What Professor Sakakibara (and I) focused on was the relationship between finished products and key devices (critical components) in electronics equipment. Many of Japan’s major electronics manufacturers had their own branded finished electronics products and were constantly pursuing technological innovation in key devices to achieve differentiation. Having advanced users within the company allows companies to proceed with technology development while listening to their input, and if technology development succeeds, practical application should progress quickly. It is thought that if they can develop outstanding key devices, those devices will contribute to differentiation of their company’s finished products. There are many benefits for both sides when a single company manufactures both finished products and key devices in-house. This point had already been identified in previous research.

Even if groundbreaking technology is successfully developed, it will not spread on its own. Key devices, which are the crystallization of many years of research and development, are initially too expensive. Cost reduction efforts are essential, and at the same time, trial and error to achieve mass production begins. Once mass production succeeds and automation of production progresses, the cost of key devices drops dramatically. As a result, the quantity of key devices exceeds internal demand. This point is particularly notable in second-tier or lower companies whose finished products are inferior in terms of competitiveness. Sooner or later, such companies face the problem of whether to sell or not sell a prized key device. If the device is not sold outside the company, differentiation of finished products is protected, but those products will face a disadvantage in terms of cost competitiveness. Conversely, if the key device is sold outside the company, differentiation of finished products is lost, but there is greater cost reduction. Companies that are second-tier or lower in terms of finished product competitiveness tend to choose the latter, and if that happens, leading companies have no choice but to follow suit, causing all companies to lose the differentiation of finished products through key devices, and ultimately leading to price-cutting competition.

A situation described as “winning with technology but losing in business” persisted for some time, particularly among Japanese electronics manufacturers. However, it is only natural that investments for the future will dwindle if a business cannot generate sufficient profits. Moreover, countries that were once emerging economies in Asia have developed, and powerful competitor companies have also grown. As a result, the situation where Japanese companies were winning in terms of technological development was no longer evident. Thus, it seemed that my grasp of the issue could no longer be said to accurately capture reality. I personally felt that I had reached an interim conclusion regarding the way Japanese companies should possess both finished products and key devices in a paper published in 2012 (Matsumoto, 2012). Furthermore, I was dissatisfied that previous research seemed to be focused on reasons why Japanese companies lose, making it difficult to have a forward-looking discussion. I wanted to do more positive research.

One important concept when considering synergies is “economies of scope.” Put very simply, economies of scope refer to when it is more efficient for one company to handle two different businesses than for two different companies to handle each business separately. There are two types of economies of scope: intra-temporal economies of scope and inter-temporal economies of scope (Helfat & Eisenhardt, 2004). Recent years have seen active research in this area, and what I also focused on is the latter economies of scope. Let me explain in simple terms. Suppose there are resources—such as people, things, and money—used by certain business A. Assume that company (1) withdraws from business A and uses the resources that were used there to enter business B. Then, company (1) should be more efficient than company (2) that enters business B from scratch, without anything. This is inter-temporal economies of scope. Achieving this requires resource redeployment. So the research issue is: under what circumstances, what sort of resources, and through what methods of reallocation can better outcomes be achieved compared to not reallocating resources?