Mastering the market: Japanese government targeting of the computer industry

Abstract

A key topic of inquiry in the ongoing debate over Japan's remarkable postwar growth is the role of the government. Some argue that the state has played a leading role in stimulating and guiding the development of specific industries; others argue that market factors, such as high rates of investment and savings and low labor costs, have been the key impetus. This article focuses on the link between the state and the market, in particular the impact of state policies on market competition. It is primarily concerned with how targeting policies can be structured in ways that spur industrial development; that is, how policies can help firms enter an industry and encourage them to invest heavily to make better products, without sapping their initiative and making them dependent on the government. A case study of Japan's national strategy to develop an economically viable computer industry provides an opportunity to explore the relationship among targeting policies, market competition, and industrial development.