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The Industrial Geographer, 2011, Volume 8, Issue 1, Pages 1-25.

Copyright 2011 Motoyama

Innovation and Location:A Case Study of Sonys Vaio LaptopYasuyuki Motoyama

Center for Nanotechnology in SocietyUniversity of California Santa BarbaraSanta Barbara, CA 93106-2150

[email protected]

AbstractThis article investigates the question of why innovation has been geographicallyconcentrated. Although many past studies of regional institutions, social networks,and tacit knowledge have provided insight into this question, they have done little toprobe the engineering and technical aspects of the phenomenon of the place-

rootedness of innovation. This study approaches this question through an empiricalanalysis of innovation at the micro-scale, a case study in the product development ofSonys Vaio 505 laptop. It uncovers three specific features in the process ofinnovation: complexity, the interdisciplinary development of technology, andprototyping and testing. Each of these engineering and technical aspects requiresthe co-location of the engineers and managers of the innovation project.

Keywords: innovation, location, Japanese firms


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IntroductionIt has been generally understood thatcorporate research and development(R&D) activities have been globalized.Transnational corporations oftenoperate R&D centers at the cross-continental scale: in Europe, North

America, and Asia. Many of themclaim that their global R&D networksynergistically creates newtechnologies and products. Forexample, Sony (2004a) explicitly callsfor a global synergy in R&D with itsten operating R&D centers in theworld, and Canons R&D centersaround the world try to develop

creative products and solutions forCanon as a whole (Canon 2006).

A close analysis of Sony,conventionally viewed as a highlyglobalized firm, reveals that over 95percent of its R&D not only occurredin Japan, but more specifically in thesouthern Tokyo region. Moreover,virtually all of its most famousproducts - the Walkman, Passportvideo camera, Vaio laptop, AIBO robot,

PlayStation game machine, and flat-panel screen technology - were createdby development teams located inJapan (Aoki, interview, September 21,2004; Arimura 1999).

This article investigates the questionof why such geographic concentrationof R&D is critical. Past studies toanswer this question could be groupedinto three schools of thought: the

institutional, social network, and tacitknowledge schools. We will reviewhow each school answered the reasonsfor concentration and assesses theirlimitations. In essence, little has beeninvestigated on the engineering aspectof making innovation, which hascrucial connection to a specific location.

It is hard to analyze such a technicalaspect of innovating if the main unit ofanalysis is a region. Inevitably, theconcept of innovation becomes genericat such a broadly defined scale.Simply put, regions, as an aggregateunit, do not produce innovation, whilewe may observe a number ofindustrial or social innovations withina region. Thus, if someone speaks ofan innovative region, the scale andconcept of innovation loses anexplanatory power. In contrast, thisarticle will conduct a micro-level casestudy and assess a particular productdevelopment, specifically how Sonydeveloped its first stylish laptop, the

Vaio 505 in the late 1990s. This in-depth analysis will reveal threefeatures of creating innovation thatare inherently tied to geography, thusproviding further understanding of therelationship between innovation andregions: the complexity, theinterdisciplinary development oftechnology, and prototyping andtesting.

Studies in Industrial Clusters andJapanese FirmsIndustrial ClustersBy analyzing the location of patentfiling or initial public offerings of high-tech firms, a number of empiricalstudies support that innovation occursin geographical clusters (for example,Jaffe et al. 1993; Feldman and Florida1994; Audretsch and Feldman 1996;

Patton and Kenney 2003; Sonn andStorper 2007). This section discussesthe conclusions those past studiesdrew for the reasons for such clustersand introduces three different schoolsof thought: the institutional, socialnetworks, and tacit knowledge schools.In sum, these schools all argued thatinnovation was more likely to occur if


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people, firms, and other regional andinstitutional actors were clustered inclose proximity to each other.

First, the institutional perspectiveemphasizes the benefits of a localizedlearning effect among differenteconomic players in a regionaleconomy (Storper 1997; Morgan 1997;Maskell 2001; Pinch et al. 2003; Lowe,2009). These studies supportedMarshallian positive externalitiesshared by a pool of labor and themobility of skilled workers, whichwould result in spin-offs (Camagni1991; Scott 2000; Capello & Faggian

2005). More importantly, competitionand collaboration between co-locatedfirms spurred the dissemination ofknowledge and the interactivelearning process (Porter 1998;

Antonelli 2006).

The second school of thoughtconcerning innovation and clusters issocial network theory, primarilydescended from the influential

embeddedness theory of Granovetter(1985). This theory analyzes howpeople exchange information andargues that communication is sociallyembedded. In this context, the sourcesand reliability of communication areas important as the rich informationthat typically comes through trustedrelationships cultivated byparticipants (Hackman & Morris1978). At the same time, judgmentcriteria were often highly culture and

context-specific (Lakoff & Johnson1980) and shared by people in thesame social group (Coleman 1990).

This network concept has been appliedin an economic context. Empiricalstudies have found that local-basedbusiness networks produced higher

Source: Based on Sony (2002) and Sony (2004a), authors calculation.

Figure 1 Sonys Worldwide Research and Development Centers.


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entrepreneurship and innovationlevels in northern Italy (Brusco 1982;Piore & Sabel 1984), the Silicon Valley(Saxenian 1994), and the art andculture sector in New York (Currid2007). This school of thoughtemphasizes the role of face-to-faceinteraction as the richest form ofcommunication, necessarily requiringco-location among participants(Storper & Venables 2004).

The third school of thought is the tacitknowledge theory, based on the workof Polanyi (1966) and Nonaka andTakeuchi (1995). In an informationage of relatively easy access to explicit

and codified knowledge, innovationdepends on tacit knowledge derivedfrom direct interpersonal contact andthe dynamic interaction betweencodified and tacit knowledge(Malmberg & Maskell 2002). Whilecodified knowledge can be transmittedin the form of books, academic papers,and websites, tacit knowledge does nottravel easily because it is best sharedby people with similar norms, codes ofcommunication, and routines (Howells

2002; Gertler 2003; Zook 2004). Thus,knowledge and innovation clusters inspecific regions with a shared businessculture and especially within the sameorganization.

However, the focus of these streams ofliterature was on how muchinnovation was observed in a givenregion, but not on how each innovationwas made. The three schools measure

innovation by proxies, such as thenumber of patents, public offerings ofventures, as mentioned earlier, or,more broadly, the growth of a regionalhigh-tech industry as in Silicon Valley(Saxenian 1994). Here, the literaturerarely specified what was innovatedand how this occurred. In other words,the past literature has assumed that

innovation in the form of goods andservices would result if firmscompeted and collaborated or if peoplemet and shared tacit knowledge. Thisproject starts from a hypothesis thatthe mechanism to create innovation issubstantially more complex, and thecomplex process has deep geographicroots. This analysis on the process ofinnovation is critical becauseinnovation in contemporary society isin good measure an engineering andtechnical matter. If we miss theanalysis on the technical process, wemay be missing the fundamentalnature in the making of innovationand its linkage to the location.

To investigate the specificity ofinnovation and the process of makingit, more in-depth examinations canemerge by focusing on activities ofeconomic actors. This article focuseson innovations at the concrete micro-level and analyzes the productdevelopment activities of a firm. Onlyafter differentiating which engineerwas involved in what kind ofinnovation can you start to analyze

the process of generating a specificinnovation and understand itsconnection to geography.

Innovation at Japanese FirmsAs we examine the innovationactivities conducted by Sony, we haveto keep in mind both the advantagesand disadvantages of studying aJapanese firm. It is advantageous tostudy Japanese firms because there

are many successful ones ininnovation-intensive industrial sectorswith an engineering orientation, suchas machinery, electronics, andcomputers. Sony is a well-knownplayer in the electronics and computersectors, sectors that provide a goodsample in exploring the specificity andthe process of making innovation.


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Second, Japanese firms have a highinternational presence, and conductsales, distribution, and manufacturingat the global level. Thus, thegeographic concentration ofinnovation-making activities contrastssharply with the global manufacturingand sales operation; this dichotomyindicates strategic reasons for suchconcentration.

At the same time, what this projectuncovers could apply only to Japanesefirms due to their specific cultural andorganizational characteristics. Indeed,past studies in business, economics,and political economy have identified

several unique features of Japanesefirms. Gerlach (1992) and Lincoln andGerlach (2004) revealed the stablenetworks of business relationships,including cross-shareholding andsupply networks within a keiretsugroup. Aoki (1988) and Aoki and Dore(1994) discussed the aspect of theunique labor system in which unions,often organized at the enterprise levelinstead of the industry level, andmanagement have maintained a

relatively harmonious relationshipbased on the life-time employment andseniority-based wage system.

In addition to these generalcharacteristics of Japanese firms, twogroups of studies discussed the uniquepatterns of Japanese firms related toinnovation. First, Fransman (1999p.159-160) specifically analyzed howthe labor-management relationship

affected the innovation system. Underthe life-time employment system,firms assumed that their employeeswould not quit, and thus it gave firmsan incentive to invest in and trainemployees. It further promoted jobrotation within the company andinformation sharing between themarketing, production, and R&D

divisions. This insight echoed Fruins(1992, 1997) findings that thereexisted a close interaction between theproduction and R&D units. Second,Nonaka and Takeuchi (1995), andShibata and Takeuchi (2006) arguedthat the strength of Japanese firmscame from the organizational practicesof sharing tacit knowledge andpromoting the dynamic interactionbetween the tacit and explicitknowledge.

These studies, however, provided fewindications of how the uniqueness ofthe innovation system amongJapanese firms shapes the geography

of innovation. It is unclear if the closesupplier relationship enforcesgeographical proximity or whethersuch close relationship allows thedistant yet effective coordinationbetween networked firms. Similarly,the close labor-management relationsmay suggest the operation ofmanufacturing and R&D divisions ingeographic proximity or in distance. Inother words, the geographic analysisof the innovation system in Japanese

firms is a vacuum in the past studies.So far, the only implication forgeography comes with the concept ofthe sharing of tacit knowledge, whichsuggests the face-to-face interactionbetween innovators and the proximateenvironment.

One notable exception in the study ofgeography of innovation by Japanesefirms came from McCann and Arita

(2002), who reported that the extremesecrecy of the semiconductor industrymade the location of R&D units andtrial plants unrelated to the regionalcluster of firms often discussed by theeconomic geography literature. Inother words, firms collaborated basedon their strategic alliance, in which


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were also informative (Endo, May 7,2004; Sakaguchi, July 21, 2004; Aoki,September 21, 2004; Tambata,September 24, 2004; Iguchi andMiyano, December 4, 2004). Bothsources were critical andcomplemented to understanding thein-depth process of making theproduct.

Sony Before the Vaio 5 5The Vaio was not the first PC createdby Sony. The companys history of PCproduction goes back a few decades.Sony first produced a transistor-basedcalculator, SOBAX, in 1967. Iteventually pulled out of the calculator

business due to fierce pricecompetition from Sharp and Casio,two other Japanese producers(Kawaguchi 2003 p.66). In 1982, Sonycollaborated with Panasonic andintroduced the SMC-777, based on theopen MSX standard developed byMicrosoft, a project led by NobuyukiIdei. A former CEO of Sony, heaggressively started the Vaio businessafter 1996. Sony had a string offailures include the NEWS, a

workstation, in 1987, the AX in 1988,and the IBM-compatible QuarterL in1993 (Sony-EMCS 2005). Despitethese failures, Sony stayed in the PCindustry by OEM to Dell and Apple inthe 1990s. Yet it was a long-standingwish of Sony to produce its own brandof PCs.

Progress in information technology inthe mid-1990s brought anotherbusiness opportunity for Sony.Household consumers in Japanstarted to use PCs not only fortraditional word processing, but alsofor graphics, music, and games. Thisopened up the possibility ofaudiovisual use for PCs, and Ideiconsidered this as the companys nextprimary market. VAIO is an acronym

for Video Audio Integrated Operationand explains Sonys ambition tointegrate PCs, telecommunication,music, and movies. Sony started toproduce its first Vaio series in desktop,MiniTower, and notebook forms inJuly 1997. While it was introducedsimultaneously in the U.S. and Japan,Michael Dell dismissed it as theinvisible invasion (McWilliams 1997)despite the fact that Sony spent $20million on advertising. In sum, theearlier history of PCs at Sony wasrepeated failures despite its highambition. The challenge wasenormous for Sony, and it had to seekdifferent business models to emerge in

the PC market.

The project leader for the Vaio 505,Susumu Ito, joined Sony in 1982, andbecame involved in the development ofthe companys earlier PCs. As Sonyexited the market each time yetmaintained its ambition to re-enterthe market, Sony assigned him tocontinue to work on the developmentof peripheral devices for PCs. In 1994,Ito was stationed in Mountain View,

California, working on thedevelopment of mobile terminaldevices in collaboration with Apple,Motorola, and AT&T. At the start of1996, a Sony executive called himback to Japan to develop a new PCwith the Sony name (Ito, interview,September 24, 2004).

The Development of the Vaio ConceptThe Vaio project officially started inOctober 1996 with six members: Ito,the chief engineer; three electricalengineers; one software engineer; andone designer. 1 Five engineers were

1In general, engineers deal with technical

matters, while a designer is in charge of the

overall, exterior appearance. However, this


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affiliated to the Design Division I ofSony IT Company (Goda 1999) atSonys Shonan Technical Centerlocated at Fujisawa, 45 km (28 mi)southwest of its headquarters inCentral Tokyo. They systematicallyreviewed the market feasibility of apotential product in comparison withthose of its competitors, especiallyToshiba and IBM, by discussing thetypes, prices, and functions of theproducts already in the market. Theytried to find some originality toposition the Sony product, which wasnot easy to achieve. The conventionalcompetition strategy in the PC marketat that time was the bigger, the better.

The main issue was the size of thememory (Dynamic Random AccessMemory, DRAM) or the processingunit (Central Processing Unit, CPU).Sony did not produce its own CPU andhad to rely on Intel. Ito and others hadlearned that the fastest PC with thebiggest DRAM would be obsolete in

just six months (Ito, interview,September 24, 2004). Additionally,with fierce competition from Koreanand Taiwanese DRAM producers,

competition over the speed of DRAMwould be unprofitable. The discussionwent over a month in 1996, and themost important idea to come out of thediscussion was the type of concept forthe Vaio they should not pursue: Anew PC should not compete on thebasis of the bigger the better (Ito,interview, September 24, 2004).

Instead, they searched for other

qualities in which they could compete.Toshiba and IBM produced laptops,but these were still relativelyexpensive, normally $3,000 each orhigher, and marketed mostly for officeuse. And they were not true laptops as

division of labor is not rigid, as we will uncover

in this article.

they have come to be known but bulky,unattractive, and semi-portable. Itocalculated that there would be amarket for non-office use. The teamdeveloped the design principles ofportability and aesthetics that a modelwas smaller, thinner, lighter, and adifferent color than competing models(Tambata, interview, September 24,2004).

Instead of the conventional A4 size(236 x 297 mm), they decided to scaledown to B5 size (208 x 259 mm),approximately 15 percent smaller.They figured that scaling down tonotebook size would substantially

improve the portability of the PC (Ito,interview, September 24, 2004). Itoproposed a thickness limit of 23 mm,in contrast to the previously available37.6 mm; and a weight limit of 1.35 kgto enhance portability, instead of 2.4kg (Sony 1997). In contrast to thenormal dark-colored, plastic exterior,they decided on a shiny, magnesiumbody surrounding all parts of thelaptop (see Figure 2).

This concept of a slim and light laptopcame not only from the five engineersof the project, but also from a designer,Teiyu Goto, who contributedsubstantially in this process of conceptdevelopment. Goto, who had been achief designer for Sonys PlayStation,was positioned at the Creative Center,a design unit of Sony located at theheadquarters in Shinagawa in centralTokyo. While Ito and Goto had

communicated about the project sincelate 1996, Goto had to visit theTechnical Center at least once a weekto participate in the discussion (Ito,interview, September 24, 2004).

Although the concept of a new productcould be described in one phrase,portable and good-looking, manyother ideas were incorporated. Thus, it


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was important for Goto to follow whatother concepts were debated andrejected. For all the project members,knowing the final meeting decisionwas not sufficient, and understandingthe past debates was critical. Then,Goto could share the concept moredeeply by going through what exactlyother members meant by portableand good-looking. As a result, theyhad to conduct all these designdiscussions at the Technical Center ona face-to-face basis. From the earlystage of the project, Goto suggestedthat clock frequency of CPU would notbe important, and the slimness couldbe the best attraction for consumers(Goda 1999).

As the team confirmed the concept,they started to convert it into anactual design. The period fromJanuary to February 1997 was the

peak of such brainstorming meetings.They repeatedly drew designs, createdprototypes made of paper orpolystyrene, discussed the results,scratched it all, and started over. Theydesignated a special meeting room forthis project, where they placedupdated designs and prototypes (see

Figure 3). There were always somemembers of the project team in thisroom discussing sophistication andstylishness of the design, use, andfunctions. This discussion had to beface-to-face and focused on a prototype.Otherwise, ideas and counter-opinionscould not be clearly discussed oreffectively compared. It was almostimpossible to rely solely on oral, non-visual communication.Communication via telephone was

undesirable because it could createconfusion (Tambata, interview,September 24, 2004; Endo, interview,May 7, 2004).

Information had to be shared by allmembers in real time. A model designfrom a previous day was obsolete, andtime for a catch-up meeting would be awaste. Additionally, peoples ideaswould not come out smoothly if any

interruption occurred. For example, ifone member had missed a meeting theprevious day and started to ask whyand how the rest of them came upwith a different idea, that wouldrequire a review of the pastinformation and delay producing ideasfor the next step (Tambata, interview,September 24, 2004). Therefore, the

Source: Sony (1997).

Figure 2 Sonys previous laptop,the PCG700 Series (left),and the updated model, the Vaio 505 (right).


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brainstorming exercises required allinvolved members to be present all thetime. During this peak brainstormingperiod for two months, Goto came tothe Technical Center almost every day(Ito, interview, September 24, 2004).

Component DevelopmentAs they consolidated the design, theproject members started a search foravailable components. In February

1997, the project team added fourmore members: two electricalengineers, one mechanical engineer,and a new director. While the chiefengineer, Susumu Ito, led the Vaioproject previously, the new directorwith experience in managing Sonyscamcorder projects now supervised theproject, and Ito could concentrate onthe engineering aspect of the Vaio.

As the name Vaiostates, it integratedaudiovisual (AV) functions into PCs.This integration would include the useof music and audio files in a digitizedformat (software) as well as the directink to a camcorder (hardware).Recruiting AV-oriented engineers wasessential. Moreover, since Sonyheavily emphasized the user-

friendliness in the developmentprocess of the camcorder, the additionof this experienced staff was critical.This was in contrast to Ito and otheroriginal members, who were dedicatedelectrical engineers (Ito, interview,September 24, 2004). They were awareof that an engineers interpretation ofstyle and functionality could vastlydiffer from consumer expectations.This was an effort by Sony to

incorporate as much market-forwardfeedback as possible even in thedesigning and production phases. Thisincorporation of different expertiserequired the formation of a projectteam with people of differentbackgrounds and continuousinteraction among them.

Sonys policy was to procurecomponents from its affiliated firms,

but the project team did not hesitateto procure components from themarket (Ito, interview, September 24,2004). In relationships with suppliers,they were willing to collaborate andeven to invest. For a modemconnection, the team looked for athinner connecting device. Theconventional size for a modem

Source: Sony (2003).

Figure 3 Drawings of laptop design ideas (left)and the polystyrene prototype (right).


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connector was more than 25 mmsquare. However, as the thickness ofthe Vaio was set at 23 mm, they hadto shrink the telecommunicationdevice. The solution proposed by Sonywas to eliminate plastics in theconnection for the top and bottom ofthe rim, and the plastic on the left andright sides would still support theconnection. This component had beenpreviously procured from a specializedparts supplier, and now the supplierhad to make changes in theirproduction line. Accordingly, Sonyinvested approximately $2 million inthe supplier, located in the southernTokyo metropolitan area.

The collaboration with suppliersextended to a complicated level,involving a potential competitor in theindustry. The Vaio 505 monitor was aliquid crystal display (LCD) suppliedby market-leading Toshiba, Sonystarget competitor in laptops. LCDswere becoming popular in the late1990s and widely used for laptops. Atthat time, the market demand was fora larger screen size, since a larger one

was easier to see. In contrast, the Vaio505 required a smaller size, 10.41inches, in lieu of the conventional 12-inch or 14-inch size. In addition to size,Sony considered it necessary to have amonitor with higher resolution. Vaiowas intended to integrate PCs andmultimedia, and its expected usesincluded watching movies, graphicdesign, and games. The resolution ofconventionally available LCDs was not

sufficient, and Sony requested thatToshiba develop a new model. Toshibaresponded, supplying a smaller, yethigher resolution monitor to itscompetitor. Toshibas lab was locatedin Kawasaki, only half an hour trainride from Fujisawa, an easycommuting distance for attendingmeetings.

These dynamic processes of componentprocurement show that relationshipswith suppliers were complex. It wasnot as simple or static as Sony tellingsuppliers what to make and suppliersproviding the specified components.Instead, the relationships weredynamic, as Sony and its supplierscontinued to discuss, produce, modify,and re-evaluate components. Undersuch circumstances, it was moreconvenient to use suppliers that wereclose to Sonys Technical Center(Sakaguchi, interview, July 21, 2004).

One component that the Vaio teamadhered to internal procurement was

the exterior body, made of magnesium.It was Sonys first attempt to producesuch material in such a thin shape.They believed that the style providedby this skin would be a critical part ofthe product, and did not want tooutsource its production. However,after making a prototype, the designteam found that the cost of producingthe exterior was considerably higherthan expected. Then, they had toconsult immediately for cost feasibility.

Ito rushed to the headquarters inShinagawa to discuss the subject withthe executive board. Eventually, Itoand the executives agreed thateconomies of scale would likely solvethis cost issue. That is, if the Vaio 505were to sell as well as expected, thecost per laptop would decreasesufficiently (Aoki, interview,September 21, 2004). This kind ofunexpected turnabout in the

development project meant thatproximity was essential not onlybetween engineers but also betweenthe engineers and the executives atthe headquarters.

The design and allocation ofcomponents was not a simple spatialmatter, but required mechanical and


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other functional coordination. In oneinstance, the arrangement ofcomponents required the technique ofminiature engineering, as well ascreativity. Most laptops were equippedwith a lithium battery, which was aconventional cylindrical shape and 20mm wide. With the new Vaiosthickness limit of 23 mm, the locationof this battery became a major issue. Alaptop must have a keyboard thinenough to be about 5 mm, yet thatwould leave less than 18 mm left forthe battery space. The non-keyboardspace must be allocated for other keycomponents of a PC, such as amotherboard with CPU, video slots,

and the hard disk drive. The Vaioteam considered requestingdevelopment of a new thin batteryfrom the Sonys battery division,which was highly competitive in themarket. However, they realized thisdevelopment would be substantiallycostly in terms of time and budget.

Interestingly, the solution came notfrom engineers but from the designer.Goto proposed that, contrary to the

conventional wisdom, the battery didnot need to be located under the mainbody. Instead, it could be placed at the

junction of the main body and themonitor. The conjoining part could bea cylinder shape and could be as thickas both the main body and monitorcombined. The project leaderimmediately accepted the idea, andthe Vaio 505 received a distinctcylinder joint at its spine (Figure 4).

Another challenge involving the sizeand product dimensions was thebalance between the miniaturizationand the management of technologiesrelated to thermodynamics andsoftware engineering. A combinationof several types of engineeringtechnologies achieved the desired

small scale of the Vaio. The volume ofspace taken up by the Vaio 505 had tobe reduced to 40-60 percent of theprevious model, which meant theheating density of many componentssoared inside the laptop. In a PC, theheat mainly comes from the CPU. A133 MHz processor could increase thetemperature by 49 oC. Similarly, alarge scale integrator (LSI) wouldincrease the temperature by over 50oCand the hard disk drive by 12oC(Koyanagawa et al. 2000 p.10).Moreover, the engineering team facedan even bigger challenge as theydecided to remove a cooling fan tomake the body lighter and thinner and

eliminate fan noise for aestheticreasons. To solve these heat problems,they first had to create effectiveaerodynamics. In what Sony called theprogressive cooling system, theycarefully designed ventilation holes sothat air would be efficiently broughtinto and out of the laptop without afan. They used a computer simulationmodel to calculate the most optimalstructure of the body. Second, they setup heat pipes, which were low in

conductivity and could transportheated air efficiently outside themachine. While the computersimulation was useful, they ultimatelyhad to create a prototype to see howmuch heat reduction eacharrangement brought (Iguchi,interview, December 4, 2004). Twomechanical designers described, orcomplained about this lengthy processof designing, prototyping, testing, and

redesigning as follows:

With a variety of choices inmaterials for the body, methodsto strengthen body structure,and location of components, itwas a process of creating aprototype, abandoning it, andrecreating it a few dozen times.


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Some days, I was feeling thatwe were finally getting closer tothe optimal body structure anddevice location. However,people [other project members]kept providing me newinformation, such as that therewas a better material available,or a request to improve coolingefficiency, and so on. I had to

abandon my designing again,again, and again. (Laugh.) Itried to be optimistic and toldmyself repeatedly that we couldachieve a better and lighterlaptop (Asawa, cited in Sony2004).

Asawa-san [the mechanicaldesign leader] and Icoordinated all the time. Whenthe design of the body changed,we re-designed the[mother]board. After the boardadjustment, we remade thebody. It was a very close andlengthy coordination(Ishikawa, cited in Sony 2004b).

Miniaturization, a specific type ofinnovation, involved both electricaland mechanical engineering as well asmaterial science and simulationengineering. It was a trial and error,cut and try process. A change in onecomponent caused snowballingchanges in other components.Focusing upon these two mechanicdesign engineers can allow us to

observe the complex coordination inreal time.

Information technology was critical forthe design process, but did not alwaysprovide solutions. Human creativitysuperseded the efficiency of machines,and higher density came from rule-breaking. The Vaio team usedcomputer-aided design (CAD), andthere were rules that every registeredcomponent needed a certain spacebetween other components,determined by component suppliers.The suppliers determined this neededspace based on the standard use of acomponent. In reality, not the entirespace was necessary as suppliers hadsuggested, and the Vaio engineersredesigned with an intentional overlap

Source: Sony (2004a).

Figure 4 Backside of the Vaio 505.


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in the space. This overlap could reduceunused space and achieve higherdensity. However, it required closeexamination and hands-on placementof every component (Miyano, interview,December 4, 2004). A mechanicalengineer checked that no overlapwould cause any significant problem.It was an extremely tedious andlengthy process to go over every one ofthe 1,100 components of the Vaio, butultimately effective.

Coordination took place not onlywithin the project group, but alsobetween different divisions. From

April 1997, they started a project

progress meeting every month. Thismeeting invited key persons from sixdivisions: design, material, productquality, applied technology, softwareapplication, and production. They metin Shinagawa, the corporateheadquarters as well as the location offour divisions: material, productquality, applied technology, andsoftware application. The productiondivision was located in Nagano, athree-hour distance from the

headquarters, but the personnelcommuted to Shinagawa for everymeeting. The executives at Shiangawadid not get involved in this meetingdirectly. However, the project leadermade a separate progress report to theexecutives by sending a meeting memo.It was important to continuallyupdate the progress to both theexecutive board and related divisions.We [the design team] of course

communicated with a specific divisionon an ad-hoc, as needed basis, but themonthly meeting facilitated ourcoordination process (Ito, interview,September 24, 2004). Meetings on anad-hoc basis when problems arosewere not sufficient, and continuouscommunication was important to setall involved parties understand where

the project had stood, what kind ofproblems they faced, and how theytried to solve previously butunsuccessfully. Understanding suchcontext in the project was critical, andthe progress report on a regular basiswas needed.

Toward Mass ProductionPreparation for the whole productioncoordination, including that withsuppliers, would normally take fourmonths for PCs (Komamura, cited inSony-EMCS 2004b). To launch sales inNovember, Sony started to bridgedesign and mass production in July.Sony outsourced its Vaio production

entirely to Sonys Engineering,Manufacturing, and Customer Service(EMCS), its wholly-owned subsidiarylocated in Nagano, three hoursnorthwest of the headquarters (Seethe left map on Figure 5). It wasSonys strategy to separate corporatefunctions into two organizations: SonyIT Company concentrated on productdevelopment, marketing and sales,while Sony EMCS focused on massproduction and customer services

(Sony-EMCS 2005).

Sony bridged design and production byclosely coordinating the productionengineers from both the factory anddesign sides. This coordinationrequired sharing of knowledge for bothsides, and Sony facilitated byexchanging personnel between thetechnical center and the productionline. Prototype making is always

different from mass production, andthe job of design engineers at thefactory is to narrow the gap betweenthe two. From the production side, onaverage, I made business trips [to thedesign division] three times per week(Suyama, cited in Sony-EMCS 2004a).The production engineers from thefactory side had two missions. First,


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as stated, they had to confirm thatwhat was specified by the design teamwould be produced on the productionline. Additionally, they had tocoordinate the production processes,including procurement of specialized

parts from suppliers.

The higher level of miniaturization inthe Vaio 505 meant that higherprecision in locating componentsrequired a careful production process.This precision was particularlyimportant for smaller components.The design engineer had to test theproduction line a few times tocarefully confirm that the productionline at the factory could produce

exactly what the design team wanted(Miyano, interview, December 4, 2004).Excluding the design prototypes in theearlier concept development phase,the formal pilot production took placetwice: once to test the mold makingand the other to test mass production(Ito, interview, September 24, 2004).

As more configurations for softwareapplications were needed, anadditional 30 software engineers

joined the Vaio team at the corelocation, Fujisawa. To incorporate theaudiovisual dimension, the Vaio 505

contained graphics, map navigation,sound and multimedia audio programs,totaling 33 software programs (Sony1997). The software engineers workedon the development, coordination, andadaptation of various programs. (Ito,interview, September 24, 2004).

Mass production started in October1997, a month before the product wasintroduced to the market. By thisstage, most of the design and softwareengineers at Fujisawa were no longeractively involved in the project, andthe major players at this time werethe production line in Nagano. TheNagano site produced both the Vaiolaptops and the AIBO, a robot dog(Sony 2004c). There were 1,550employees at this site, and about half

Source: Based on interviews by the author and Sony-EMCS (2005).

Figure 5 Map of Vaio 505 development: Japan (left),and an enlargement of the Tokyo area (right).


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of them were estimated to work in theproduction of various Vaio units.

There was collaboration with Sonysoverseas R&D labs, from LSI SystemsLab of San Jose and Telecom Europeof Brussels. However, their role waslimited to local adaptation, such astranslations of brochures and labels,and configuration of softwareprograms. The Vaio team decided thatthe model would be universal exceptthe interface, and the local adaptationrequired only at the language level.Therefore, there was no extra roleexpected for overseas R&D labs.

The final intrafirm coordination tookplace between the design team and themarketing division. Since 1997, Sonyhad delegated the marketing functionto its subsidiary, Sony Marketing,which was in charge of marketing andsales of all Sony products in Japan(Sony Marketing 2004). Ito, the projectleader, presented the product conceptand targeted consumers for the Vaio505 to the marketing staff. Goto, thedesigner, explained the theme of the

exterior design. This sharing ofproduct image was critical in order forthe sales staff to establish effectivesales points.

After the initial release, the Vaio 505captured 10 percent of the laptopmarket in Japan within two months.This was a significant share for justone model, i.e. not by the laptops ofthe company as a whole. Furthermore,

it opened up a new market for laptopsin non-office, household use and evenin office use for style-conscious people.The ethos of portability and aestheticswas well received in the market. Itthereafter created a competitive rushas other firms, such as Toshiba, IBM,and Matsushita developed this laptopmarket with their own style.

Analysis of the Process of GeneratingInnovationThis close-up analysis of innovation atthe concrete, micro-level productdevelopment can provide insights intohow the process of innovation isorganized and how it is linked to aspecific series of locations. This sectionsynthesizes and discusses threefeatures of the process of generatinginnovation based on Sonys Vaio case:complexity, the interdisciplinarydevelopment of technology, andprototyping and testing.

First, modern product development is

about managing complexity. The Vaio505 laptop consisted of about 1,100components. A new product with newfeatures came with new components,which could either be produced in-house, such as the magnesium exteriorand the aerodynamic cooling method,or by suppliers, such as the LCD byToshiba. In either case, it required aseries of changes and innovations.

Moreover, it was not simply the

number of components, but thecoordination among them that madethe product development process evenmore complex. The Vaio teamdeveloped many componentssimultaneously, yet had to make thenew laptop function as a system. Insuch circumstances, the changes tocomponents snowballed. Themechanical design engineers describedthe reconfiguration in the location of

each component whenever a newmaterial was introduced or changes toother components happened. Thus,this coordination and managementwas a lengthy and complex process.

Second, innovations often took placewith an interdisciplinary approach.The best example was when the Vaio


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team faced limited space for thebattery, on its face a matter ofchemical engineering, and the issuewas solved by a simple methodproposed by the designer. Additionally,as the Vaio team decided to remove acooling fan, an important mechanicalcomponent, they replaced this functionby introducing new material from thefield of chemical-physics and byconfiguring the most optimalthermodynamics via simulationtechnology. This shows thatinnovation did not necessarily happenin a single trajectory. In other words,higher technology was not necessarilybetter. An electrical engineering

problem was not necessarily solved bygathering together more sophisticatedelectrical engineers. Solving thetechnical challenge was not easy, butcould take place in multiple directions.Therefore, it was the availability,interaction, and management ofseveral technical fields that shapedthe new product. Sony had to managea pool of highly skilled labor inelectrical, mechanical, and simulationengineering as well as chemistry and

physics. This interaction was mosteffectively possible at close proximity,so that the engineers and researcherscould freely exchange, test, evaluatetheir knowledge, and recreate. Inaddition to the technical side, thedevelopment project as a wholeincorporated the companys marketingdivision and also the executives. In anemergency, the understanding andsupport from the executive board was

critical. Thus, coordination betweenvarious divisions of the company wasessential.

Third, prototyping and testing wasfundamental for the development ofthe laptop. Especially with this Vaio505, it was not just a laptop meant tofunction with improved specifications,

but a product with a new concept anda style. The product design in adigitized format presented by CAD ona computer screen hardly meantanything because the engineers had toevaluate what consumers would feelif the product was sitting next to them.This prototyping did not necessarilyrequire the real laptop, but could besubstituted with paper or polystyrenemodels. However, it was critical for allthe core project members to be presentwith a prototype to discuss if it wasgood-looking or which model wasbetter in what sense. The concept ofportability set the weight limit, butthis information of 1.35 kg (roughly 3

lbs.) was less relevant compared withcarrying the real-size laptop with realweight to check if it was indeedportable and desirable. In sum, thisprototyping and testing was a processthat was space-constrained andrequired the physical presence of theproduct and of the core projectmembers.

ConclusionThrough the microlevel case study ofproduct development, this article hasaddressed the critical engineering andtechnical processes of makinginnovations that were tightly andinherently linked to a specificgeography. By focusing on the threefeatures of innovation examinedherecomplexity, interdisciplinarydevelopment, and prototypingthis

study has demonstrated that theinnovation associated with Sonys Vaio505 laptop was a messy, lengthy, andunpredictable process. Furthermore,the engineering and technical featuresof innovation making were tightlylocated to the specific location. Thisnew product was not the creation ofone engineer who designed it from


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beginning to end. Rather, nobodyknew what the final product would beat the beginning, and what wasrequired was flexibility during theproject. Learning by doing is aconcept in organizational studies toencourage the creation of innovation(Young 1991; Irwin & Klenow 1994;Jovanovic & Nyarko 1996). The Vaiodevelopment case could more preciselybe described as learning only aftermaking mistakes. In short, theproduct development is not a highlyrationalized or centralized process, butan organic and interacting process.With this lengthy, complexcoordination process, a firm had to

prepare, ironically, for unplannedsituations. The best solution was tohave human and capital resources inproximity, and this was specificallywhy the colocation mattered.

While these findings provide newinsight in economic geography, theresults of this study also complementthe three schools of thought discussedearlier. The study has observed theagglomeration linkages that exist

between Sony and its suppliers. Socialnetworks and face-to-facecommunication were important amongthe development team members whenthey discussed the meaning of theproduct concept and the stylishness ofthe most updated model. The processof prototyping and testing canparticularly bridge the theory of tacitknowledge with innovation in aregional context. The concept of

portable and good-looking came witha highly specific expectation of whatwas meant by good-looking. At thesame time, such understanding wasnot codifiable and was somewhatvaguely shared in the projectmembers minds from past experienceand further elaborated in theirdiscussions during the project. To

discuss the understanding of good-looking, the project members had tobe co-located and they had to developa prototype. That is why tacitknowledge is hard to transfer acrossdistance.

Remote communications throughinformation technology, conferencecalls, and videoconferencing playedsome role in the development process,but they did not become the mainmode of coordination between projectmembers. Ito, the project leader,stated, we shared CAD (Computer

Aided Design) in the Intranet, butthat meant little in terms of

development, but sharing the mostupdated design. When we tried tocreate new ideas, new design, or newsomething, we needed to meet anddiscuss (Ito, interview, September 24,2004). Findings from this research canfurther supplement such a statement.We have already discussed theexample of the exterior design and thenuanced meanings of stylishness.Moreover, when the communicationbecame iterative, and several people

were involved, remote communicationtechnology was not an effective modeof communication. Other engineersexpressed: It [remote communication]

just does not work (Tambata,interview, September 24), or Thatsnot the way how things work (Endo,interview, May 7, 2004). Theengineers further pointed out thatsomething would be missed via remotecommunication technology, which

changed the dynamics and richness ofmeeting (Sakaguchi, interview, July21, 2004).

For engineers, who had to create thebest product, the most critical matterwas how effectively they could reachthe best solution. Whether it waspossible to have a meeting via remote


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communication technology was of littleconcern. It might have beentechnically possible to exchange ideasvia remote communication technology;if it would have been inefficient ortaking a longer time to reach thesolution, such communication was notdesirable. To manage the complexproject, engineers chose the mosteffective mode of communication,which in this case was the face-to-facemeeting. In contrast, if theinformation flow was not needed to beiterative, remote communicationscould fill in the process in productdevelopment, such as to update thelatest design or to provide notification

of the conclusion of the previousmeeting.

These findings differ from the pastdebates about innovation as aninteractive process whose primaryconcern was how innovation occurredvia technology-push, market-pull, or amixture of both (Lundvall 1988;Lundvall 1992: Morgan 1997 p.493).Those studies further discussed theinteraction among different economic

players in a region, such as betweenfirms, suppliers, and users. However,these interactions were still seen fromthe macro-perspective of innovationwithin a region. In contrast, theinteracting process found in thisresearch was a micro-level aspectwithin a product development project.Each stage and even each exchange ofknowledge was interactive and shapedthe course of the product and

technological development.

It is important to consider how thisparticular case of geography of productdevelopment is situated among theglobal operations of Sony. Althoughthis Vaio development presented onlyas one case among a number of Sonyproducts, it provides a snapshot of the

relationship between the maintechnical center in Tokyo and theoverseas R&D centers. We havealready observed that the role playedby Sonys overseas R&D center in the

Vaio 505s introduction was highlylimited to the translation of brochuresand labels. Additionally, the overseasR&D centers of Sony weresubstantially small in scale; eachcenter usually had fewer than thirtyengineers or researchers, sometimesonly a few of them, while the maintechnical center had over twothousand (Endo, interview, May 7,2004; Harryson 1998). Furthermore,with such small scale, each overseas

R&D center was designed to developonly a specific and narrow technicalfield, such as the TV-video interfacesystem in San Jose, California, asoftware application for CD-ROM inSingapore, and broadcastingequipment and systems in the UK(Arimura 1999). Other functionsprovided by the overseas R&D centersincluded minor local adaptations, suchas modifying the electric voltage andchanging colors and designs. Thus,

there was little overlap andsynergistic collaboration between themain technical center and theoverseas centers, and the relationshipbetween them was clearlyhierarchical; the main technical centerinitiated the concept and led the majorcomponent development, and theoverseas R&D centers contributed inthe peripheral and the last-stagedevelopments.

This study was an in-depth exercise toinvestigate the specificity ofinnovation. While the employed casestudy is an appropriate methodologyfor such analysis, we have to clarifywhat the case represents. In the past,Schumpeter (1926, p.66) provided aninsight in providing a typology of


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innovations: (1) a new product, (2) anew market, (3) a new method ofproduction, and (4) a new organization.The Vaio case represents the newproduct, more specifically in the R&D-intensive consumer electronics andcomputer sector. This article does notaim to generalize these findings toother types of innovations, and furtherstudy is needed in the other areas.

Second, we have to consider what theSony case means more broadly. Theobjective of this project was toexamine the engineering and technicalaspects of innovation making throughSony, a Japanese firm, and not to

argue that Japanese firms had specificgeographic patterns of innovations. Inthis sense, this case was anappropriate sample among the leadingplayers in the industrial field.

Third, we additionally need toconsider how Sony behaved incomparison with other Japanese firms.Comparing Sony to the uniqueness ofJapanese firms discussed by the pastliterature reveals that Sony did indeed

behave like other Japanese firms.Sony had a life-time employmentsystem. Although Sony was notaffiliated with traditional keiretsu, theindustrial conglomerates, Sony had itsown networks of firms. Arita andFujita (2001), and McCann and Arita(2006) found that Sony was typical ofother semiconductor firms, likeToshiba, NEC, Mitsubishi, Fujitsu,Rohm, Oki, and Sanyo, where each

core firm organized a vertically-integrated network structure.Therefore, the findings from this studyprovide direct implications at least forother Japanese firms. Moreover,despite these limitations in scope, thisarticle can contribute as a first step tolink the engineering and technical

aspects of innovation-making and thelocation.While most examples in this micro-level study were taken from in-housedevelopment, the findings can apply tothe broader agglomeration at themetropolitan level. The tight andcomplex coordination would berequired between firms, and hence,the proximity would be an enablingfactor. Indeed, we observed examplesof inter-firm coordination withToshiba for the monitor and with asmall supplier for the connector of themodem.

Lastly, it is important to note how this

study framed the concept of a region.The past agglomeration schoolquestioned why a specific region, sayTokyo or Silicon Valley, was importantfor a firm or a collection of firms. Incontrast, this study questioned whyproximity was important for a firmand its product development. In thissense, the approach to conceptualize aregion was different, while thegeographic coverage of both studiescoincided at the same physical space,

the Tokyo metropolitan region. Thepast agglomeration school perceived aregion as an organic entity thatproduced innovations. In contrast,this study observed the proximitybetween the development center, thedesign center, and the headquarters,as well as the stickiness betweenthem (Markusen 1996, 2003), andconcluded that a region was a place inwhich the stakeholders could maintain

the tight and dense coordinationbetween them. This coordination tookplace on a daily and ad-hoc basis tosolve any number of problems that thestakeholders faced, and they executedsuch coordination within ametropolitan area.


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AcknowledgmentsThe author thanks all interviewees fortheir time, and Matt Eisler, BethChapple, and Toddie Downs for theirinput. All errors are the responsibilityof the author.

List of IntervieweesAll interviews took place in Tokyo,

Japan.

Aoki, Masayoshi. General manager.Corporate Headquarters. Sony.

September 21, 2004.

Endo, Eishi, Ph.D. Assistant manager.Energy R&D Department. R&DDivision. Energy Company, Sony.May 7, 2004.

Iguchi, Akira. Software leader. ITCompany. Sony. December 4, 2004.

Ito, Susumu. Senior General Manager.VAIO Design Department. VAIO

Design Division. Sony EMCSCorporation; Deputy GeneralManager. Departmnet No.2. ITCompany. IT & Mobile Solutionsnetwork Company. Sony. September21, 2004.

Katsumoto, Shuzo. Section Chief.Center for Environment Promotion.Sony. August 10, 2003; August 6,2009.

Kurosawa, Nozomi. AssistantManager. International Public

Affairs. External RelationsDepartment. Sony. July 21, 2004.

Miyano, Akihiro. Electrical designer.IT Company. Sony. December 4,2004.

Sakaguchi, Kei. General Manager.Corporate PR Department.Corporate Communications. Sony.July 21, 2004.

Sanakata, Keita. Assistant Manager.Corporate PR Department.Corporate Communications. Sony.July 21, 2004.

Tambata, Ippei. Designer. HIGP.Design Center. Sony. September 24,2004.

Toyoda, Mami. Human ResourcesDepartment 1. Sony. September 20,

2003.

Yokote, Hitomi. Senior Manager.International Public Affairs.External Relations Department.Sony. July 21, 2004.

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