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Going Soft: How the Rise of Software-Based Innovation Led to the Decline of Japan's IT Industry and the Resurgence of Silicon Valley

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Author Info

  • Ashish Arora

    (Fuqua School of Business, Duke University, and NBER)

  • Lee G. Branstetter

    (Carnegie Mellon University and NBER)

  • Matej Drev

    (Carnegie Mellon University)

Abstract

This paper documents a systematic shift in the nature of innovation in information technology (IT) toward increasing dependence on software. Using a broad panel of U.S. and Japanese publicly listed IT firms in the period 1983 to 2004, we show that this change in the nature of IT innovation had differential effects on the performance of the IT industries in the United States and Japan, resulting in U.S. firms increasingly outperforming their Japanese counterparts, particularly in more software-intensive sectors. We provide suggestive evidence that human resource constraints played a role in preventing Japanese firms from adapting to the documented shift in IT innovation. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 95 (2013)
Issue (Month): 3 (July)
Pages: 757-775

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Handle: RePEc:tpr:restat:v:95:y:2013:i:3:p:757-775

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Keywords: information technology; software; Japan; Silicon Valley;

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  1. Hall, B. & Jaffe, A. & Trajtenberg, M., 2001. "The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools," Papers, Tel Aviv 2001-29, Tel Aviv.
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  7. Ashish Arora & Lee G. Branstetter & Matej Drev, 2013. "Going Soft: How the Rise of Software-Based Innovation Led to the Decline of Japan's IT Industry and the Resurgence of Silicon Valley," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 95(3), pages 757-775, July.
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Cited by:
  1. Ashish Arora & Lee G. Branstetter & Matej Drev, 2011. "Going Soft: How the Rise of Software Based Innovation Led to the Decline of Japan's IT Industry and the Resurgence of Silicon Valley," Global COE Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University gd11-199, Institute of Economic Research, Hitotsubashi University.

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