How stickiness to low-end markets leads to innovation: Co-evolution between Brother Industry Ltd. and Brother International Corp. USA, 1908–2000

Abstract

This article analyses the history of Brother Industry Ltd. (BIL) to propose a new take on the conventional wisdom surrounding the internationalisation of Japanese companies – a common understanding that the key factor behind Japanese firms’ successes in establishing an international competitive edge was how the companies’ headquarters in Japan implemented a powerful combination of control and integration over their international distributors and moved up from low-end markets to high-end markets through unyielding technological development. By exploring the case of BIL, we locate a different path to growth where highly autonomous local subsidiaries sought to remain in low-end markets and thereby assisted their companies to develop into innovative global companies.

Keywords:

• business history
• co-evolution
• entrepreneur
• internationalisation
• disruptive innovation
• Japanese manufacturing industry
• Brother Industry Ltd. (BIL)
• Sewing machine industry
• printing machine
• Yasui family
• American retail market
• low-end markets

Disclosure statement

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 In research on organisational theory, scholars have argued that the organisational identities (Albert & Whetten, 1985) that grow out of founding philosophies are far from fixed; instead, companies often need to reinterpret their principles and organisational identities to survive (Gioia et al., 2013). Hansen (2012), for instance, cited the example of Danish shipping giant Møller-Mærsk as evidence of that dynamic. While this article does not venture into analysing individual organisational identities, studies akin to the one above are valuable in the fact that they focus on founding philosophies.

2 Ghoshal and Nohria (1989) attempted to classify headquarter-subsidiary relations into identifiable patterns based on their contingency frameworks, concentrating on the specific elements of ‘subsidiary autonomy’ and ‘consensus and shared values’ in decision-making. In another study, Kostova and Roth (2002) highlighted the varying degrees to which subsidiaries adopt orders from headquarters and argued that the extent of adoption is largely dependent on the ‘external institutional context’ in the given country and the ‘relational institutional context’ between the two organisations. Applying the ‘Hybrid Organizational Identity’ (Albert & Whetten, 1985) concept to the binational organisation of MNEs, Voisey (2010) also explored how the organisational identities and capabilities of the North American subsidiaries of Japanese high-tech firms co-evolved over time.

3 When there is a good fit between the firm’s design and its competitive advantage, the organisation is ‘strategically aligned’ with the strategy (Saloner et. al., 2001, 95).

4 See Gordon (2012, Chapter 2) for more on the history of how Singer formed its sales network in Japan and impacted Japanese society.

5 The company was renamed Brother Industries Ltd. in 1962. In this article note that we use ‘BIL’ to refer to the company both before and after the name change.

6 The contemporary Japanese sewing-machine industry was struggling with unfair assessments of its product quality in the American market. Low-quality items accounted for a sizable share of sewing-machine exports, making it difficult for American trust in Japanese quality to grow (Hayashi, 1961, 136).

7 Masayoshi thus relied on an ex-Asiatic Commerce member in the European market, as well, avoiding any active involvement on the part of BIL. Brother decided to establish Brother International Europe Ltd. (BIE), with a head office in London and a production site in Dublin, in October 1958 (BIC 2004, 31–32; BIE 1998). Etzin was the new firm’s inaugural president (BIL 1971, 146).

8 Hugel would go on to join Ronald Reagan’s campaign team and eventually receive an appointment to serve as deputy director of the CIA in 1980 (Howard, 2009, 101).

9 As we mentioned at the beginning of the article, these two threads running through BIL’s operations stand in stark contrast to Sony’s experience, where Morita used strong leadership to extinguish conflicts between headquarters and local subsidiaries in the 1970s, after which headquarters then led the way in aligning the company with the high-end market from the 1980s onward.

10 Matthias Kohlstrung, currently the managing director at Germany subsidiary Brother International GmbH, looked back on the beginnings of his career at Brother in the early 1990s and remembered the circumstances contributing to the development delays. ‘Germany was already in a crisis. By the time the typewriter market collapsed a few years later, around 1993 and 1994, we hadn’t gotten our printer and fax businesses to a point where they could offset the losses. It all combined into a devastating blow, one that ended up forcing us to consolidate’ (Eichstädt, 2021).

11 These figures were obtained by dividing the corresponding values for JPY-denominated net sales by the average exchange rate for the year in question. The impact of the JPY’s sharp appreciation against USD during the period is evident.

12 In a similar pattern, the BIC-USA marketing team also gave BIL ideas for new products with features like anti-curl systems (ACS; a feature that straightens roll paper to prevent curling), answering-machine functionality via semiconductor memory, and plain-paper faxing via thermal-transfer printing (BIC 2004, 102–103).

13 Office Depot topped Information Week’s ranking of the most innovative e-business corporations in 2000 (Nikkei Information Strategy, April 2000, 218).

Additional information

Notes on contributors

Yuki Nakajima

Yuki Nakajima, professor of business history at Nanzan University has conducted research on the history of Japanese electronics industry in the post WW2 period. He published Nihon no Denshi Buhin Sangyo: Kokusai Kyousou Yui wo Umidashita Mono [The Japanese Electronics Parts Industry: The Long Road to International Competitive Advantage], Nagoya: The University of Nagoya Press, 2019.

Motohiro Nakauchi

Motohiro Nakauchi is Professor in Department of Business Administration at Aoyama-Gakuin University. His research focuses on studying CEO succession, knowledge transfer, and innovation management. His work has been published in journals such as Strategic Management Journal and Management Decision. He received the Distinguished Paper Award, Business Policy and Strategy Division, Academy of Management Annual Meeting, 2011.