Why Do Firms Differ? 71 economies of scale and scope in manufacturing ation. If the rationally choosing view of techno- called for large firms operating in several different logical advance is misguided, the rationally product fields, or market areas. The M form of choosing view of organizational change is even managerial structure evolved to govern effectively more so s kind of business operation Just as important, it is common, not infreque Over the long run what has mattered most has for a particular mode of organization put in plac been organizational changes needed to enhance for one reason to turn out to have advantages, dynamic innovative capabilities. Reich(1985), or disadvantages, in arenas that were not Hounshell and Smith (1988), and other writers considered at the time the original move was have described how the organizational device contemplated and made. It also is common, not laboratory came into existence, to permit firms about just what features of a firms organization to shield a portion of their scientific and technical are responsible for certain successes or failures personnel from the pressures of day by day Thus, as I understand it, large Japanese firms problem solving so that they could work on the adapted ' life time employment for their skilled development of new products and processes. This workers in the early post war era to try to deal development was preconditioned by the rise of with a problem of skill shortages and labor a new ' technology' for product and process unrest. It is quite unclear how many Japanese development, one employing the understandings managers foresaw advantages associated with and techniques of the sciences and engineering worker loyalty, and ability of a firm to do disciplines in a systematic way. One can read in-house training without fear of losing the Chandler's and Lazonick's account of the rise of investment through worker defection. Just in other aspects of the modern corporation in terms time was, I understand, largely a response to of Teece's arguments about needed complemen- scarce space, high inventory costs, and inpu tary assets or capabilities. shortages. It is not clear how many saw that it As I read the case study evidence, devising would facilitate quality control and learning to use effectively a significantly new American companies looking at their Japanese rganizational form involves much the same competitors often have been uncertain about just kind of uncertainty, experimental groping, and why the Japanese are better in some respects learning by making mistakes and correcting and just what they can effectively transplant them, that marks technological invention and They only will be able to learn by trying some nnovation. New modes of organization arent things, seeing what happens, and having the good simply 'chosen when circumstances make them luck to see it right appropriate. They, like technologies, evolve in a The evidence is very limited, but there is manner that is foreseen only dimly. And even reason to believe that firms have greater ability when a firm makes a conscious decision to change to replicate themselves in another setting in a organization, it may take a long time before it way that preserves their strength, than is comfortable and effective in its new suit of comprehend and adopt what gives their rivals clothes strength. Thus as Womack, Jones, and Roos want to return here to a point I made at the (1991) and Clark and Fujimoto(1991)document start of this paper. I suspect that the uncertainties convincingly, American automobile manufac about new organization are even greater than turers still are struggling to catch up with the those surrounding technological innovations. This Japanese in terms of productivity and quality of is especially so regarding organization which production. Where they are coming close it seer molds effective dynamic innovative capabilities to be in cases where the Japanese are serving as d the abilities to profit from innovation. At partners. This does not look accidental. Florida the present time there is little in the way of and Kenney(1991) report that Japanese owned sted and proved theory (let me use the automobile assembly plants in the United States less pretentious word-knowledge) that enables have rather quickly been able to establish confident prediction of the best way of organizing practicesstrategies and structures-similar to a particular activity, or what will be the conse- their home operations, and with comparable quences of adopting a different mode of organiz- outcomes