The average establishment in the Japanese optoelectronics industry is smaller than its U.S. counterpart. The average size of Japanese firms in the optoelectronics industry is 188 employees (see Fig. 7.7 for size breakdown). By contrast, U.S. optoelectronics firms average 750 employees (DOC 1994, IV-35). This may seem surprising in light of the relatively large size of the Japanese optoelectronics industry overall, but it is entirely typical of Japanese industry. In general, Japanese firms are much less vertically integrated than their American counterparts. Unlike General Motors, the Toyota Motor Company is just an assembler of automobiles. The auto parts it uses in assembly are purchased from a large network of long-term outside suppliers. This is known both in Japan and abroad as the keiretsu system (on the Japanese keiretsu system, see Weinstein and Yafeh 1996). Many argue this system combines the high-quality information flows between component user and component maker so characteristic of vertical integration with the high-powered incentives so characteristic of the impersonal market mechanisms (Aoki 1988). The average Japanese optoelectronics establishment is typically tied through equity or long-term contractual relationships to a larger company 25 to 30 times its size, on average (OITDA 1994).
Fig. 7.7. Distribution of employment by size of firm in Japan's optoelectronics industry, 1992 (OITDA 1994).
The much larger size of the Japanese optoelectronics industry compared to the U.S. industry is reflected in its scale of investment. Although Japanese and U.S. investment data are based on incomplete surveys, for the years for which data are available it appears that the Japanese optoelectronics industry has been investing at a rate of better than $1 billion a year (Fig. 7.8), which is five to six times the investment rate of the U.S. optoelectronics industry. Significantly, despite the smaller size of the average Japanese firm, average investment per firm is higher in Japan than in the United States, as Figure 7.9 shows (OITDA 1994; DOC 1994).
Fig. 7.8. Investment in the optoelectronics industry: U.S. and Japan, 1989-1992 (OITDA and DOC).
Fig. 7.9. Investment per firm in the optoelectronics industry: U.S. and Japan, 1989-1992 (OITDA and DOC).
To some extent, the high rate of investment per firm in the Japanese optoelectronics industry may reflect the structure of employment in the industry. As shown in Figures 7.10 and 7.11, the types of employees hired in the Japanese optoelectronics industry differ to some extent from those hired in the U.S. optoelectronics industry. In particular, scientists and engineers account for a much larger proportion of total employment in the Japanese optoelectronics industry; correspondingly, production workers play a smaller role. The relatively small role of production workers in the Japanese optoelectronics industry may be the result of high rates of investment in labor-saving equipment.
Fig. 7.10. Employment by employee type in the Japanese optoelectronics industry, 1993 (OITDA 1994).
Fig. 7.11. Employment by employee type in the U.S. optoelectronics industry, 1993 (DOC 1994).