Bipolar beginnings

The bipolar transistor was the first important commercial device of the 1950s. Figure A-1.1.1 is a schematic of an n-p-n bipolar transistor. It consists of two p-n junctions back to back. The two n-type regions, called the collector and the emitter, are separated by a very thin p-type semiconductor layer, referred to as the base.

This structure is the successor to the original point-contact transistor invented at Bell Labs. The p-n junctions make it far more robust and practical than that first pioneering device.

We can get an appreciation of the bipolar transistor's principles of operation by applying a negative voltage to the n-type top side (emitter region) and a positive voltage to the n-type bottom side of the structure (collector region), where we see a resistor in series with the battery.

Because of the negative (forward) bias on the emitter-to-base p-n junction, electrons are injected into the base region. Since the base is very thin (a fraction of a micron), the injected electrons traverse it with little loss. They are collected by the reverse-biased base-to-collector p-n junction.

The result is that a large current flows through the collector circuit with the large resistor. On the other hand, the current through the other circuit (the emitter-to-base circuit) is very small, because few electrons flow through that circuit. In effect we have built an amplifier, in which a small current in the emitter-to-base circuit is translated into a large current in the collector-to-base circuit.

David Sarnoff, long the chairman of RCA and a pioneer in the electronics industry, summarized his career in these words: “I hitched my wagon to the electron rather than the proverbial star.”

The world has followed suit. The past sixty years have witnessed the most rapid transformation of human activity in history, with digital electronic technology as the driving force.

Nothing has been left untouched. The way people communicate, live, work, travel, and consume products and services have all changed forever. The digital revolution has spurred the rapid expansion of economic activity across the face of the planet.

In this book I will explore the unprecedented outburst of electronic innovation that created the digital revolution. Based on this example, I will examine how innovation works, what it has achieved, and what forms we can expect it to assume in the near future.

Since innovation does not happen in a vacuum, I will also explore the political and economic factors that can accelerate or impede changes in the industrial landscape. One of these is globalization, which creates neither a level playing field nor a truly “flat world.” Governments everywhere are focused on industrializing as quickly as possible in the face of growing competition. As a result, attempts to gain national competitive advantage by building artificial walls are not going away.

Defining innovation

Before outlining the issues to be covered, we must clarify what constitutes an “innovation” in the first place.

Motivation

The new millennium coincided with an explosion in the use of the Internet for commercial purposes. Dot.com companies in the United States such as Amazon and eBay led the way, creating online services where none had existed before. Recognizing the value of e-commerce, traditional companies also jumped online, including Wal-Mart in retail, Cisco in networking, Dell in the PC industry, and Charles Schwab in banking. In just a few short years, a company without a website was considered passé and the Internet was becoming mythologized: “A few years from now business economists may include the Internet in the Schumpeterian Hall of Fame, as an economic innovation of the same magnitude as the steam engine and the assembly lines of yore” (DePrince Jr. & Ford, 1999). Radical changes toward online business models were widely believed to be ushering in a “new economy” requiring new competitive strategies, business models, and even a new economics.

Given the major role played by the United States in developing the Internet and fostering its commercialization, other nations voiced concern that it would dominate e-commerce, spreading US culture and economic influence via electronic networks. The Internet compresses time and space, making it easier for companies to expand beyond regional boundaries. Commerce emerges as a powerful force beyond the control of individual countries, with a corollary being that the relevance of differences between countries diminishes. Taking this argument to the extreme, some predicted the emergence of a borderless global economy.

Introduction

Taiwan has a hybrid economy that exhibits characteristics of both developed and developing economies. It has a highly developed and modern manufacturing sector, with linkages to customers throughout the world, and its companies are world leaders in the production of computers and other electronic products. Taiwan's literacy rate is comparable to mature economies, and it has a large base of technically skilled workers. Yet, the legal framework for e-commerce is developing only slowly and the rate of IT spending is relatively low, given the level of development. The result is that the Internet and e-commerce have progressed on two distinct trajectories: one for globally oriented manufacturing firms, and the other for firms selling to local consumers. The former utilize business-to-business e-commerce technologies to coordinate with global trading partners, while the latter have developed business-to-consumer strategies tailored to the preferences and buying habits of Taiwanese consumers.

The most important drivers of e-commerce use for manufacturers in Taiwan appear to be international competitive pressure and the requirements of global customers. In contrast, the retail/wholesale sector has a high density of physical retailers, is not subject to a great deal of pressure from foreign competition, and thus lags behind manufacturing in its use of the Internet and e-commerce. For Taiwanese firms, e-commerce adoption is typically undertaken either to broaden their customer base by exploring new marketing channels or to create competition for traditional channels.

Introduction

In recent years globalization has become the subject of fervent debate, intensified by the spread of low-cost information and communications technologies (ICTs), particularly the Internet. On the one hand, crossborder flows of capital, labor, and information may be leading to convergence in how economic activities are organized, reducing the role of the state and its ability to control and guide its own economic development. There are fears that globalization is causing serious economic dislocation as competition intensifies and trade imbalances grow. On the other hand, culture, history, regulation, and other local factors may limit economic convergence, preserving national differences and creating unique capabilities and comparative advantages.

The spread of low-cost ICTs, particularly the Internet, accelerates the convergence process by facilitating cross-border information flows and coordination of economic activities. Excitement about the Internet's potential for improving quality of life and bolstering overall economic health is, however, tempered by concern over its potential for worsening the perceived threats of globalization.

The United States has played a key role in developing Internet technologies and applying them to create new models of e-commerce – uses of the Internet for business activities such as buying, selling, and providing support for products and services in the firm's value chain. US firms have been supported in these efforts by favorable government policies, a largely deregulated telecommunications market, a dynamic venture capital market, and positive attitudes toward information technology. US companies have used the Internet to create new businesses, transform old ones, and coordinate global production networks.

Introduction

E-commerce in the United States has been shaped by the economic, social, and policy environment in which it developed, and in particular by the unique business patterns of the US high-tech industry sector. Many key e-commerce technologies and business processes were developed in the United States and the so-called Silicon Valley model – venture capital funding, entrepreneurial start-ups and spin-offs, and close ties to university research (e.g., Kenney, 2003) – has been the locus of much of the investment, innovation, hype, and despair associated with Internet-based e-commerce. Firms in the Silicon Valley model include many survivors of the dot.com era that are leaders in highly visible segments of B2C e-commerce, such as book and music retailing, online auctions, web portals, travel services, and online stock trading.

But the Silicon Valley model is only one dimension of a rich and complex pattern of e-commerce diffusion in the USA. A much larger share of e-commerce activity is characterized by a pattern we call “adaptive integration,” whereby existing firms incorporate the new technologies and business models offered by the Internet to extend or revamp their existing strategies, operations, and supply and distribution channels. Adaptive integration is the dominant pattern for business-to-business e-commerce in most major industries, including manufacturing, wholesale trade, banking, insurance, and transportation, and B2B dominates B2C e-commerce by far.

Introduction

The Internet and e-commerce are recent examples of ongoing information technology innovations credited with driving the productivity revival of the past decade. Established firms such as Dell, Cisco, General Electric, IBM, and Wal-Mart, along with firms “born on the Internet,” such as Amazon and eBay, have shown the potential of IT and e-commerce to enhance customer services, streamline internal operations, and improve B2B coordination. Today, Internet use is almost universal among firms in the industrialized countries, and is growing rapidly in the developing world as well. Thus, there is global convergence in the continuing trend toward e-commerce diffusion.

Yet, technology diffusion is rarely a smooth and linear process. Many firms fail to achieve deep usage beyond initial adoption. Prior studies show that an e-commerce innovation must be integrated into a firm's value chain before it can generate significant business value. Ecommerce integration encompasses using the Internet for selling, buying, and coordinating both internal and external business processes. We would expect firms that are more advanced – that integrate the Internet most extensively – would reap the greatest benefits. And because firms in developed and developing countries may be at different stages of the diffusion process, we would expect there to be divergence in the relative importance of the factors that influence each stage.

Indeed, as with the earlier chapters in this book, we find that there is both global convergence and local divergence in e-commerce diffusion.

Introduction

After implementing a comprehensive economic liberalization program in the 1990s, Mexico has become one of the most open economies to foreign trade and investment, and has positioned itself among the ten largest economies in the world. The resulting substantial integration into the global economy has created both the conditions and the pressures for the business community in Mexico to adopt the Internet to improve coordination, expand markets, and cut costs to face a highly competitive environment in both national and international markets. Mexico has long been a major production platform for subsidiaries of numerous multinational corporations (MNCs), many of which operate as maquiladoras, a situation reinforced as it has become increasingly engaged in international trade. Those MNC subsidiaries, along with a small but growing echelon of internationally oriented domestic companies, account for a large share of the country's total exports, and are the most dynamic and technologically advanced business establishments in the Mexican economy. Accordingly, they have led in the use of information and communication technologies (ICTs) for commercial purposes.

Major improvements in the country's telecommunications infrastructure since the mid-1990s have facilitated and spurred the use of both personal computers and the Internet. Economic liberalization, along with aggressive promotion campaigns by trade and industry associations, have further paved the way for the adoption of e-commerce by large and small, domestic and foreign enterprises. This has occurred particularly in finance, distribution, and manufacturing, and largely in the country's main industrial hubs (Guadalajara, Monterrey, and Mexico City).

Introduction

The French-specific path for e-commerce is shaped by the characteristics of the country's economy and innovation system. The French national system of innovation is led by large established firms that are not well adapted to the decentralized process of innovation at the heart of the Internet revolution. This has hindered the development of e-commerce as innovation has occurred only in industries where dominant firms were driven to go online in response to national and international competition. Also, the central government used to play a powerful role in the economy, and has more influence over technology adoption choices than in other countries.

As a result, technologies tend to be widely adopted only when supported by big companies, as in the case of EDI, or by government, as in the case of videotext. France was an early adopter of e-commerce in the 1980s in both the business-to-business and the business-to-consumer segments based on EDI and videotext (marketed as Minitel) technologies, respectively (Brousseau, 2001, 2003; Brousseau & Kraemer, 2003). As a result, when the Internet became available for commercial application in the mid-1990s, French consumers and firms did not perceive it to be advantageous compared with existing technologies, delaying adoption of Internet-based e-commerce.

The diffusion of Internet-based e-commerce was inhibited by the adoption of these earlier technologies and the switching costs associated with moving to Internet-based options. Also, the presence of efficient physical distribution channels limited the adoption of online shopping.

Introduction

Japan is characterized by a unique industrial landscape, including interlocking networks of firms (keiretsu), a highly interwoven political economy (iron triangle), and a distinctive business culture. The combination of these factors leads to a somewhat insular business environment, as indicated by globalization measures uniformly below the global average of firms in the GEC database. Despite the importance of globalization to innovation, Japan is comparable with other economies along the various e-commerce usage measures contained in the global sample. However, Japan lags far behind in achieving some of the key benefits associated with Internet adoption, such as increased sales and reduced procurement costs. Japan thus illustrates the salience of local factors in the adaptation of new technologies such as e-commerce within national environments. In contrast to the notion of the Internet and e-commerce driving a borderless global economy, Japan illustrates that characteristics of the national economy may be reinforced by the use of the Internet and e-commerce, and not be muted by the global melting pot.

Japanese firms have made great strides in adopting a wide variety of e-commerce technologies. Together with adaptation of proven models such as the Silicon Valley model in Tokyo's Bit Valley, ecommerce emerges as an important, though not necessarily transformational, technology enabling operational efficiencies along industry supply chains. However, the level of information systems spending is modest compared with the average firm in the global sample. This has led to the idea that Japanese companies lag in getting online.