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Diversification of the Japanese materials industry
Kiminori Gemba
Research Centre for Advanced Economic Engineering, University of Tokyo, Japan
Abstract
This article provides a quantitative analysis of the diversification of R&D activities in Japanese industries using an 'entropy index'. The analysis shows that Japanese materials industries have diversified their R&D activities considerably since the 1970s. While textile companies have been successful in diversifying to improve profitability and sales, Japanese steel companies, by contrast, have not successfully diversified. Case studies of these two industries suggest that an industry's diversification strategy is more likely to be successful if it leverages existing technological capability by pursuing a path of technological opportunism. Hence, analyzing a company's existing technology portfolio and projecting the likely development of those technologies will help innovative companies determine where and how to best diversify their business.
Keywords
diversification, entropy, technological opportunity, steel industries
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