning that the American semiconductor industry would soon share the fate of the lamented American consumer electronics business. Few dissented from the implications: the only hope for salvation would be to adopt Japanese-style public policies and imitate the kinds of capabilities Japanese firms possessed. But the predicted extinction never occurred. Instead, American firms surged back during the 1990s, and it now seems the Japanese who are embattled. This striking American turnaround has gone largely unremarked upon in the public policy literature. And even scholarship in strategic management, which thrives on stories of success instead of stories of failure, has been comparatively silent. Drawing on a more thorough economic history of the worldwide semiconductor industry (Langlois and Steinmueller 1999), this essay attempts to collect some of the lessons for strategy research of the American resurgence. We argue that, although some of the American response did consist in changing or augmenting capabilities, most of the renewed American success is in fact the result not of imitating superior Japanese capabilities but rather of taking good advantage of a set of capabilities developed in the heyday of American dominance. Serendipity played at least as important a role as did strategy.

A New Economic Analysis of the American Revolution

We offer an analysis of the American Revolution in which actors are modeled as choosing the sovereign organization that maximizes their net expected benefits. Benefits of secession derive from satisfaction of greed and settlement of grievance. Costs derive from the cost of civil war and lost benefit of Empire membership. When expected net benefits are positive for both secessionists and the Empire civil war ensues, otherwise it is settled or never begins in the first place. The novelty of our discussion is to show how diverse economic and non-economic factors (such as pamphleteering by Thomas Paine and the morale of the Revolutionary forces) can be integrated into a single economic model.

Stagnation and Change in Islamic History

There appear to be two seemingly contradictory images of economic change in the Islamic World and mixed evidence on whether Islamic societies have been open or conservative against modern ideas, technological advancements, and legal developments. Whereas a conservative attitude has been dominant in some societies and time periods, Muslims were at the forefront of scientific, technological, and legal developments in others. Rather than rely on ad hoc assumptions about the attitudes and characteristics of societies or the inherent qualities of new developments, this paper explains attitudes towards change by studying the political economy of the relationship between the rulers and the legal community. I extend recent theories of endogenous institutional change to develop a framework based on how rulers and legal community reacted to new developments immediately and how their strategic interaction unleashed an endogenous process toward change in the long run. Using this framework, I identify conditions under which new ideas, technologies, and legal developments have resulted in immediate change in Islamic societies. I also examine the process of change in the long run, whether and how immediate outcomes could be sustained over time as strategic interaction continued repeatedly.

Tax Collection in History

Methods of tax collection employed by modern governments seem dull when compared to the rich variety observed in history. Whereas most governments today typically use salaried agents to collect taxes, various other types of contractual relationships have been observed in history, including sharing arrangements which divide the tax revenue between the government and collectors at fixed proportions, negotiated payment schemes based on the tax base, and sale of the revenue to a collector in exchange for a lump-sum payment determined at auction. We propose an economic theory of tax collection that can coherently explain the temporal and spatial variation in contractual forms. We begin by offering a simple classification of tax collection schemes observed in history. We then develop a general economic model of tax collection that specifies the cost and benefits of alternative schemes and identifies the conditions under which a government would choose one contractual form over another in maximizing the net revenue. Finally, we use the conclusions of the model to explain some of the well-known patterns of tax collection observed in history and how choices varied over time and space.