David B. Yoffie

Competing in the Age of Digital Convergence

From the Publisher: The essays in this important collection examine the consequences of digital convergence on the participating companies and industries, their internal capabilities, the products and services they produce, and the way they compete. In the process, the authors reveal that the key to success for companies in this new environment will not be to engineer big technological breakthroughs or to execute grand acquisitions. Instead, the winners will be those companies that develop innovative products and services by creatively combining existing technologies with new managerial approaches. Timely essays place the computer industry in historical perspective; address prospects for industry convergence; identify economic, legal, and managerial obstacles to convergence; and examine the managerial challenges facing companies in rapidly changing hardware and software environments, particularly around issues of product and process development and interfirm alliances.

Between free trade and protectionism: strategic trade policy and a theory of corporate trade demands

Conventional theories of the political economy of trade argue that industries in import-competing businesses favor protectionism, while multinational firms and export-dependent corporations advocate unconditional free trade. However, many multinational industries have recently advocated “strategic” trade policies: that is, they are willing to support free trade at home only if foreign markets are opened or foreign governments reduce subsidies to their firms. If demands for strategic trade policy were adopted by the United States, they could represent a threat to the General Agreement on Tariffs and Trade (GATT) and the multilateral trading system. This article seeks to explain the emergence of these new corporate trade demands and thereby broaden theories of the political economy of trade. The article begins with the widely supported position that multinational and export-oriented firms prefer unconditional free trade. Building on concepts from theories of industrial organization and international trade, the article then hypothesizes that rising economies of scale and steep learning curves will necessitate that these firms have access to global markets via exports. If growing dependence on world markets is combined with foreign government subsidies or protection, the trade preferences of firms will shift from unconditional free trade to demands that openness at home be contingent on openness overseas. The manner in which firm demands then get translated into industry demands will vary with the industrys structure. If the industry consists of firms with symmetric strategies, it will seek strategic trade policy; but if the industry is highly segmented, it will turn toward protectionism. The article concludes with a preliminary test of these hypotheses in four brief studies of the politics of trade in the semiconductor, commercial aircraft, telecommunications equipment, and machine tool industries.

Software development on Internet time

There is probably little debate that Internet software companies must use more flexible development techniques and introduce new products faster than companies with more stable technology, established customer needs, and longer product cycles. Internet and PC software firms favor a more flexible style. The basic idea is to give programmers the autonomy to evolve designs iteratively but to force team members to synchronize their work frequently and then periodically stabilize their design changes or feature innovations. Studying two companies, the authors found that Netscape was using a version of the Microsoft-style synchronize and stabilize process for PC software, but adapting it to build Internet browser and server products. They also found that Microsofts Internet groups were modifying their standard process to increase development speed and flexibility. The goal was to balance flexibility and speed with professional engineering discipline.

THE DYNAMICS OF NEGOTIATED PROTECTIONISM

R ecent protectionism by the United States has principally taken the form of negotiated barriers to trade, such as voluntary export restraints. These barriers tend to evolve over time and to display three patterns, which we label institutionalized, temporary, and sporadic protectionism. Cartel theory and studies of the politics of protection suggest that the dynamics of negotiated protectionism will depend on three variables: the barriers to entry into an industry, the size of the domestic industry, and the exit barriers for domestic firms. Low barriers to entry will lead to institutionalized protectionism when the domestic industry is large and exit difficult; temporary protectionism results when the domestic industry is small and exit easy; and sporadic protectionism is likely when barriers to entry are high. Brief studies of U.S. protectionism in textiles and apparel, steel, footwear, televisions, and automobiles illustrate the value of this framework. T rade protectionism has often been thought of as a unilateral act by a sovereign state. Yet much protectionism during the 1970s and 1980s has, been negotiated rather than unilaterally imposed. Voluntary export restraints (VERs) and similar arrangements have become the preferred means by which the United States has sought to cartelize industrial sectors threatened by imports. Such negotiated protectionism has been particularly evident in five industries in the United States during part or all of the last quarter century. In textiles and apparel, steel, footwear, television sets, and autos, the United States has negotiated trade restrictions with numerous foreign exporters. While the U.S. government has occasionally provided unilateral measures of protection for small industries, all U.S. administrations since World War II have been reluctant to countenance general schemes of protection for major industries. Yet, beginning with the Eisenhower administrations negotiations in textiles in 1956, virtually every U.S. president has actively sought VERs for economically and politically sensitive industrial sectors.

Building a Company on Internet Time: Lessons from Netscape

The Internet has created new demands on start-up companies: How do you grow an organization faster than ever before? This article draws lessons from Netscape, the fastest growing software company in history. Netscape executives did four big things right: they crafted a compelling but pragmatic vision; they made experience a top priority in hiring staff; they built big-company resources while maintaining smallcompany flexibility; and they successfully leveraged external resources in order to compensate for the companys small size. At the same time, company leaders made mistakes: They overestimated the pace of technological change, they failed to develop systematic strategic processes until it was almost too late, and they often sacrificed long-term value in favor of short-term cash. Despite these failings, Netscape built a successful organization that ultimately delivered

What Netscape learned from cross-platform software development

10 billion in value to their shareholders after only four years.

Foreign direct investment and the demand for protection in the United States

and Marc Andreessen, a recent graduate of the University of Illinois where he had led the team of hacker programmers that built Mosaic, the first mass-market browser for the Web. Together they founded Netscape to create a simple, universal interface that would allow users with almost any type of communications device to access the Web. Their initial focus was on two products: a commercial-grade browser that would take up where the buggy Mosaic left off, and a Web server, the software that allows individuals and companies to create Web sites [1]. Navigator 1.0, released in December 1994 as Netscapes first product, was a spectacular success, quickly becoming the browser of choice for Internet users. By December 1995, the company was worth more than

Mastering Balance: How to Meet and Beat a Stronger Opponent

7 billion in terms of market capitalization. It soon introduced a series of browser and server products that used Internet protocols as the basis for intranets, extranets, and other business applications. Netscape thus evolved from a browser company into an enterprise software company, distinguished by its ability to write Internet software for all major personal computer platforms, as well as for Unix. By 1998, after deciding to give away the browser for free, most of Netscapes revenues were from servers, about 60% of which was from customers running various versions of Unix. The other 40% of its server revenues was from cus-Its development strategy produced unexpected costs, a wrong turn with Java, performance compromises, and questions about future ties to Sun Microsystems.

Judo Strategy: 10 Techniques For Beating A Stronger Opponent

Over the past decade, foreign direct investment (FDI) in the United States has grown dramatically, changing the composition of many U.S. industries and bringing foreignowned firms into the domestic political process. Presumably, FDI also has affected the politics of protection, by both altering the domestic coalitions around protectionist demands and shifting the potential benefits that protectionism is likely to bring. To understand this process, we create and test a model that examines the level of inward investment and the extent to which this investment either complements or substitutes for existing import levels. Import-complementing investment, we suggest, will cause a split in protectionist demands, with local producers favoring protectionism and foreign investors pushing for free trade. Import-substituting investment, by contrast, will create convergent interests between local and foreign producers. In both cases, inward FDI reshuffles traditional alliances and demands for protection, challenging many prevailing views about protectionism in the United States.

The Newly Industrializing Countries and the Political Economy of Protectionism

Any company can learn to compete more effectively with stronger rivals by mastering the concept of balance in the face of attack. Balance is a judo strategy principle that emphasizes the importance of retaining the initiative and shaping the competition in ways that make it easier to win. Rather than get thrown on the defensive, successful judo strategists learn to engage with powerful opponents by mastering three techniques: grip your opponent, avoid tit-for-tat, and push when pulled. These techniques are illustrated with a variety of examples drawn from both new-and old-economy companies.