Flexibility trap: a case analysis of U.S. and Japanese technological choice in the digital watch industry

Abstract

This paper examines the widely shared belief that a flexible system of transactions is faster in adapting to major technological change than an inflexible system. Borrowing some ideas from Elster (Ulysses and the sirens, 1979; Explaining technical change, 1983; Nuts and bolts for social sciences, 1989, Cambridge University Press, Cambridge), this paper contends that the flexible system may lead to a myopic selection of technology, because it delays the technological turning point if the important part of the technological evolution is generated by the aggregation of the choice patterns of firms. This paper investigates the case history of technological choice in the U.S. and Japanese digital watch industries in the 1970s. The paper's conclusions beg a reconsideration of current and previous thinking on industrial policy and technology strategy.