CONCEPTUAL AND EMPIRICAL EVIDENCE OF INTERNATIONAL MACRO AND MICRO CONGRUENT GENERIC STRATEGIES:...

INTRODUCTION

As trade becomes freer around the world, the pressures of competition are becoming greater. Due to this increased competitive intensity in world trade, efforts to understand the macro and micro ramifications of international competitive superiority are of considerable

Porter (1990a) suggests that nations create environments that can encourage or discourage firm competitiveness. Dunning (1990, 1992) posits that a better understanding of the interplay between competitive advantages of countries and the firms of that country may offer significant advances to competitive international trade theory. The interaction between a country and its firms is of great importance to both emerging and fully industrialized nations. Although this is a vital area of understanding and many have offered theoretical explanations (e.g., Doz and Prahalad, 1991; Kogut, 1985; Porter, 1990b), more empirical testing must be performed to understand the effects of congruent or divergent macro (i.e., government policy)--micro (i.e., firm) generic strategies.

One interesting but overlooked aspect of the generic strategies research is the paucity of research concerning differences between manufacturing and service industrial sectors in relation to macro and micro strategies. From 1900 to 1984, the percentage of the population employed in the U.S. service sector increased from 30% to 74% (Bateson, 1989). Moreover, Koepp (1987) claims that 85% of all new jobs created in the U.S. since 1982 have been in the service sector. According to Bateson (1989), the service sector has surpassed the manufacturing base on worldwide GNP, accounting for 59% of the world's productivity output.

In a major step of recognition for service firms, Fortune magazine announced in 1995, for the first time since 1955, their decision to include service corporations -- banks, life insurance firms, utilities -- in their annual Fortune 500 list. In the first year of the new list, the number of service firms surpassed industrials, 291 to 209 (New York Times, 1995). The economic might of the service sector is not only growing, but is different from the manufacturing sector. Characteristics of the service sector normally include inseparability, intangibility, perishability, and heterogeneity (Dahringer, 1991). These traits make the two industry sectors distinct and worthy of investigation.

If national (i.e., macro) policies are at odds with firm (i.e., micro) strategies, then convergence or strategic fit may be difficult, if not impossible, to achieve. Strategic fit creates synergies that enhance co-alignment with the environment, and for the purpose of this article, strategic fit refers to governmental industrial policy supporting or hindering firm performance. Thus, the research questions are (1) does the U.S. have a more centralized economic policy than Japan and (2) does each government implement similar macro generic strategies with the same results for both manufacturing and service industry sectors which are evident at the firm level?

This paper is divided into four parts. First, the key elements of macro and micro generic strategies are explored and highlighted, including recent research in this domain. Next, hypotheses are offered to test for differences in micro strategies between Japan and the U.S. Third, data is gathered to investigate the micro generic strategy performance of manufacturing and service sector firms in these two countries. Finally, the paper closes with a discussion and conclusion section.

MACRO & MICRO GENERIC STRATEGIES

Macro Generic Strategies

Traditionally, comparative advantage has been the guiding force behind international trade pacts. The factors of production and natural resources helped to determine a nation's comparative advantage (Cateora, 1990). In order to provide firms with a strong home base, it takes a long-term national commitment to invest in competitive processes and human resources skills, as well as cultivating a basis for potential industry clusters (Porter, 1990a). Gaining comparative advantage is an expressed goal of governments, some to a larger degree than others are. An advantage can be attained by supporting certain industries, protecting others, or by adjusting a nation's currency rates. Import duties, quotas, unique quality inspections, and foreign investment restrictions are some of the methods used by the Japanese government to buttress its country's comparative advantage (Jatusripitak, Fahey, and Kotler, 1989).

Samli and Jacobs (1995) offer an insightful framework in which to approach macro strategies. They delineate six elements of macro generic strategies that have been blended into four macro generic strategic factors. The four drivers of a coordinated macro--micro strategy include 1) national strategy and support, 2) product research and development, 3) domestic competition and innovations, and 4) relationship between government and industry.

National strategy and support. Often national governments are accused of working too closely with firms in specific industries in order to assist firms in gaining market supremacy. In order to develop an active macro strategy, an expressed national industrial policy that coordinates firms and industries is often used. An industrial policy can be defined as containing three elements (Landegger, 1993): 1) a strategy agreed upon by industry, banks, and the government; 2) assisted growth of selected industrial segments; and 3) assisted phasing out of selected industrial segments.

It follows that a coordinated national policy fosters a beneficial environment for business firms, as demonstrated by the coordinated efforts of the Japanese government and its industries (Landegger, 1993). If this relationship indeed exists between the Japanese government and industry, one may expect sales growth opportunities for individual firms. This growth may be realized due to benefits arising from coordinated efforts and information, or what some might call market "protectionism."

Product research and development. Deardorff (1984) concludes that research and development is the primary determinant of exports. Thus, in order to optimize macro strategy, subsidized firm R&D by a nation's government should be of vital interest to any nation wishing to build a comparative advantage. Additionally, Lieberman and Montgomery (1988) note that technological leadership results from advantages derived from research and development races.

Japan is often noted for its ability to support R&D firm research, especially in the area of process innovations, compared to the U.S. (Bhoovaraghavan, Vasudevan and Chandran, 1996; Wagner and Digman, 1997; Zannetos, 1984). U.S. firms on the whole usually receive little, if any, financial support (unless involved in U.S. national interests such as national defense, infrastructure, etc.) for R&D research (Luker, 1997). If these prior conclusions are accurate, differences in spending levels on R&D might be evident between firms in both nations, with the Japanese perhaps spending more in this area.

Competitiveness and innovativeness. Other methods used to gage international competition are labor costs, interest rates, exchange rates, and economies of scale. Porter (1990a) notes that having active domestic rivals that create pressure to innovate can lead to a healthy and competitive nation. Rivals stimulate the need for the best raw materials and human resource skills, while pressuring firms to innovate and improve. Domestic competition forces firms to explore global markets (Mascarenhas, 1986) and strengthens them to succeed. Today "companies achieve competitive advantage through acts of innovation" (Porter, 1990a: 74).

Innovation can be segmented into new products or new processes (Franko, 1989). New product innovation can help create and capture new markets while yielding competitive advantages. Process innovations are more incremental and often times are not related to the end product themselves. But, since many innovations can be imitated, firms must continue to improve upon their inventions or risk losing their competitive advantage. The U.S. may be considered by some to be "prospectors" (Miles and Snow, 1978) because of a history of inventing mass appeal type products (transistors, televisions, telephones, and computers to mention a few), and therefore continued competitiveness and innovativeness should be apparent when compared to the Japanese.

Relationship between government and industry. Given that countries in this world are founded on different principles and that nations do not have identical definitions of what capitalism means (Thurow, 1992), there is a range of diverse relationships between federal governments and industry members. While some relationships may be categorized as collaborative--having a sense of joint identification of problems, mutual construction of solutions, and attempts to remove barriers between themselves--others are quite the reverse. While a close relationship can lead to the protection of certain industries (possibly leading to a weakly competitive industry relative to global standards), a government can play a legitimate role in crafting and stimulating environmental forces that are conducive to competitiveness. In any case, fostering positive relationships to develop a macro competitive strategy can be a prudent approach to reaching maximized outputs. For instance, a macro generic strategy that is advantageous to business may be as simple as providing a balanced budget so as not to drive up interest rates by having to service an existing national debt.

In summary, the four macro generic strategies can be implemented by national governments to assist the competitiveness of its firms. These macro generic strategies are the attempt by the national government to help stabilize and foster an environment that is conducive for a firm to become more competitive. An implicit point of the macro generic strategies is that a level of harmonization or congruency must be achieved between the macro generic strategies and the firm level micro generic strategies.

Micro Generic Strategies

To earn profits, a firm must conceive a strategy that is exceptional vis-a-vis the competition. A firm's competitive advantage rests on its ability to focus managerial expertise, implement sophisticated strategic plans, and occupy a defensible niche (Porter, 1980). A competitive advantage influences what activities and technologies a firm should use as its nucleus when investing monetary and managerial resources (Kogut, 1985). There are three generic strategies that a firm may follow when striving for its competitive advantage: cost leadership, focus, and differentiation (Alderson, 1957; Porter, 1980, 1990a, 1990b). A number of studies have been conducted to test the validity of Porter's generic strategies (e.g., Dess and Davis, 1984; Galbraith and Schendel, 1983) and have found general support for his framework. However, the vast majority of research on generic strategies has been conducted in the U.S.

Nonetheless, evidence suggests that Porter's generic strategies are applicable to other nations (Green, Lisboa and Yasin, 1993), but just as multinational corporate structures are non-homogeneous throughout a firm (Ghoshal and Nohria, 1989) neither are their strategies. Hamel and Prahalad (1985) and Hout, Porter, and Rudden (1990) both assert that firms from different national origins will tend to follow different competitive strategies.

Following different strategies due to national origin may be a prudent method for maximizing a distinctive competency. Obtaining a strategic fit (Venkatraman and Camillus, 1984) between the firm and a nation's comparative advantage can lead to optimal results for both the nation and the firm. Thus, aligning a firm's competitive strategy to coincide with a nation's comparative strategy would be the best match.

It appears that some countries provide an environment for firms that are more adept at taking advantage of the nations coordinated macro--micro industrial policies, such as Japan. Japan has demonstrated a commitment to long-term competitive growth relative to the U.S., as demonstrated by the large trade imbalance between Japan and the U.S. (Hori, 1993). Similarly, the trade press has suggested that Japanese firms often have a competitive advantage over U.S. firms because their macro--micro generic strategy is more convergent than the U.S.'s policy (e.g., Nye, 1992; Weidenbaum, 1993). Hence, one may assume that on the whole, Japanese firms should be outperforming U.S. firms on long-term performance indicators.

One claim for this dominance is that the Japanese government, using the MITI (Ministry of International Trade and Industry) as its implementation arm, offers a coordinated national policy in which Japanese firms are afforded advantages, which help them compete more successfully. These advantages are said not to be available to American firms in the U.S., as the U.S. government does not allow the comparative advantage doctrine to drive most of the economic actions it takes (Hahn, 1993). However, there has been little research comparing the success or deficiency between Japanese and U.S. firms taken at an aggregate level. Most studies address only a small group of firms operating in a narrow SIC classification; however, this study takes an exploratory perspective through examination of Japanese and U.S. firms' financial performance for the manufacturing and service industry sectors.

HYPOTHESES

A firm's ability to assemble expertise and devise a potent competitive strategy will be observable through proxies of their financial performance (Mintzberg, 1978). The performance measures used to compare Japanese and U.S. firms are intended to capture the complexity of their international competitive strategy.

Japan is purported to have more cohesive national business policies, hence the term "Japan Inc." Therefore, Japanese firms might be expected to spend more on research and development and have greater net profit margins than the U.S. In contrast, the U.S. market might be characterized as having a large entrepreneurial or prospector influence with a traditional laissez faire approach to business. One might expect U.S. firms to perform well in relation to competitiveness and innovativeness while investing more heavily in creative/unique market solutions leading to greater performance in sales growth, return on sales, and perhaps return on assets. Grounded in the principles of strategic fit, one might expect these effects to generalize across product and service industries.

The performance measures identified in the literature (e.g., Ghoshal, 1987; Kogut, 1985; Porter, 1990a, 1990b; Samli and Jacobs, 1995), as salient to a firm's ability to gain profits and survival, are numerous. Five micro performance measures have been chosen as indicators to compare the international competitiveness of firms from Japan and the U.S. These measures include 1) research and development expenditures, 2) net profit margin, 3) sales growth, 4) return on assets, and 5) return on sales. The micro performance measures cover both the long- and short-term competitive positions of a firm. For example, research and development expenditures and net profit margin are considered to be indicators of long-term performance (Anderson, Issel and McDaniel, 1997; Cantwell and Harding, 1998). Conversely, sales growth, return on assets, and return on sales can be classified as short-term measures of performance (Finkelstein and D'Aveni, 1994; Oliver, 1996; Slevin and Covin, 1997).

The Japanese firms have often been considered more competitive as they often focus on long-term performance rather than shorter-term performance (Abbeglen & Stalk, 1985). Moreover, U.S. firms are often driven toward short-term profit maximization to satisfy their shareholders (Business Month, 1990). Conversely, Japanese firms do not have the same considerations and can focus on the longer-term horizon (Campbell, 1994). For instance, Japanese firms have demonstrated their ability to garner greater net profit margins and to compete with U.S. firms in terms of profit margins in the U.S. steel industry (Prizinsky, 1998) and in other industries (Rivera, 1996). Using this range of different performance measures and the analysis of the two different industry sectors (i.e., manufacturing and service sectors) provides a broader understanding of this complex phenomenon of firm competitiveness. Thus, the following formal hypotheses are offered:

Hypothesis 1a: Japanese firms will have higher research and development expenditures than U.S. firms will in the manufacturing sector.

Hypothesis 1b: Japanese firms will have higher research and development: expenditures than U.S. firms will in the service sector.

Hypothesis 2a: Japanese firms will have a higher net profit margin than U.S. firms will in the manufacturing sector.

Hypothesis 2b: Japanese firms will have a higher net profit margin than U.S. firms will in the service sector.

Hypothesis 3a: U.S. firms will have a higher sales growth than Japanese firms will in the manufacturing sector.

Hypothesis 3b: U.S. firms will have a higher sales growth than Japanese firms will in the service sector.

Hypothesis 4a: U.S. firms will have a higher return on assets than Japanese firms will in the manufacturing sector.

Hypothesis 4b: U.S. firms will have a higher return on assets than Japanese firms will in the service sector.

Hypothesis 5a: U.S. firms will have a higher return on sales than Japanese firms will in the manufacturing sector.

Hypothesis 5b: U.S. firms will have a higher return on sales than Japanese firms will in the service sector.

METHODOLOGY

Sample

For the sample, firms were eliminated which had more than three years of missing data. Due to the exploratory nature of this study, a broad sample of cross-industrial firms was chosen for both manufacturing (SIC = 2000 to 3999) and service (SIC = 4000 to 9999) industry sectors. The original sample for manufacturing firms consisted of 471 Japanese and 738 U.S. manufacturing firms. Likewise, the original sample for service firms included 83 Japanese firms and only 44 U.S. firms. Due to violations with the assumption of homogeneity of variance for both the manufacturing and service sector samples, equal sample sizes for both industry sectors were accomplished through random elimination of firms to an equilibrium point.

Hinkle, Wiersema and Jurs (1994) suggest that with equal sample sizes the effects of homogeneity of variance will not be serious. The final sample for manufacturing firms is composed of 471 Japanese and 471 U.S. firms. Similarly, the final sample consists of 44 Japanese and 44 U.S. firms representing the service industry sector. Data for this procedure was gathered through the GLOBAL VANTAGE COMPUSTAT database.

A sample period of six years (1989-1994) was analyzed to account for national economic and business cycles. Szymanksi, Bharadway & Varadarajan (1993) suggest that an extended period longer than two years is appropriate when studying performance. The extended sample period allows for periods of environmental change to be smoothed out through the use of multi-year performance averages. Similarly, they argue that multiple measures of performance should be employed.

Measurement and Analysis

The micro strategy lends itself to empirical testing; however, assessment of a nation's macro strategy, while still workable, is more intangible and difficult to appraise. Thus, the macro strategy will be addressed through descriptive/anecdotal evidence in the discussion and conclusion section. To test the different micro strategy hypotheses, five financial performance measures were captured for both the manufacturing and the service industry sectors. Past research suggests that accounting measures can serve as proxy measures for a firm's strategy (Mintzberg, 1978).

After a review of the literature, five financial performance measures conveying characteristics of a firm's generic strategies were identified (Ghoshal, 1987; Kogut, 1985; Porter, 1990a, 1990b; Samli and Jacobs, 1995). These five measures include research and development, net profit margin, sales growth, return on assets, and return on sales. Moreover, these five measures have been demonstrated to exhibit attributes associated with long- and short-term performance.

For long-term performance, a six-year average measure was computed for research and development (Hundley, Jacobson, & Park, 1996) and net profit margin (Gilbert, 1995). Likewise, a six-year average for short-term performance was calculated for sales growth, return on assets (Haugh, 1981), and return on sales (Szymanksi, Bharadway & Varadarajan, 1993).

For the analyses, independent sample t-tests were first employed on each set of variables for each industry sector to test for differences in means between the two countries. In addition, size was parceled out through a factorial design to control for the effects of firm size for both industry sectors.

RESULTS

Hypotheses 1a and 1b suggest that Japanese manufacturing and service firms spend more capital on research and development than their U.S. competitors. These hypotheses were not supported as illustrated in Table I. For both hypotheses, the U.S. firms had higher overall means. However, the standard deviation was much greater for both sectors indicating that there is a broad range of research and development expenditures. The statistically significant differences for Hypothesis 1a (t = 4.92; p = .000) were not found when controlling for size (F = .112; p = .738). For the service firms, research and developments were found not to be significantly different between Japanese and U.S. firms (F = .27; p = .605).

TABLE I
MICRO STRATEGY PERFORMANCE TEST OF MEANS

                               Manufacturing Sector

                 Japan         U.S.                      With
                  Mean         Mean                    Controls
               (Standard     (Standard    t-test        for Size
  Variable     Deviation)   Deviation)    Scores     (log of sales)

 Research &       6.42         7.52      t = 4.92       F = .112
 Development    (29.50)      (280.97)    p = .000       p = .738

 Net Profit       .063         -.003     t = -1.73     F = 19.94
   Margin        (.047)       (.820)     p = .083       p = .000

Sales Growth      .026         .141      t = 5.08      F = 47.75
                 (.068)       (.487)     p = .000       p = .000

  Return on       .052         .066      t = 1.94       F = 5.20
   Assets        (.028)       (.161)     p = .053       p = .023

  Return on       .899         1.23      t = 12.64     F = 123.85
    Sales        (.330)       (.451)     p = .000       p = .000

                                Service Sector

                 Japan         U.S.
                 Mean         Mean                   With Controls
               (Standard    (Standard     t-test         for Size
  Variable     Deviation)   Deviation)    Scores     (log of sales)

 Research &       7.81        107.78     t = 1.30        F = .27
 Development    (42.49)      (508.10)    p =  .197       p = .605

 Net Profit       .053         .152      t = -1.55       F = 8.03
   Margin        (.089)       (.873)     p = .125        p = .006

Sales Growth      .086         .097      t = .250        F = .083
                 (.189)       (.205)     p = .803        p = .774

  Return on       .044        -.020      t = -1.37       F = 8.06
   Assets        (.056)       (.297)     p = .175        p = .006

  Return on       .972         1.38      t = 2.77        F = 8.01
    Sales        (.622)       (.769)     p = .007        p = .006

Hypothesis 2a was supported, particularly when controlling for size (F = 19.94; p = .000). In addition, Hypothesis 2b was supported, as the results indicate that Japanese service firms had greater profit margins when controlling for size (F = 8.03; p = .000). Hypothesis 3a, which suggested that U.S. firms would have higher sales growth in the manufacturing was supported sector (F = 47.75; p = .000), but not hypothesis 3b (F = .083; p = .774), as neither Japanese nor U.S. firms were found to be significantly different in the service sector.

Support was found for Hypothesis 4a, as U.S. manufacturing firms did have a significantly higher return on assets (F = 5.20; p = .023). Interestingly, Hypothesis 4b was not supported. Japanese service firms had a higher return on assets (F = 8.06; p = .006) than their U.S. counterparts. Conversely, Hypotheses 5a (F = 123.85; p = .000) and 5b (F = 8.01; p = .006) were both supported.

DISCUSSION

Macro Strategies

A key point of this paper is the critical need for a degree of strategic fit to exist between a nation's macro strategy elements: 1) national support, 2) product research and development, 3) competitiveness and innovativeness, and 4) the relationship between government and industry, with a firm's micro generic strategies. An example of the first macro generic strategy of national support may be evident through the organized industrial policy for the steel industry, as Japan rallied around a "Steel is the Nation" slogan administered by MITI. Several Japanese firms, including Nippon Steel, eventually became world leaders in steel production replacing American firms. It appears that many times when MITI designates an industry to buttress, such as electronics, in the 1970s, and semiconductors in the 1980s, Japanese firms flourish compared to their international counterparts.

National support may also be considered protectionism. Recent examples of this phenomenon include U.S. producers of rice, oranges, and beef which felt that they were unable to effectively compete in the Japanese market due to possible Japanese government interference (Brown, 1996). Correspondingly, there has been a long history of claims about protective Japanese national policies regarding automobiles, auto parts, radios, and televisions (Brown, 1996).

The U.S. government has not placed a high priority on nurturing an environment for non-defense related R&D. Unfortunately, firms from the U.S. have done a poor job of maintaining product R&D, as R&D expenditures continue to decrease in relative terms within the U.S. (Samli and Jacobs, 1995). In the 1980s, critics claimed that money generally used to support U.S. firms' research and development functions was being funneled into mergers and acquisitions, which adversely affected research funding and capabilities (Hitt, Hoskisson, Ireland, and Harrison, 1991).

Franko (1988) notes that one reason for the decay in global market share stems from the negligence of U.S. firms to invest in technology-related competitive advantages. Some argue that the strategy adopted by U.S. firms, which places a premium on new product development to the detriment of process innovations, has hindered the macro competitiveness of the country (Thurow, 1992). On average the Japanese spend roughly 30% more on non-defense related R&D expenditures as a percentage than do U.S. firms (Samli & Jacobs, 1995).

From a competitiveness and innovativeness perspective, the U,S., as a whole, has done a remarkable job in making improvements to productivity and global competitiveness. The Worm Competitiveness Report (1997), an annual study conducted by the International Institute for Management Development and the World Economic Forum, compares 53 countries according to 381 criteria. It uses standard economic statistics (e.g., trade performance and policies, government finances and regulations, etc.) and qualitative data collected from industry leaders in each country. The data is interpreted to compare how successfully countries blend policies and management to create wealth from natural resources, infrastructure, and workers' skills, among other indicators. The U.S. was deemed the most competitive nation, displacing Japan who has held the Number 1 ranking for many years and is now 3rd behind Singapore.

Regarding innovations, Chakrabarti, Feinman, and Fuentevilla (1982) found that between 1953 and 1973, the U.S. was credited with 257 innovations, while Japan was credited with 27 innovations. Further, roughly half of the U.S. innovations were deemed radical product innovations, whereas only 25 out of 27 Japanese innovations were for the firm's internal use and meant for productivity or quality improvements. Many argue that the U.S. spends a greater percentage for R&D on product innovations, versus the bulk of Japanese R&D expenditures being focused on process innovations (e.g., Bhoovaraghavan, Vasudevan and Chandran, 1996; Wagner and Digman, 1997; Zannetos, 1984).

The relationship between government and its constituent firms has never been great in the U.S. relative to Japan. This is evident as the relational norms and culture that exist between the Japanese government and business leaders appears to be much more cooperative versus the antagonistic nature often found between the U.S. government and business leaders. For example at MITI, industrial leaders, banking leaders, and government civil servants often meet to discuss the future directions that an industry should take. This can be contrasted with the U.S., where the Commerce Department would not be inclined to summon the three largest automakers, assorted major banks, and auto suppliers to a closed-door summit. The U.S. devotion to anti-trust laws precludes the development of such collusion.

Micro Strategies

Regarding micro strategies, the findings indicate that there were many significant differences between Japanese and U.S. firms in both manufacturing and service industry sectors. In the manufacturing sector, the primary differences were found with regard to net profit margin, sales growth, ROA, and ROS. The literature has postulated that Japanese firms are able to take a longer-term perspective towards profits with the assistance of congruent macro--micro policy. However, this position was not demonstrated in our study. Japanese and U.S. firms did not have statistically significant differences for research and development in either manufacturing or service industries. Conversely for Hypotheses 2a and 2b (see Table II), Japanese firms had much greater net profit margins for both sectors. This finding reaffirms the literature regarding how Japanese firms place greater emphasis on process innovation versus product innovation as their margins were significantly higher than those of U.S. firms.

TABLE II
Summary of Hypotheses

                       Manufacturing     Service

       Hypothesis 1    Not Supported   Not Supported
        (Research &
       Development)

       Hypothesis 2      Supported       Supported
(Net Profit Margin)

       Hypothesis 3      Supported      Not Supported
     (Sales Growth)

       Hypothesis 4      Supported      Not Supported
 (Return on Assets)

       Hypothesis 5      Supported       Supported
  (Return on Sales)

For short-term performance, the hypotheses were primarily supported with exceptions in the service sectors. Interestingly for the sales growth measure, there was no difference between the Japanese and U.S. firms. Additionally, Japanese firms had significantly higher means for return on assets in the service sector. For the other short-term performance measures, the U.S. did have significantly higher priorities on short-term performance.

CONCLUSIONS & LIMITATIONS

The first research question posed, regarding whether the U.S. or Japan has a more centralized economic policy, appears to suggest that Japan may have a more directed or coordinated national program, according to the macro data gathered. The answer to the second research question, and perhaps a more poignant inquiry, whether such policies offer a better strategic fit, and hence, enhanced performance at the firm level is more difficult to discern. However, it may appear that each nation seems to have a healthy strategic fit within their own competitive strategies. In other words, within their own norms and institutional expectations the U.S. and Japanese governments author their own unique brand of national competitive policy, but do not covet the same intermediate goals of success.

The results appear to coincide with the approach taken by each nation. The U.S. is perceived to be captivated with short-term performance, and not surprisingly the empirical results indicate that U.S. firms outperformed Japanese firms with regards to return on sales, arguably a short-term measurement. Conversely, Japan scored significantly higher on the net profit margin measure in both sectors. Net profit margin is more similar to an efficiency assessment and may concur with Japan's national programs to gain market share and dominate certain markets, again a Japanese macro strategy for directing a nation's efforts.

The strategic approaches taken by the U.S. and Japan are obviously different, and the merits of each can be argued incessantly. Some might suggest that the U.S. laissez-faire mentality allows market forces to reward or deny success and in the long run is a more efficient and robust approach to commerce. Conversely, Japan's effort to foster a more cohesive approach to take advantage of a coordinated effort has lifted the country from a developing country after World War II to a major economic power. Some researchers, however, suggest that the prolonged Japanese economic stagnation is due to this guided approach, stating that interference with market forces is to blame for their initial success and current quagmire (The Washington Quarterly, 1999).

This study is one of the few that takes a macro level approach, but also contains micro level data. The data used to answer the micro strategy hypothesis was from a six-year sample period of a firm's operating history. In general, a total of six years is a long time if a firm is doing admirably or poorly; however, any conclusions drawn should be considered tentative due to the exploratory nature of the study and the short time frame analyzed. Additionally, the level of analysis was conducted to look for country effects at an aggregate level in the manufacturing and service sectors. Individual industry effects were not tested or accounted for in this study. Moreover, differences in accounting measures between the two countries could have confounded the results.

Further, America has been the first industrialized economy to emerge from the global recession. Thus, this may help account for the significant differences between Japanese and U.S. firms on some of the performance measures. Since the data used were from the two largest industrialized nations, results say nothing about the effectiveness of macro and micro strategy congruence of other industrialized or emerging nations.

For future research, researchers need to take a finer grained approach. For example, researchers should examine the potential macro--micro congruency differences, which may emerge between firms that compete only within Japan and those that compete both domestically in Japan and globally. Greater levels of Japanese macro--micro support may be more evident for global industries than for domestic industries. The same could be argued for U.S. global firms relative to solely U.S. domestic firms, as the U.S. government provides some degree of support to global industries such as Boeing.

In addition, more research should be conducted in the service sector. As our results have indicated, the service industry deviated from our hypotheses, while the theorized directions for the manufacturing sector were supported with the exception of research and development. These findings could lead to future studies that examine whether or not the Japanese government supports the service sector to the same extent it does the manufacturing sector or is the macro--micro congruency not appropriately aligned between the Japanese government and Japanese service firms? This area merits greater research as both countries continue to move toward greater service economies, which will inevitably lead to greater competition among Japanese and U.S. service firms.

The authors wish to acknowledge the Robert Wang Center for International Business, Ben L. Kedia, Paula D. Harveston and Ananda Mukherji for their assistance on this paper. A previous version of this paper was presented at the 1996 American Society for Competitiveness Annual Meetings in Atlanta, GA.

REFERENCES

Abbeglen, J.C., & Stalk, G.K. (1985). The Japanese corporation, New York: Basic Books.

Alderson, W. (1957). Marketing and executive action, Homewood, IL: Richard D. Irwin.

Anderson, R.A., Issel, M.L., & McDaniel, R.R., Jr. (1997). Nursing staff turnover in nursing homes: A new look. Public Administration Quarterly, 21 (1), 69-95.

Bateson, J.E. (1989). Managing services marketing, London: Dryden Press.

Bhoovaraghavan, S., Vasudevan, A., & Chandran, R. (1996). Resolving the process vs. product innovation dilemma: A consumer choice theoretic approach. Management Science, 42 (2), 232-246.

Brown, D.L. (1996). The changing Japanese consumer: New attitudes, purchasing habits on quality, value, and imports. East Asian Executive Reports, 18 (5), 8, 14+.

Business Month. (1990). Faxpoll feedback: Lip service to the long term. 135 (2), 9.

Campbell, N. (1994). The role of Japan's top managers. Journal of General Management, 20 (2), 20-29.

Cantwell, J., & Harding, R. (1998). The internationalization of German companies' R&D. National Institute Economic Review, 163, 99-115.

Cateora, P.R. (1990). International marketing, Homewood, IL: Richard D. Irwin.

Chakrabarti, A.K., Feinman, S., & Fuentevilla, W. (1982). The cross-national comparison of patterns of industrial innovations. Columbia Journal of World Business, 17 (Fall), 33-39.

Dahringer, L.D. (1991). Marketing services internationally: Barriers and management strategies. Journal of Services Marketing, 5 (Summer), 5-17.

Deardorff, A.V. (1984). Testing trade theories and predicting trade flows. In Ronald W. Jones and Peter B. Kenen (Eds.), Handbook of International Economics vol. I (pp. 467-517). Amsterdam; New York: North-Holland.

Dess, G.G., & Davis, P.S. (1984). Porters 1980 generic strategies as determinant of strategic group membership and organizational performance, Academy of Management Journal, 27, 467-488.

Doz, Y.L., & Prahalad, C.K. (1991). Managing DMNCs: A search for a new paradigm. Strategic Management Journal, 12 (Summer), 145-164.

Dunning, J.H. (1990). The Globalization of Firms and the Competitiveness of Countries: Some Implications for the Theory of International Production, Lund Sweden. Institute of Economic Research, Lund University.

Dunning, J.H. (1992). The competitive advantage of countries and the activities of transnational corporations. Transnational Corporations, 1, 135-168.

Finkelstein, S., & D'Aveni, R. (1994). CEO duality as a double-edged sword: How boards of directors balance entrenchment avoidance and unity of command. Academy of Management Journal, 37 (5), 1079-1108.

Franko, L.G. (1988). Global corporate competition: Who's winning, who's losing, and the R&D factor as one reason why. Strategic Management Journal, 10 (September/October), 49-74.

Galbraith, C., & Schendel, D. (1983). An empirical analysis of strategy types, Strategic Management Journal, 4, 153-173.

Ghoshal, S. (1987). Global strategy: An organizing framework. Strategic Management Journal, 8 (5), 425-440.

Ghoshal, S., & Nohria, N. (1989). Internal differentiation within multinational corporations. Strategic Management Journal, 10 (4), 323-337.

Gilbert, J.T. (1995). Profiting from innovation: Inventors and adopters. Industrial Management, 37 (4), 28.

Green, R.F., Lisboa, J., & Yasin, M.M. (1993). Porter's (1980) generic strategies in Portugal. European Business Review, 93 (2), 3-10.

Hahn, R.W. (1993). Toward a new environmental paradigm. Yale Law Journal, 102 (7), 1719-1761.

Hamel, G., & Prahalad, C.K. (1985). Do you really have a global strategy. Harvard Business Review, 63 (July/August), 134-148.

Haugh, J.W. (1981). Compensation for banking executives in the 1980s. The Magazine of Bank Management, (January), 12.

Hinkle, D.E., Wiersema, W., & Juts, S.G. (1994). Applied Statistics for the Behavioral Sciences, Boston: Houghton Mifflin Company.

Hitt, M.A., Hoskisson, R.E., Ireland, D.R., & Harrison, J.S. (1991). Effects of acquisitions on R&D inputs and outputs. Academy of Management Journal 34 (3), 693-706.

Hout, T., Porter, M.E., & Rudden, E. (1982). How global companies win out. Harvard Business Review, 60 (5), 98-108.

Hori, S. (1993). Fixing Japan's white-collar economy: A personal view. Harvard Business Review, (November/December), 157-168.

Hundly, G., Jacobson, C.K., & Park, S.H. (1996). Effects of profitability and liquidity on R&D intensity: Japanese and U.S. companies compared. Academy of Management Journal, 39 (6), 1659.

Jatusripitak, S., Fahey, L., & Kotler, P. (1989). Strategic global marketing: Lessons from the Japanese. In J. Sheth and A. Eshaghi (Eds.), Global marketing perspectives (pp. 125-36). Cincinnati, OH: South Western Publishing.

Koepp, S. (1987). Plueeze! Will someone help me? Time, (February 2), 28-34.

Kogut, B. (1985). Designing global strategies: Comparative and competitive value-added chains (Part 1). Sloan Management Review, 26 (4), 15-28.

Landegger, C.C. (1993). Increase in global competition demands development of U.S. industrial policy. Pulp and Paper, 67 (August), 91-97.

Lieberman, M.B., & Montgomery, D.B. (1988). First-mover advantages. Strategic Management Journal, 9(Special Summer Issue), 41-58.

Luker, B., Jr. (1997). The public sector and Sunbelt development. Challenge, 40 (4), 58-82.

Mascarenhas, B. (1986). International strategies of non-dominant firms. Journal of International Business Studies, 17 (1), 1-25.

Miles, R.E., & Snow, C.C. (1978). Organizational strategy, structure, and process, New York: McGraw-Hill.

Mintzberg, H. (1978). Patterns in strategy formation. Management Science, 24 (9), 934-948. The New York Times. (April 24, 1995). Fortune adds service sector to its `500' list of corporations." Section D, 1.

Nye, J.S., Jr. (1992). Coping with Japan: U.S.-Japanese relations. Foreign Policy, (89), 96.

Oliver, J. (1996). Which numbers count. Management Today, 57 (3), 106-108.

Porter, M.E. (1980). Competitive strategy. New York: The Free Press.

Porter, M.E. (1990a). The competitive advantage of nations. New York: The Free Press.

Porter, M.E. (1990b). New global strategies for competitive advantage. Planning Review, 18 (May-June), 4-14.

Prestowitz, C. (1994). Playing to win. Foreign Affairs, 73 (4), 186-189.

Prizinsky, D. Asian imports squeeze prices: Steel industry. Crain's Cleveland Business, 32 (19), 3.

Rivera, E. (1996). Japan Inc.: The next generation; Japan recovers from recession. Transpacific, (66), 82.

Samli, C.A., & Jacobs, L. (1995). Achieving congruence between macro and micro generic strategies: A framework to create international competitive advantage. Journal of Macromarketing, (Fall), 23-32.

Slevin, D.P., & Covin, J.G. (1997). Strategy formation patterns, performance, and the significance of context. Journal of Management, 23 (2), 189-209.

Szymanski, D.M., Bharadwaj, S.G., & Varadarajan, P.R. (1993). An analysis Of the market share-profitability relationship. Journal of Marketing, 57 (3), 1.

Thurow, L. (1992). Head to head, New York: William Morrow.

Venkatraman, N., & Camillus, J.C. (1984). Exploring the concept of `fit' in strategic management," Academy of Management Review, 9 (3), 513-525.

Wagner, B., & Digman, L. (1997). The relationships between generic and time-based strategies and performance. Journal of Managerial Issues, 9 (3), 334-354.

The Washington Quarterly. (1999). Is the world economy headed into recession? 22 (1): 89.

Weidenbaum, M.L. (1993). The shifting roles of business and government in the world economy. Challenge, 36 (1), 23.

World Competitiveness Report. (1995). The world economic forum and the international institute for management development.

Zannetos, Z. (1984). Strategies for productivity. Interfaces, 14 (1), 96-102.

The authors wish to acknowledge the Robert Wang Center for International Business, Ben L. Kedia, Paula D. Harveston and Ananda Mukherji for their assistance on this paper. A previous version of this paper was presented at the 1996 American Society for Competitiveness Annual Meetings in Atlanta, GA.

Robert M. Peterson is Assistant Professor of Marketing at The University of Portland. C. Clay Dibrell is a Doctoral Candidate in the Area of Management at The University of Memphis.