Innovation and Location: A Case Study of Sony’s Vaio Laptop Yasuyuki Motoyama Center for Nanotechnology in Society University of California – Santa Barbara Santa Barbara, CA 93106-2150 [email protected] Abstract This article investigates the question of why innovation has been geographically concentrated. Although many past studies of regional institutions, social networks, and tacit knowledge have provided insight into this question, they have done little to probe the engineering and technical aspects of the phenomenon of the place- rootedness of innovation. This study approaches this question through an empirical analysis of innovation at the micro-scale, a case study in the product development of Sony’s Vaio 505 laptop. It uncovers three specific features in the process of innovation: complexity, the interdisciplinary development of technology, and prototyping and testing. Each of these engineering and technical aspects requires the co-location of the engineers and managers of the innovation project. Keywords: innovation, location, Japanese firms The Industrial Geographer, 2011, Volume 8, Issue 1, Pages 1-25. Copyright © 2011 Motoyama Introduction It is hard to analyze such a technical aspect of innovating if the main unit of It has been generally understood that analysis is a region. Inevitably, the corporate research and development concept of innovation becomes generic (R&D) activities have been globalized. at such a broadly defined scale. Transnational corporations often Simply put, regions, as an aggregate operate R&D centers at the cross- unit, do not produce innovation, while continental scale: in Europe, North we may observe a number of America, and Asia. Many of them industrial or social innovations within claim that their global R&D network a region. Thus, if someone speaks of synergistically creates new “an innovative region,” the scale and technologies and products. For concept of innovation loses an example, Sony (2004a) explicitly calls explanatory power. In contrast, this for “a global synergy in R&D” with its article will conduct a micro-level case ten operating R&D centers in the study and assess a particular product world, and Canon’s “R&D centers development, specifically how Sony around the world try to develop developed its first stylish laptop, the creative products and solutions for Vaio 505 in the late 1990s. This in- Canon as a whole” (Canon 2006). depth analysis will reveal three features of creating innovation that A close analysis of Sony, are inherently tied to geography, thus conventionally viewed as a highly providing further understanding of the globalized firm, reveals that over 95 relationship between innovation and percent of its R&D not only occurred regions: the complexity, the in Japan, but more specifically in the interdisciplinary development of southern Tokyo region. Moreover, technology, and prototyping and virtually all of its most famous testing. products - the Walkman, Passport video camera, Vaio laptop, AIBO robot, PlayStation game machine, and flat- Studies in Industrial Clusters and panel screen technology - were created Japanese Firms by development teams located in Japan (Aoki, interview, September 21, Industrial Clusters 2004; Arimura 1999). By analyzing the location of patent filing or initial public offerings of high- This article investigates the question tech firms, a number of empirical of why such geographic concentration studies support that innovation occurs of R&D is critical. Past studies to in geographical clusters (for example, answer this question could be grouped Jaffe et al. 1993; Feldman and Florida into three schools of thought: the 1994; Audretsch and Feldman 1996; institutional, social network, and tacit Patton and Kenney 2003; Sonn and knowledge schools. We will review Storper 2007). This section discusses how each school answered the reasons the conclusions those past studies for concentration and assesses their drew for the reasons for such clusters limitations. In essence, little has been and introduces three different schools investigated on the engineering aspect of thought: the institutional, social of making innovation, which has networks, and tacit knowledge schools. crucial connection to a specific location. In sum, these schools all argued that innovation was more likely to occur if Motoyama 2 Source: Based on Sony (2002) and Sony (2004a), author’s calculation. Figure 1. Sony’s Worldwide Research and Development Centers. people, firms, and other regional and The second school of thought institutional actors were clustered in concerning innovation and clusters is close proximity to each other. social network theory, primarily descended from the influential First, the institutional perspective embeddedness theory of Granovetter emphasizes the benefits of a localized (1985). This theory analyzes how learning effect among different people exchange information and economic players in a regional argues that communication is socially economy (Storper 1997; Morgan 1997; embedded. In this context, the sources Maskell 2001; Pinch et al. 2003; Lowe, and reliability of communication are 2009). These studies supported as important as the rich information Marshallian positive externalities that typically comes through trusted shared by a pool of labor and the relationships cultivated by mobility of skilled workers, which participants (Hackman & Morris would result in spin-offs (Camagni 1978). At the same time, judgment 1991; Scott 2000; Capello & Faggian criteria were often highly culture and 2005). More importantly, competition context-specific (Lakoff & Johnson and collaboration between co-located 1980) and shared by people in the firms spurred the dissemination of same social group (Coleman 1990). knowledge and the interactive learning process (Porter 1998; This network concept has been applied Antonelli 2006). in an economic context. Empirical studies have found that local-based business networks produced higher Motoyama 3 entrepreneurship and innovation innovation in the form of goods and levels in northern Italy (Brusco 1982; services would result if firms Piore & Sabel 1984), the Silicon Valley competed and collaborated or if people (Saxenian 1994), and the art and met and shared tacit knowledge. This culture sector in New York (Currid project starts from a hypothesis that 2007). This school of thought the mechanism to create innovation is emphasizes the role of face-to-face substantially more complex, and the interaction as the richest form of complex process has deep geographic communication, necessarily requiring roots. This analysis on the process of co-location among participants innovation is critical because (Storper & Venables 2004). innovation in contemporary society is in good measure an engineering and The third school of thought is the tacit technical matter. If we miss the knowledge theory, based on the work analysis on the technical process, we of Polanyi (1966) and Nonaka and may be missing the fundamental Takeuchi (1995). In an information nature in the making of innovation age of relatively easy access to explicit and its linkage to the location. and codified knowledge, innovation depends on tacit knowledge derived To investigate the specificity of from direct interpersonal contact and innovation and the process of making the dynamic interaction between it, more in-depth examinations can codified and tacit knowledge emerge by focusing on activities of (Malmberg & Maskell 2002). While economic actors. This article focuses codified knowledge can be transmitted on innovations at the concrete micro- in the form of books, academic papers, level and analyzes the product and websites, tacit knowledge does not development activities of a firm. Only travel easily because it is best shared after differentiating which engineer by people with similar norms, codes of was involved in what kind of communication, and routines (Howells innovation can you start to analyze 2002; Gertler 2003; Zook 2004). Thus, the process of generating a specific knowledge and innovation clusters in innovation and understand its specific regions with a shared business connection to geography. culture and especially within the same organization. Innovation at Japanese Firms As we examine the innovation However, the focus of these streams of activities conducted by Sony, we have literature was on how much to keep in mind both the advantages innovation was observed in a given and disadvantages of studying a region, but not on how each innovation Japanese firm. It is advantageous to was made. The three schools measure study Japanese firms because there innovation by proxies, such as the are many successful ones in number of patents, public offerings of innovation-intensive industrial sectors ventures, as mentioned earlier, or, with an engineering orientation, such more broadly, the growth of a regional as machinery, electronics, and high-tech industry as in Silicon Valley computers. Sony is a well-known (Saxenian 1994). Here, the literature player in the electronics and computer rarely specified what was innovated sectors, sectors that provide a good and how this occurred. In other words, sample in exploring the specificity and the past literature has assumed that the process of making innovation. Motoyama 4 Second, Japanese firms have a high divisions. This insight echoed Fruin’s international presence, and conduct (1992, 1997) findings that there sales, distribution, and manufacturing existed a close interaction between the at the global level. Thus, the production