FRAGMENTED STANDARDS AND THE DEVELOPMENT OF JAPAN MICROCOMPUTER SOFTWARE INDUSTRY

The Japanese software industry has yet to join the ranks of Japan's other industries pre-eminent in global competition. This research offers a perspective on the delay of a significant Japanese presence in global markets that relies on newly developed ''network externalities'' theory in economics. After summarizing the influence of the hardware industry on the development of the ''downstream'' software industry, the paper describes the deleterious impact of multiple standards on the emerging microcomputer software industry. The paper outlines public policy efforts to address problems that arise from multiple standards, and notes that public policy has proven less successful in this industry. A comparison of the competitiveness of the US and Japanese microcomputer software industries follows. The discussion on competitiveness suggests that while Japanese firms may lag in the near term, the problems posed by multiple standards may well aid in the long-term adaptability and performance of the Japanese industry. In contrast, the US industry, while benefiting from the existence of a single dominant standard, has evidenced difficulty moving to new standards.