Information Storage Industry Center

David McKendrick and Allen Hicken

Report 97-05
October, 1997

TWO PORTRAITS OF GLOBAL STRATEGIC BEHAVIOR
Strategic Similarity and a Common Competitive Logic
      The first portrait emphasizes conformance in foreign investment behavior irrespective of nationality. Sectoral data on foreign investment suggest that overseas investment tends to concentrate in some industries more than others regardless of nationality, and that production and marketing strategies within sectors tend to converge (Kumar, 1990; Dunning, 1993). Referring to aggregate foreign investment data, Mason and Encarnation (1994) observe common foreign investment strategies of European and American multinational corporations. Changing competitive and economic imperatives are said to have prompted particular industries to globalize at particular times (Stopford and Strange, 1991), and patterns of international competition are argued to occur along industry lines (Porter, 1986, 1990). A strong case has also been made by Prahalad (1975), Doz (1980), Prahalad and Doz (1987), Hill (1995) and others that in establishing an international presence firms tend to follow similar strategic blueprints based on the kinds of conflicting environmental pressures they encounter regarding cost and local responsiveness. 
      A dominant theoretical theme within this perspective is that a firm tends to adopt a global strategy that is best suited to the kinds of cost pressures it faces and the degree of responsiveness to local markets that is required (Lorange, 1976; Prahalad, 1975; Prahalad and Doz, 1987). Firms facing strong cost pressure in global markets will try to minimize unit costs, pushing them to locate productive activities in the most favorable low-cost locations. Firms can also face pressures to be locally responsive across different countries, whether through product differentiation, marketing strategy, or government regulatory requirements. The pressure to be locally responsive can increase costs through duplication of facilities or lack of product standardization. Firms in the same industry or product segment face similar and often contradictory pressures for global integration and national differentiation. The economics of aircraft manufacturing, for example, would suggest geographically concentrating most activities to take advantage of economies of scale and learning. But because aircraft manufacturers are required to be somewhat locally responsive for political purposes, they may place some assembly activities in locations that are not optimal from the point of view of cost-minimization. By contrast, global competition in many commodity and standardized products is driven by intense cost pressures, forcing firms to move operations to lower cost locations to achieve economies of scale or to lower the cost of value creation (Porter, 1986; Hill, 1997). However, firms in these industries confront much less pressure to customize their products along national or regional lines than do other industries such as food, many consumer products, or even computers.²
      The pressures for national differentiation or responsiveness and global integration thus lead firms to use one of four basic strategies for competing globally (Bartlett and Ghoshal, 1989; Hill, 1997): an international strategy for firms facing weak cost pressures and relatively little need to be locally responsive; a multidomestic strategy for firms needing to have local operations in a number of markets but not subject to intense cost pressure; a global strategy for firms under intense cost pressure but not required to be very responsive to local tastes because their products are relatively standardized; and a transnational strategy for firms subject both to intense cost pressure and the need to be locally responsive. While some firms might modify the basic strategy, in the end the industry as a whole responds to shifts in underlying economic, technological, and political imperatives. 

National Differences in Global Strategic Behavior
      The other portrait gives evidence of persistent cross-national diversity in organizational operations and performance. A diverse range of studies in business history, political economy, international business, and organizational sociology stress the different organizational models embraced by firms in different nations. Collectively, this research suggests that firms involved in global competition begin their lives under very different legal, social and political environments and histories, all of which shape organizational forms, structures and practices. 
      These national specificities add up to considerable diversity when viewed from the perspective of the global system. For example, franchised corporations were more predominant in the United States than other Western countries in the early 19th century (Rosenberg and Birdzall, 1986); since World War II, state-owned enterprises have been prevalent in France and Austria but not in Japan (Shonfield, 1965, Zysman, 1983); and a different mixture of organizational forms are found in socialist states than in capitalist ones (Carroll, Goodstein and Gyenes, 1988b; Nee, 1992). In addition to cross-national diversity of organizational forms, firms adopt and enact practices and notions of legitimate or effective behavior that they observe in their national environment (North, 1981; Kogut, 1992). The American System of Manufacturing, employment practices, the multidivisional structure, scientific management, just-in-time and kanban systems of manufacturing are all examples of organizational structures and practices that are slow to be absorbed, if at all, by firms from outside their country of origin (Baron, Dobbin and Jennings, 1986; Cole, 1985; Womack, Jones, and Roos, 1990; Kogut, 1992; Guillen, 1994). Chandler's (1990) history of German, American, and British industrial enterprises revealed considerable national difference in structure and performance. Corporate governance styles also show national biases (Charkham, 1994). 
      A variety of empirical evidence suggests that such cross-national differences remain visible in multinational firms. National level data on outward foreign investment indicate that firms from the same country tend to invest in neighboring countries or in those countries with which they have close political or cultural ties (UN, 1993). For instance, Davidson (1980) found that 30 percent of American foreign investment before 1975 went to the "culturally similar" countries of Canada, UK, and Australia.³ Franko (1978) contrasted the organizational structures of Continental European multinationals with those of their American counterparts as reported by Stopford and Wells (1972). Compared with American and European multinationals, Japanese MNCs sell more manufactured goods through international trade than through local production (Mason and Encarnation, 1994). The national character of American and Japanese multinationals is evident in the composition of top management (Dunning, 1993). Bartlett and Ghoshal (1989) also noted the persistence of national characteristics in the global strategies of firms in the same industry. Though not explicit about national styles of strategic behavior, Hu (1992) comes down squarely on the side of the importance of nationality: global firms, he says, are only "national firms with international operations."
      Overall this view advances the notion that strategic behavior cannot be explained entirely by reference to technological and economic factors. Rather, managerial ideologies, cultural norms, or historical residues accumulate to limit the repertoire of an organization's choices and thus channel behavior. Moreover, these national styles of behavior persist for extended periods.

Globalization and Industrial Performance
      Considerable recent attention has been given to accounting for the competitive performance of national industry in international markets (Dertouzos et al. 1989; Porter, 1990; Hollingsworth, Schmitter and Streeck, 1994; Nelson, 1996). A striking feature of this research is its greater focus on sub-national variables such as inter-firm relationships, intra-firm organization, and firm and industry innovation, as compared to the traditional higher-level explanatory variables like macroeconomic policy or factor endowments (Nelson, 1996). This is a welcome change both because industries are common referents in debates about national competitiveness and because cause and effect relationships are better revealed "only by closely examining an industry over time and understanding the process by which it emerges in a nation and achieves and sustains international success" (Porter, 1990: 179). 
      Curiously, while these comparative industry studies are motivated by the consequences of international competition, they seldom address it directly other than to show exports from the home base (e.g., Porter, 1990). One result is that global investment has not come through as an important factor in sustaining or reinforcing the competitive performance of national industry. This is surprising on the face of it since industries are producing an increasing portion of their value-added overseas. By the late 1980s an estimated 25-30% of global production was accounted for by the affiliates of multinational corporations (UNCTC, 1992). And while Japanese multinational corporations emerged later than their European and American counterparts, since the 1970s they have globalized production rapidly. Between 1982 and 1985 the value of Japan's outward investment actually exceeded that of the U.S. and was roughly equal between 1990 and 1992 (Nunnenkamp, Gundlach and Agarwal, 1994). More recent evidence from the business press puts the overseas production by prominent Japanese companies even higher: Sony currently produces 47% of its output outside Japan with plans to increase this to 80%; Toshiba's production in Asia, excluding Japan, will make up over 50% its global output by early 1999; in 1995, Toyota's offshore plants made 58% of vehicles sold abroad, the first year that vehicles produced overseas by a Japanese automaker exceeded that company's exports (CL, 1997).
      This increase in global production is entirely consistent with theories of the firm, which contend that a firm's international competitiveness derives from effective multinational behavior. Along with diversification and vertical integration, global expansion is one of the principal vehicles of firm growth (Penrose, 1956; Chandler, 1990). Theories of the multinational corporation have established that firms expand abroad in order to exploit the value of intangible assets such as technological or organizational capability, product differentiation or marketing skills (Buckley and Casson, 1976; Rugman, 1981; Teece 1985). While globalization entails risks and uncertainty (Mitchell, Shaver, and Yeung, 1992), the international strategy literature largely agrees that firm performance is enhanced by establishing international operations. In most industries today it is virtually impossible for a firm to generate or preserve a worldwide advantage while operating only in one country. International operational skills have to be learned, typically through sequential investments (Kogut and Zander, 1993). The accumulated experience of MNCs gives them advantages over firms with only a domestic base.
      But can the same be said for performance of a national industry? Does it make sense to say that the competitive advantage of a nation's industry can be acquired or preserved through some kind of collective learning about multinational operations? Or is this a fallacy of composition, that, in fact, there are more similarities in global strategic behavior among firms in the same industry--regardless of country of origin--than cross-national differences? Do the technical, economic and political imperatives of an industry push all firms to learn in similar ways and make the same strategic moves, thereby eliminating any kind of differential national advantage?
      There is some preliminary evidence that national industries do select on similar global strategic behavior and as a consequence share in similar outcomes (both positive and negative). In his seminal work on technological change, David Landes (1969) observes that the dyestuffs branch of German chemical industry was third behind Britain's and France's in the 1860s but only a decade later it held more than 50 percent of the world market, and 90% by 1900, in part because of their aggressiveness in overseas expansion, which was unmatched by their competitors. More recently, American machine tool makers did not recognize the market for flexible manufacture because they were collectively focused on precision machining for the national defense market (Nelson, 1996). But in general, national industrial performance has not been linked explicitly to global strategic behavior. 

THE HARD DISK DRIVE INDUSTRY
      Before turning to our historical analysis, we first describe the research context for this study. As described in detail by Christensen (1992, 1993), disk drives are magnetic storage and retrieval devices used with computers and are increasingly found in a number of other applications. The main components include disks, recording heads, a motor, an actuator mechanism, and electronics. Data is stored on a platter made either of glass or, more commonly, a rigid aluminum alloy that is coated with magnetic material, and the platter is rotated by the motor. Data is read from and written to the platter by a tiny read/write head flying just above the platter without making contact. The HDD has an actuator arm similar to a phonograph that moves the head to the proper place above the platter. Once in position, the head retrieves the information, transfers it to the computer's CPU, and the information appears on the screen of the monitor. 
      In 1996, hard disk drives were a $28.8 billion industry. Led by Seagate Technology, IBM, Quantum and Western Digital, American firms held 80% of the global market, while Japanese companies accounted for 14% and Korean firms accounted for most of the remaining 6%. As shown in Table 1, a similar pattern is evident during the past two decades.⁴ American firms have been the leaders of the disk drive industry, whose evolution has been marked by rapid technological change, several periods of entry and consolidation, intense competition, and extensive globalization throughout the value chain. IBM shipped the first movable-head disk drive in 1956 and over the next 25 years was responsible for almost every significant innovation in the industry.

Home-Based Assembly: 1956-1982
      Throughout the 1950s, 1960s and 1970s, before the introduction of the desktop disk drive, American firms assembled disk drives primarily in Silicon Valley, the Los Angeles area, Minneapolis, Oklahoma City, and the region around Boston. Some firms that were vertically integrated computer vendors also assembled drives in Europe. IBM, for example, manufactured drives in Germany, England and Italy; Control Data manufactured in Germany and England; and Burroughs had operations in Scotland. Burroughs also had assembly operations outside the U.S. and Europe in Brazil, Mexico and Canada (Disk/Trend, 1980). Japanese and European companies, with the exception of Germany's BASF, which had an operation in Silicon Valley, all assembled in their home countries. Among the firms that located assembly outside their home market, the principal rationale was proximity to customers: placing assembly in those markets where governments, banks and insurance companies -- the primary customers for their computer systems -- were likely to look favorably upon firms that committed to local assembly of systems and peripherals.
      With the introduction of the 5.25-inch drive for desktop computers, a new strategic blueprint was introduced. In 1982 and 1983 Seagate, Computer Memories, Ampex and Tandon introduced a new strategy to the HDD industry, though Tandon had assembled floppy disk drives in Singapore from the late 1970s. Rather than locating production in locations that would enhance their ability to sell to governments--a primary motivation of captive drive manufacturers during the 1960s and 1970s--these firms began to assemble drives in what they saw as the best location from a cost standpoint, selecting low cost areas in Asia, particularly Singapore.⁷
      By the end of 1983 assembly was scattered geographically, but still overwhelmingly in the United States. As Table 2 shows, virtually all of the production of hard disk drives in 1983 was concentrated in two countries, the U.S. (72.3% of shipments) and Japan (12% of shipments). With almost 5% of global shipments, Europe produced more disk drives than non-Japan Asia. Home-based production remained the dominated strategy for both American and Japanese firms. In 1983 U.S. firms produced some 93% of their drives in the U.S. while Japanese firms produced all of theirs in Japan.

Strategic Convergence: 1990-1997
      For high-volume, low priced and low to-medium capacity drives, where cutting costs was paramount, S.E. Asia was clearly the location of choice for American companies, and their strategy increasingly confined the Japanese to niches in the high-capacity segments. This was a surprising switch since high-volume, low cost manufacturing is an area where the Japanese traditionally excel. Eventually the success of the American firms impelled the Japanese to follow with investments in S.E. Asia. Between 1991, when Fujitsu began production in Thailand, and 1996, all the principal Japanese HDD firms gradually shifted manufacturing to S.E. Asia, principally the Philippines. 
      By 1991 Fujitsu had reached the maximum capacity of its Yamagata, Japan HDD facility and was searching for ways to expand HDD production capacity (CI 1/3/92). In addition to expanding the Japanese facilities and investing in the U.S., as it had done in the past, Fujitsu decided to manufacture drives in Thailand and retooled an existing recording heads facility for production of low capacity 3.5-inch drives (IDC 2/28/91). Production stayed at low levels until 1993 when the appreciation of the yen forced Fujitsu to move a large share of its manufacturing to Thailand. By the end of 1995 Fujitsu was doing nearly all of its volume manufacturing at the Thailand facility and a new facility in the Philippines. The President and CEO of Fujitsu Computer Products of America cited the move to S.E. Asia as one of the prime factors behind the company's rapid growth in 1996. Fujitsu doubled its worldwide hard drive revenues for 1996 and experienced a 123 percent growth in shipments (compared with overall 1996 market growth of 17 percent) (BWI 6/17/97). 
      NEC, Hitachi, and Toshiba soon joined Fujitsu overseas. NEC completed its own HDD facility in the Philippines in 1995 and increased its off-shore production to 75% of total HDD output (COM 10/9/95). Hitachi also made its first HDD investment in the Philippines in 1995 and now has 90% of its 2.5-inch disk drive production in the Philippines, and will soon make all 3.5-inch drives there as well.⁸
      By 1995, over 64% of the word's disk drives were produced in S.E. Asia generating nearly 61% of the industry's revenue (Table 6).⁹ HDD production in the U.S. fell to below 5% of world shipments which generated less than 9% of world revenues, while production in Japan fell to 15.7% of shipments and 13.3% of revenue. By 1995 Japanese firms had greatly increased their presence in S.E. Asia, producing nearly 55% of their HDDs in the region. Virtually all of the remaining drive production for Japanese firms was still located in Japan--45% compared with 18% still located in the U.S. or Japan for U.S. firms.¹⁰ By the mid-1990s, then, the geographic distribution of Japanese assembly had begun to resemble that of their American competitors.

Global Strategy and National Advantage
      Despite recent Japanese movements into S.E. Asia, American industry was able to sustain its advantage by being the first to implement this global strategy. Although Japanese industry increased its proportion of total assembly in S.E. Asia to nearly 55% by 1995, it was still below the almost 67% produced there by U.S. industry. American industry's early move into S.E. Asia coincided with the dramatic shift in the competitive logic of the industry to low cost, high-volume manufacturing. 
      As was shown in Figure 3, the critical high-volume market was for 3.5-inch disk drives, the demand for which exploded in the late 1980s, and, as Table 8 indicates, the largest part of the 3.5-inch market was for non-captive sales. It was America's success in this market that extended its advantage. During this period, America's dominance was led by its independent HDD firms--Seagate, Conner, Quantum, Maxtor and Western Digital--and was dependent on their ability to ramp-up low cost, high-volume production in S.E. Asia where, with the exception of Quantum, they assembled the overwhelming majority of their 3.5-inch drives. It took three years for the U.S. industry to claim more than 50% of this market. Although each of these firms trailed Hitachi, Fujitsu, and NEC in the introduction of this form factor, this strategy allowed American industry to claim 90% of the non-captive market by 1991.¹² Only after the purchase of two U.S. HDD firms by foreign firms in late 1995 did the U.S. share of this market dip below 90%.

POPULATION LEVEL LEARNING AND GLOBAL INDUSTRIAL COMPETITION
      This narrative history of globalization in the disk drive industry offers a sense of the sequence in which a new global strategy took shape. Our analysis was based on visible strategic behaviors--shifting assembly to overseas locations. The industry thus provides a unique opportunity to inductively derive a generic model of the stages of global strategic behavior within an industry.
      One could adopt different theoretical lenses to interpret this process. We think that population level learning is a useful model for making sense of global strategic behavior and performance. Population level learning refers to "systematic change in the nature and mix of organizational action routines in a population of organizations, arising from experience" (Miner and Haunschild, 1995: 118) and occurs through processes of both firm-level adaptation and selective elimination. By joining processes of adaptation and selection in one model, it draws on the analytic strengths of organizational ecology (Hannan and Freeman, 1984, 1989), institutional theory (DiMaggio and Powell, 1983), and models of organizational learning (Cyert and March, 1963; Levitt and March, 1988). Two key premises of the theory are that change is systematic and not random, and that learning is collective as well as individual. It builds on a variation-selection-retention model of population change, where organizations learn from the experience of others to enact new routines at the population level (Miner and Haunschild, 1995). The population is said to have learned when new routines, or methods of doing things, become more prevalent among its member organizations.
      The process begins with variation, when different types of routines are used by different firms. Organizations may introduce new routines into the population by copying new routines from other populations or generate new routines by inferring from the experience of other organizations. Selection occurs when multiple organizations copy one of the routines already in the population. By breaking the logjam of diverse practices, the new routine becomes dominant while others drop out. Retention refers to the sustainment and execution of routines once they have become widespread in the population. A routine may become part of the population's "taken-for-granted" norms, or else strong interdependencies associated with the selected routine may generate high switching costs. Although organizations in a population tend to converge on the routine, total convergence or equilibrium is never completely reached in dynamic systems. The efficacy of the dominant routine is eventually undermined by some kind of endogenous or exogenous discontinuity, such as a radical technological change. This change introduces the possibility that a new routine can be more effective, and the cycle begins anew.
      The increasing prevalence and preeminence of a routine in a population can occur through both adaptation and selective elimination. Adaptation takes place at the organization level, with firms imitating the routines of other organizations they deem successful. A firm might, for example, follow its competitors into a new line of business or adopt similar inventory control procedures. Processes of selective elimination are also an important source of population level learning and change. In this case, firms that are unable to adapt are replaced in the population by new or existing organizations that, drawing on the experience of other organizations, incorporate the new routine at time of founding. Whether through adaptation or selective elimination, population level learning depends in important ways on the interaction of organizations, as opposed to feedback from trial and error events inside the organization. An organization can engage in selective copying of the routines believed to be useful to others, or else it can engage in more deliberate inferential learning by using the experience of other organizations as a natural experiment (Miner and Haunschild, 1995: 126). Thus, learning occurs at the level of the organization but in reference to the population, and it leads to a change of routines in the population as a whole. 
      Population level learning can have both positive and negative consequences. Organizations that are first to select an effective routine can have an advantage over those that learn late by locking up critical resources or, in the case of certain technologies, setting a standard. However, learning is not inherently effective or adaptive. Firms can copy others' routines or actions that appear desirable but are in fact unrelated to outcomes--what Levitt and March (1988) call superstitious learning--and can lead an entire population to hold to practices that are sub-optimal (Miner and Haunschild, 1995). Firms can also find it difficult to accurately distinguish the characteristics or interdependence of specific routines and thus may imitate inexactly, as experienced by many firms that tried to implement just-in-time manufacturing processes. Also the advantage that a routine confers on a population in one period can be a disadvantage when circumstances change, resulting in a "competence trap" (Levitt and March, 1988) and making extant firms vulnerable to new "competence destroying" technologies (Tushman and Anderson, 1986). In these cases the probability of effective organizational adaptation may be reduced, and selective elimination becomes the main source of population level change in routines. 
      Inasmuch as global strategic behavior evolves from repeated variation-selection-retention processes among the firms in an industry, population level learning offers a useful framework for reconciling the contradictory perspectives identified at the beginning of this paper. As social groups, organizations become infused with goals and values of the social environment in which they operate (Selznick, 1957). An organization becomes enmeshed in interdependent relationships with buyers, suppliers, and financial backers and in patterns of culture, norms, and ideology (Tushman and Romanelli, 1985). Schools and training programs generate the skills from which organizations draw and which are structured and certified by the state, and organizations often induce the state to produce a certain kind of worker (Carroll, Delacroix, and Goodstein, 1988a). Thus, most of these relationships and skill sets take on national characteristics, and we would argue that nationality acts as a "segregating process" within a population of organizations, much as law, social networks, culture, status or language serve to separate organizations into subgroups (Hannan and Freeman, 1989; Carroll and Hannan, 1995; Podolny, 1995). That is, nationality creates a discontinuity among organizations that otherwise have a common dependence on the material environment, use similar technologies and deliver similar products. 
      In this way, we propose that organizations with similar environmental dependencies (e.g. the global market) but of different national origin can be thought of as members of competing sub-populations that act according to nationally specific logics and learning processes.¹³ The path dependent nature of learning processes provides an important basis for sub-population inertia, of doing more of the same. As a result, as a sub-population of firms begins to extend its operations internationally, it carries with it national business practices and principles (Dunning, 1993; Kogut, 1993). As we saw, the Japanese disk drive companies operated out of a different motive and followed a different path, initially eschewing the location economies subtext as an organizing principle. Thus, firms from the same nation and within the same industry might adopt similar global strategies, but these are likely to differ from the strategies pursued by firms from other nations. For a given industry we expect:
 
 

P1: Firms from the same sub-population are more likely to follow similar global strategies than the global strategies of firms from other sub-populations.

      Sub-populations contribute to variation in global strategies, but there is no way of knowing which variation will prove better adapted to the environment. National processes and structures persist because of the forces favoring structural inertia (Hannan and Freeman, 1989). However, global competition acts to blur distinctions between sub-populations, ultimately cutting across nations to undermine behavioral diversity. For instance, MNCs in the same industry clash in common product spaces and generate competitive pressures that drive them toward similar behavior. Changes in the external competitive environment brought on by one sub-population will likely lead to inconsistencies between this new environmental context and the existing structures and behaviors of other sub-populations (Tushman and Romanelli, 1985). Although organizations are resistant to change, over time the population as a whole adopts the new routine or practice through a combination of adaptation by ongoing firms, exit of firms that do not adopt the routine, and entry by new firms. 
      During the 1980s, for example, firms in the global chemicals industry adopted "strikingly similar" adjustment and restructuring strategies in the face of worldwide overcapacity (Bozdogan, 1989). Though Japanese chemical producers were much slower than their European counterparts to establish a strong presence in the United States market, a critically important aspect of the worldwide restructuring, they eventually followed. In computers, American, European and Japanese firms increasingly embraced international alliances to enhance their global competitiveness (Gomes-Casseres, 1993). We have seen that the surviving Japanese HDD companies came to adopt the low cost assembly strategy initiated by the Americans. Firms that did not follow were largely driven out of the industry, and several new entrants rapidly initiated off-shore assembly.
      At some point, however, a change in the environment or a product innovation or some other shock to the prevailing competitive logic introduces a new variation-selection-retention cycle in global competition. Models of punctuated equilibrium (e.g., Gersick, 1991; Romanelli and Tushman, 1994) emphasize the radical and pervasive shocks that prompt organizational change and which establish the foundation for a new era of stability. Models of evolutionary change (e.g., March and Cyert, 1963) lay stress on adaptation, on incremental and ongoing changes in an organization's local internal and external environments. For instance, the Japanese changed the economics of global competition in automobiles, ball bearings, and televisions (Prahalad and Doz, 1987: 30). In this case, specific firms altered the structural characteristics of an industry, and thereby initiated the current logic of global competition. Similarly, the introduction of the desktop disk drive in 1980 ushered in a new competitive era and changed the dominant blueprint for action. A handful of firms survived, invested in Southeast Asia and adapted to the new model, but most firms exited the industry. Whether a discontinuity is classified as major, moderate or small, the point is that it challenges the rationale for an organization's strategic orientation. The above discussion leads us to argue:
 
 

P2: Through a combination of selection and adaptation, global competition pressures nationally distinct sub-populations to converge on a similar global strategy until a technological, political, or economic discontinuity undermines its logic and creates the conditions for a new strategic blueprint to emerge.

      Retention occurs as the population as a whole reinforces its commitment to the selected routine or practice. For instance, the perceived advantages of the global strategy might influence subsequent investment decisions (Kogut, 1983), and the population would reinvest or transfer resources to sustain the routine. Moreover, to the extent that the population has an influence over the behavior of other organizations, then supporting stages in the value chain would also make investments in support of the strategy. Influence may be due to the exercise of power over suppliers (Stinchcombe, 1968), complex interdependencies (Thompson, 1967), taken-for-granted assumptions (DiMaggio and Powell, 1983), or path-dependent processes (Arthur, 1989). In some cases physical proximity is necessary, and so a supplier will be induced to imitate the same global strategy; in other cases, alterations in a supplier's logistics management might be required. Taken together, these reinvestments build systems in support of this strategic blueprint.
 
 

P3: Once the population has converged on a similar global strategy, it will engage in actions that perpetuate and maintain that strategy. To the extent that related organizations are subject to conforming pressures from that population, they will also act in ways that reinforce the dominant strategy.

      These competitive dynamics can have implications for the performance of national industry. Miner and Haunschild (1995) argue there are "forking points" that influence learning outcomes: learning can occur too early or too late. In her study of the savings and loan industry, Haveman (1992) argued that the timing of change influenced performance and organizational survival chances. Other researchers have argued that technological discontinuities are occasions for the establishment of potentially long-enduring competitive positions (Levinthal, 1994). 
      We submit that the timing of globalization can also affect industry performance. While the technical and economic requirements of an industry pressure firms to behave with greater similarity regardless of nationality, the first proposition implies that firms from the same nation are more likely to adopt or select similar strategies even if they are non-optimal from the perspective of global competitive advantage. Either through accident or design, global strategy would initially favor some sub-populations over others. While imitation of the "right" strategy is an obvious way for competing sub-populations to undermine an initial advantage, it is neither automatic nor immediate. Inherited organizational structures, practices and relationships constrain their ability to adopt possibly superior practices quickly. 
      Because these kinds of practices are difficult to observe directly or are strongly interdependent with other routines, they take much longer to diffuse across national borders than do more observable phenomena like product innovations (Kogut, 1991; Armour and Teece, 1978). The result can be differences in timing and direction of strategic action: one nation's industry locks on to a more effective strategy relative to its competitors from another nation. Such early national differences in global strategic behavior can have longer term consequences, as it takes time for firms to converge on more optimal strategies. Thus, for a given industry we propose,
 
 

P4: Early selection by a national sub-population of the global strategy eventually selected by the population as a whole confers upon that sub-population a potentially long-term competitive advantage.

      As a concluding note, it is interesting that firms within sub-populations can follow niche strategies that reject the logic of the dominant strategic blueprint in a global industry. These firms may be geographically isolated or provide specialized products or services and thus exhibit weak or no economies of scale. As more of the population adopts the dominant strategy, the resource base for niche strategies diminishes. Though they may survive for extended periods, these firms are weak competitors confined to small market shares. In the disk drive industry, for example, several firms made "ruggedized" disk drives for military applications and operated from a single location. Similarly, Brazilian and Eastern European companies survived for many years without following the dominant strategy, in their cases because of state protection. Yet, none of these firms, individually or collectively, acquired a sizable share of the global market.

CONCLUSION
      This paper has provided a detailed historical analysis of the overseas expansion and performance in the disk drive industry. Its purpose was to try to reconcile seemingly contradictory theories about global strategic behavior. One view emphasizes national differences in the behavior of firms involved in global competition, the other finds behavioral similarities in spite of differences in national origin. Our findings suggest that both are true, but that the conflict in perspectives may be a difference in theoretical focus, unit of analysis and periodization. First, we have suggested that the lens of organizational theory and its emphasis on the dynamics within a population of firms helps to clarify global processes. Second, we argue that global strategic behavior can only be compared after the unit of analysis -- some theoretically meaningful attribute of global strategy -- is fixed across firms. Third, we think that observing global strategic behavior in one population of firms over time allows researchers to observe behavioral changes that might otherwise be obscured and lend a temporal character to some basic categories of analysis.
      Our analysis finds that it is likely that firms from the same nation will initially adopt similar global strategies but that, over time, the industry as a whole converges on the same blueprint for action. We also find that firms from the country that selects on the dominant strategy first has a performance advantage over firms from other countries. That is, the timing and direction of globalization matter. We theorize that these processes and outcomes result from population level learning (Miner and Haunschild, 1995) and advance some propositions that extend this model to accommodate globalization processes and the performance of national industries. While one case obviously raises questions as to the generalizability of the model, we think its internal logic holds for other industries facing intense cost pressures, as well as for industries that face greater pressure to be responsive to host country market contexts. Overall, this paper suggests that researchers should gain from incorporating organizational theory into evolutionary views of global strategy. 
      The evidence also suggests that some commonly held assumptions about national traits of multinational behavior may be misleading. Some studies that generalize about "Japanese" multinationals or "European" multinationals are based on data that are too aggregated (e.g., Mason and Encarnation, 1994). While useful for many purposes, national and sectoral investment statistics are too aggregated to allow meaningful comparisons at the level of the firm or to capture the differences in global strategic behavior across industries that are faced with different pressures on cost and local responsiveness. Other studies suffer from sample selection biases that generalize from the experiences of a handful of older, larger surviving companies. For instance, some of the most influential studies of the MNC, especially regarding national styles of multinational management, are based on three American (General Electric, Proctor & Gamble, and ITT), three Japanese (NEC, Matsushita, and Kao), and three European (Philips, Ericsson, and Unilever) multinational corporations (Bartlett and Ghoshal, 1989). While these studies provide important insights into a range of issues, they neglect much of the behavior associated with some of the most dynamic emergent industries and firms of the 20th century, many of which had very short lives. In the span of just 4 years, for example, Conner Peripherals became a $1 billion business and joined the ranks of the famed Fortune 500 in the shortest time in history. Yet in 1996 it was acquired by Seagate and disappeared as an independent entity.
      Nothing in the globalization pattern we observed is inherently American or uniquely Japanese. Nor can differences in patterns and performance be explained by the more general lateness of Japanese overseas investment, a "vintage effect" as is sometimes argued (Mason and Encarnation, 1994). The American disk drive firms that invested in S.E. Asia were not only younger than Japanese firms, almost all of them had less international experience. Well before American disk drive firms made their first investments in Singapore, Japanese companies had already dispersed manufacturing to take advantage of low cost locations in a number of industries such as consumer electronics, sporting goods and sewing machines. As early as the 1970s, Japanese firms seemed more inclined than American firms to use overseas investments as low cost platforms for exports into markets other than Japan (Grunwald and Flamm, 1985). In fact, all the major Japanese manufacturers of disk drives had previously manufactured other products overseas. For example, Fujitsu's Singapore subsidiary started producing electronic parts in 1978.¹⁴ In contrast, all of the early cluster of U.S. HDD firms to invest in S.E. Asia were very young firms: Seagate was only three years old, Computer Memories and Miniscribe were only four years old and Maxtor was only two years old. Tandon was 7 years old, and while it had already made floppy disk drives in Asia for several years it had only one or two years of experience manufacturing HDDs prior to shifting assembly to S.E. Asia.
      In addition to any theoretical contribution this paper may make, our findings can inform a broader public debate. Until recently, scholars have been pessimistic about the competitive prospects of much of U.S. industry, observing that "[i]t is too late for the United States to regain its position of the exemplar of best practice in the world" (Kogut (1993: 11). The Japanese successfully challenged the U.S. in semiconductors, automobiles, machine tools, consumer electronics and, for a time, computers. Florida and Kenney (1990) concluded that America may be good at generating new industries but is bad at sustaining them as they become more mature.
      Given these concerns and controversies, the American HDD industry is an interesting counter example. It has maintained its dominance since the industry's inception 40 years ago. We think that in large part America has sustained its competitive advantage in HDD because of the timing and direction of its global investment, and its subsequent accumulation of capabilities in managing international networks. This is not to say that home country demand, style of industrial organization or innovative capability have not been important to American leadership in the industry. They have. But the differences between American and Japanese along these dimensions do not appear strong enough to explain the persistence of American leadership in the industry (McKendrick, 1997).
      A second assumption our findings question concerns perceptions of the relative strengths and weaknesses of American and Japanese firms. Some of our evidence leads us to observe that at least two stylized characterizations of the "Japanese firm" may be built on an insufficiently constructed empirical foundation. Japanese firms are held out as leaders in manufacturing. Early reports in the business press were similarly convinced of their impending advantage in disk drives: "Once in production, a disk drive is basically a commodity product that must be assembled as quickly and as cheaply as possible -- something that the Japanese are expert at doing" (BW, 1984). Yet, here we find that, if anything, they lagged behind American firms in their ability to ramp to volume manufacturing.
      Another characterization portrays Japanese companies as global models of decentralized coordination and operational efficiencies (Womack, Jones, and Roos, 1990; Dunning, 1993). Here we find that American firms excelled at managing international value added networks. This deserves particular emphasis in the context of global competition. As in other industries, HDD activities are coordinated using a diversity of mechanisms--by the market, internal hierarchy, and close relationships. The more interesting aspect of this coordination is that it occurs within patterns of globally dispersed concentrations of activity.¹⁵ At the same time, however, the HDD international value network appears to differ from the business networks constructed by the Overseas Chinese, which Borrus (1995) identified as contributing to the resurgence of U.S. electronics industry. In the case of the American disk drive industry, the principal international network relationships in terms of value added are among American firms. Global dispersion has not weakened interorganizational cooperation in the disk drive industry. It has merely shifted its locus and put a premium on the effective coordination of international activities. The international competitiveness of national industry derives from this kind of organizational knowledge.
      Why such discrepancies in these accounts? A primary reason may be that much of what we know about Japanese firms comes from research on the automobile industry, and our understanding of production networks relies principally from analyses of geographically concentrated craft-based industries in Silicon Valley and Italy. This suggests that additional exploration of other industries is warranted. For scholars interested in theorizing about the firm, globalization, innovation, and industrial organization are some of the issues that are best examined in the context of several specific industries. By looking at the behavior of the population of firms and its evolution over time, researchers can avoid faulty generalizations derived from firm idiosyncracies or selective successes and failures.

Endnotes
¹This research was supported by the Alfred P. Sloan Foundation, grant number 95-6-13. We are grateful to Suzanne Stout, Roger Bohn, Peter Gourevitch, and John Richards for many helpful suggestions. We also thank James Porter, President of Disk/Trend, Inc., for generously sharing his data. ²Acer Computers, for instance, assembles computers in 30 markets instead of importing them in order to shorten lead-times between assembly and delivery (The Economist, 1997). The company's reasoning is that component prices fall over time so more recently assembled computers will be cheaper. ³Davidson analyzed the data bank developed by the Harvard Multinational Enterprise Project. The data bank covered the foreign operations of 180 large U.S. MNCs from birth through 1975 and their 13,000 foreign investment projects, which accounted for some 70 percent of total foreign investment by U.S. enterprises.  ⁴The decline in U.S. market share between 1995 and 1996 is due to the purchase of two U.S. firms by foreign firms. ⁵Burroughs and Univac eventually made their own movable head disk drives. ⁶Figure 1 needs some explanation. Establishing entries and exits is not always self-evident. Ownership of a disk drive company or operation may change, but to count this as an exit and an entry could be inaccurate. For example, in 1979 Century Data, then a ten-year-old maker of disk drives, was acquired by Xerox. Century continued to make disk drives as a Xerox subsidiary with the same personnel and facilities. In this case, we did not consider the acquisition of Century to be an exit, nor count it an entry for Xerox. In contrast, in 1996 Seagate Technology completed its acquisition of Conner Peripherals. Both companies made HDD, but Conner was absorbed into the Seagate HDD operations. In this case, it represented an exit from the industry. Regarding Figure 1, no exit or entry was recorded when a disk drive operation or firm was acquired by another entity but retained the same facilities, personnel, or identity. ⁷"Seagate was looking for a highly-efficient, relatively low cost manufacturing base with an educated, receptive and disciplined labor force" (FT, June 1, 1988). ⁸Correspondence from an NEC senior manager. ⁹Singapore was responsible for 45% of the world's HDDs. ¹⁰American firms also extended the global assembly strategy to low cost areas of Europe between 1990 and 1995 (Ireland and Hungary). ¹¹This percentage is actually understated because it does not capture employment associated with a few of the least expensive components going into a disk drive: base-plates, condensers, capacitors, screws, etc. These are sourced almost entirely from vendors in Southeast Asia. ¹²Nor were the Japanese more dependant on captive sales than U.S. firms. Style of industrial organization and innovative capability issues are addressed in McKendrick (1997). ¹³For instance, Hannan and Freeman (1989) comment that joint ventures might be viewed as a mechanism that blurs boundaries between distinct organizational forms, such as those between American and Japanese automakers. This implies each national industry would be treated as a separate population and could be analyzed independent of the other. In our formulation, a global industry could represent a unitary population composed of nationally defined sub-populations. The analytic distinction is that the evolution of one national industry is interdependent with that of another. ¹⁴Interestingly, Japanese firms complained of rising cost of labor in Singapore at the same time American HDD firms were moving there to economize on wage costs (NKS, 1985).  ¹⁵These disk drive network relationships deserve closer study. Our sense is that they operate differently than in industries observed by Sabel and Piore (1984) and others -- perhaps global "flexible specialization" with a twist. Where Sabel and Piore see industrial communities as historic and continuous, we see the greater disk drive community as emergent and evolutionary: Silicon Valley, LA, Minneapolis, Boston, Boulder, Singapore, and now Penang and Ireland. Where they see regional clustering, we now observe "concentrated dispersion." Where they see small-firm networks, we see networks of firms of great diversity in sizes usually anchored and orchestrated by several large firms. Where they see job guarantees, work sharing, and limits on firm entry as foundations of industrial community, we see Schumpeterian dynamics.

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