This excellent, hard-hitting study argues that the international strength of Japanese firms is based on the size and other characteristics of their domestic market. Investment abroad to jump over trade barriers is not a source of strength, but locating production of standard products in low-wage countries is. Specialization is a key: the Japanese are not good at everything. The response called for from the West is to change the prevailing diagnosis (which says the Japanese will someday become invincible), widen horizons, do more R&D, build on Western strengths, and create a competitive domestic environment before it is too late.
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