Read From Textiles to Automobiles: Mechanical and Organizational Innovation in the Toyoda Enterprises, 1895-1933 text version








to Automobiles:



OrganizationalInnovationin the Toyoda Enterprises,1895-1933

William Mass 1

CenterJ½r Industrial Competitiveness University ofMassachusetts, Lowell

Andrew Robertson

Harvard University

The storyof Sakichi Toyoda(1867-1930), greatindustrial the entrepreneur and national hero,is taughtto every Japanese school child.Foreign tourists toldhe wastheJapanese are Thomas Edison. recently 1985,the As as patent officelisted Sakichi Toyoda oneof thetenmostimportant as inventors inJapanese history. textile The machinery company he founded that eventually gave birthto theToyotaMotor Corporation. Before Japanese the stock market bubble burst, the Toyota Motor Corporation committed150 billion yen (roughly $150million)for therecently completed ToyotaIndustrial Museum, a remarkably well-donepa:anto a visionof socialprogress technological as progress. What is lacking a sense the critical is of and essential of social role organization, without which the determinants and consequences tech~ of nological development be misunderstood. paperexplores will This both the organizational the technological and aspects earlyToyodaentrepreneurial of history insights the foundations Toyota's for into of postwar performance and potential implications economic for development moregenerally.

· The authorswould like to thank Qiwen Lu and Damian Kieran for their excellent research assistance. addition, wouldlike to thankour colleagues In we Takeshi Abe, Eisuke Daito,KazuoWada,andparticularly HideaMMiyajima helpfuldiscussions for their for and assistance securing in Japanese-language materials. of them are exempt from any All responsibility our errorsof omission for and commission. international The collaboration thathassupported research beenfunded theSocial this has by Science Research Council and

the National Science Foundation. Some of the research was conducted while William Mass

wasa HarvardNewcomenFellow,and partsof thispaperwerepresented the Harvard to Business HistorySeminar a paper in co-authored HideakiMiyajima. earlier with An version of thispaper presented the"Symposium Industrial was at on Development International and

Competition" theSuntory ToyotaInternational at and Centres Economics Related for and Disciplines, London School Economics Political of and Science, January 1996.Finally, 4-5,

we want our readers to be aware that in this draft we have followed Western convention in

placing Japanese surnames in thetext,butfirstin listing last bibliographic references.

BUSINESSAND ECONOMIC HISTORY, Volume Twenty-five, 2,Winter no. 1996.

Copyright ¸1996 bytheBusiness History Conference. 0849-6825. ISSN


In TheTechnological Trans·vmation ofJapan: FromtheSeventeenth to the T·ven·y-First Tessa Century, Morns-Suzuki thesurprising of a leading cited claim interwar Japanese technologist, director thepioneering the of RIKEN Institute Masatoshi Okochi that "Japanese researchers were skilledand original inventors, but that Japan's weakness in an inabilityto commercialize lay radically new ideas"[pp. 116-7].Okochi's concern was thatJapanese firms wouldmorereadily choose refineimported to technologies wherea market wasalready developed, rather thanto bearthegreater uncertainty, associated risk,andheavy developmental of taking moreradical costs a innovation from laboratorybench to full-scale production. Morris-Suzuki points to the exception proves rule,by discussing classic that the "the example Japanese of innovation": Toyoda the LoomWorksestablished Sakichi by Toyoda 1906, in and his son Kiichiro,who, drawing his university on training, in place put systematic costly and large-scale research extensive and prototype and mill testing refinehisfather's to inventions. In a recentpaperon "The Learning Process and the Market:The Japanese CapitalGoods Sectorin the Early TwentiethCentury," Tetsuro Nakaokautilizedthe conceptof appropriate technology describe to the possibilities in the industrialization early process indigenously for developed

technological leaps. For instance, domestic capital goods producers serve can nichecapitalgoodsmarkets that supply machinery localmanufacturers to producing traditional products. Thesesectors poorlyserved expensive are by and (for theixpurposes) inappropriately designed specified and capital goods produced developed in economies. indigenous The innovations reinforce and accelerate development, simultaneously altering previously existing conditions and openingnew opportunities "quantumleaps in technology" for for indigenous capital goods producers. Nakaoka notesl "Onetypical example a manufacturer made of who this leapsuccessfully Toyoda is the LoomWorks"[Nakaoka, 1994,p. 13].Nakaoka citesthree"quantum leaps" initiated Sakichi narrowloom, ixonbroad by in loom, and automatic loom invention, latterrefinedby Kiichixo. the Given the ongoing changes economic in conditions accompany that successful development, Nakaoka stressed needfor recurring continuous the or technological leapsto sustain development the process. Eachsuccessive technological leap requked upgraded moreexpensive and equipment engineering and know-how. Nakaoka identified insufficientcapital resources the most general as impediment barrierto sustained and development. Deciding whereand how bestto deployfinancial resources aimedat "quantum leaps" technology in requkes deepknowledge the adequacy the platformfrom which one of of attempts leap,the resources to needed helpbridge gap,anda strategy to the

for theix effective mobilization.

Thispaper describes theToyoda how enterprises achieved international competitivenesstextile in machinery production. elaborates andsuppleIt on ments assessments the of Morns-Suzuki Nakaoka addressing and by questions

about the relation between Sakichi and Kiichixo's mechanical innovations and



the technology readily available from foreign machinery suppliers; extent the and character indigenous of Japanese innovations textiletechnology; in the relationship strategic of choices and innovations both technology in and organization; the riseof Japanese and industrial leadership reflected the as in negotiations technology over transfer and a proposed mergerbetween Platt Bros.and two Toyodaenterprises. Collaborative research reported elsewhere addresses relatedquestions about the role of industrial organization and nationalinstitutions alteringthe strategic in optionsavailable Japanese for textile andtextile machinery enterprises [Lazonick Mass, and 1984,1995; Mass andLazonick, 1990;MassandMiyajima, 1993]. The insights Morris-Suzuki Nakaoka of and highlight unevenness the anddiscontinuity organizational of development technological and achievment in the process economic of development. mostimportant The and fundamental feature Japan's of interwar growth wasthecharacter andrelationship of between development both 1) exportsectors, in primarily lightindustries and

especially cotton textiles, 2) importsubstitutionheavy and in industries. a 'As case study, paper this strives buildanunderstandingtheuneven to of evolution of organizations the "leaps" and toward international technological competitiveness cotton in textile machinery, keyto long-term the cotton textile export success, part of a continuous cumulative as and developmental process. We aimto present integrated of elements continuity discontinuity an view of and

in the dynamics Japanese of technology transfer and development in and particular illuminate following to the phenomena:

ß Finance and Markets The critical access to finance and markets

provided Toyoda's by sustained relationship with the leading general trading company Mitsui Bussan, withindividual and Mitsui managers, was periodically strained entrepreneurial as initiatives required independent an development path. ß Long-Term Relationsto Key Technologist$ and TechniciansTherewasa remarkable, generally and unknown least the West), (at in rivalrybetween first and second the enterprises established Sakichi by Toyoda (Toyoda LoomWorks theToyoda and Automatic LoomWorks), whereinhe sustained relationships mutual supportwith key of technologists thecompany formerly from he managed. ß ProductDevelopment Manufacturing Toyoda and played leading a role in pioneering introduction the American the of system interof changeable intoJapanese parts manufacturing, essential thecommercial to

success of mechanical innovations.


Inventionand OrganizedIndustrialResearch Organized industrial research played early leading at Toyoda an and role (and reassess we the character relative and importance the accomplishmentsKh'chixo of of relative hisfather to Sakichi). central The technical innovations, embodied in the Toyoda automatic loom, resulted successful in pioneering commercializationautomatic of weaving machinery competition in with both imported technology indigenous and rivalsbecause they were


appropriately designed suit to Japanese textile machining and capabilities, and theyintegrated design with the development superior of Toyoda


manufacturing capabilities. SocialOrganizationand Individual EnterpriseDevelopment- The breadth depthof theJapanese and efforts develop to indigenous textile technology prompted widespread competition simultaneously and promoted


the development human technical of and resources rivals that sought to mobili7.e theirownpurposes. the same for At timeToyoda enterprises' strategy structure to theirrelative and led domination theirrivals. of Technology TransferfromJapanto Britain - We describe nature the

and sources tension of between PlattBros.andthe Toyoda LoomWorks thatreflected factors the undermining Bros.'efforts manufacture Platt to andsell automatic weaving technology developed licensed Toyoda. and from The Rise of New Industrial Leaders- Finally,the unexpected and ultimately failed irfifiafives Mitsui by Bussan merge to PlattBros. withthe Toyoda LoomWorksandtheToyoda Automatic LoomWorksreflected the changing relationships theirperception and among four parties all as theJapanese industrial faTns attained intemafional competitiveness. TechnologyTransfer acrossIndustries- The deep and long-lived rootsof Toyoda's corporate culture supported success transferring its in existing capabilities and building into new capabilities the emerging for automobile industry, evenin the faceof promising returnsto continued investment areas current in of strength.



An Introductionto the Early History of ToyodaTextile Enterprises

In 1885,Sakichi Toyoda participated an evening in study groupwhere he leamed the newly of enacted Patent Law andwassaidto havesethisgoal on invention an avenue contribute national as to to development. Having grown in a traditional up textile manufacturing region, Sakichi began efforts his at developing superior hand loomsin 1887. Sakichiattended the Third NationalIndustrial Exhibitionin Tokyo in 1890 and viskedthe machinery pavilion everydayfor two weeks. Duringthe following yearhe patented his firstwooden handloominvention. Sakichi's technical advance involved linking the flyingshuttle the movement the reedwhenbeating to of downthe weft. This firstinvention allowed productivity a increase 50percent compared of with otherindigenous loomsin use.But the woodenhandloom was not a commercial success; aboutthe same at timea flying-shuttle attachment, called

a "battan," was introducedfrom France which could be attachedat much

lower cost than a Toyodahand loom and offeredcomparable efficiency [Kobayashi, 1995, p. 16]. Sakichi built four or five of his patented loomsin a smallweaving factory that he established theTokyoarea. endeavor in His coincided with a periodof slack trade,however, Sakichi returned hisvillage the and had to by end of 1893. As a meansto generate revenuenecessary finance the to


continued loomexperimentation, Sakichi invented yarn-reeling a machine, a device winding for yarn. feeler His produced constant lengths yarntwice of as efficiently conventional as devices. relocated weaving He the factory retail and outlet, Toyoda Shoten, Nagoya opened Ito RetailStoreasa sales to and the outletfor the feelerin 1895.Sakichi's second wife andhis younger brother Heikichi managed store the andfeelersales [Toyoda, 1967,p. 28; hereafter when only page numbers given brackets, source Toyoda, are in the is 1967].

Sakichi inventedhis f·rst successful narrowwoodenpower loom in

1896andgarnered muchindustry attention. Alongwith a reeling machine

customer,Tohachi Ishikawa,Sakichiestablished the Otokawa Weaving Company as a partnership. Sakichi's capitalcontribution consisted of

60Toyoda wooden power looms. 1898 weaver By a could operate or three two Toyoda steam-powered instead a single looms of conventional Producloom. tivityin the modernized increased mill four-fold, clothquality improved, and costs by over50 percent. order advance loomexperimentation, fell In to his Sakichialso established independent an pilot plant in Nagoya running

36 powerlooms a basis gaining as for manufacturing experience 32]. [p. In 1899Kamenosuke Fugino, MitsuiBussan the mainbranch manager for the Divisionof CottonYarn andCloth,inspected operating the Toyoda powerloomsandevaluated prospects theirmass the for production. Mitsui negotiated exclusive an ten-year contract Sakichi producing selling with for and powerlooms. The Igeta Trading Company wassetup asthesales agent; its top managers camefrom the Nagoya branch MitsuiBussan, Sakichi of and Toyoda became chiefengineer the responsible improving powerloom for the [pp.34-40]. This f·rstToyodapowerloom foundinitialsales success with small manufacturers weavingnarrow cloth for such export marketsas Korea, Manchuria, Taiwan. and Toyoda's looms wereeasier maintain much to and less expensive those theprimary than of foreign competitors 47;Toyota,1988, [p.

p. 28]:

Table _1: Pricesof Narrow Power Looms, 1899

Loom Manufacturer Loom Price yen) (in

Hartmann, German Diedrichs,French 872 389



The most importantachievement Sakichi's of continued development effortswasa patented let-offdevice that maintained warpat a constant the tension it wasbeingfed off the warpbeam.In addition, as and for the f·rst time, he turnedhis attentionto the development a loom that would of automatically replenish the weft yarn when the yarn on a bobbin was exhausted. Againfacing partners concerned aboutbusiness solvency during cyclicaldownturns, Sakichiresignedfrom the Igeta Trading Company, disappointed thelackof financial by support hiscontinued for loomdevelopment. Sakichireturnedto the Toyoda Shotenand renamed Toyoda it


Trading Company (Toyoda Shokai) whichabsorbed former Trading the Ito Company. opened independent mill running power He an cloth 138 looms. His wife and his younger brotherSasuke managed ToyodaTrading the Company and the mill, so that Sakichi couldonceagainturn to his loom experiments 40;Toyota1988,pp.28-29]. [p.

Sakichinext inventedan automatic shuttle-changing devicethat was attached narrow to powerlooms 1903.Although initialeffortwasnot in the successful, Mitsui Bussan interested financing establishmentthe was in the of Nagoya Weaving Company, with 150 looms equipped with Sakichi's automatic attachments furtherexperimentation. for Lacking capacity the for loommanufacturing, Sakichi contracted KimotoIron Works,a firm with with experience manufacturing machine in textile parts [Suzuki, 1994, 155]. p. Kanegafuchi CottonSpinning Company forerunner Kanebo, (a of Ltd., one of the three dominant integrated spinning and weavingfro-ns) was interested developing in Sakichi's automatic loom for the manufacture of broadcloth export. for Although at an earlystage loom development, still of Sakichi agreed allowthe companyto utilizehis patented to devices because Kanegafuchi promised license manufacture to and Sakichi's loomif it proved successful. Kanegafuchi re-equipped powerlooms its with automatic shutdechanging mechanisms designed Sakichi. by The underlying business relationshipwas probably with Mitsui Bussan, whichwould normally have been responsible marketing selling automatic for and the looms.However,Mitsui was restricted its public actionsbecause its role as the exclusive in of representative Japan. of (Thepressures leading change the to in Mitsui-Platt relationship be discussed a latersection.) will in Kanegafuchi up a mill experiment compare performance set to the of 50 Toyoda Trading Company looms with 44 PlattBros. powerlooms, U.S. ten Dra. bobbin-changing per automatic looms, sixKip Baker and looms (English loomswith warp-stop motions). After a one-year trial,all the automatic looms proved be unsatisfactoryoperation, to in whereas PlattBros.powerlooms the werea success. Sakichi the ToyodaTradingCompany and suffered financial losses providing in material support this experiment. for Sakichi drew two lessons fromthisexperience: he became Fisst, fullycognizant theextent of of foreign competition confronted he viedto introduce automatic he as an loom into theJapanese market. Second, from then on, Sakichi supervised testing under mill conditions whendeveloping hismechanical all innovations 41[pp. 43;Toyota, 1988, 29-30; pp. Suzuki, 1994, 155]. p. In reviewing experience producing the of clothwith Toyoda's narrow automatic looms,the headof MitsuiBussan's Nagoya branch officeOkano Teiji recounted the problems resulting from the poor qualityof loom manufacturing the complexity the loom'smechanisms: and of "Because the techniques in thismachine's used manufacture not advanced, doesnot are it operate it should...(I)t not a simple as is machine, gives workers it the many problems. Moreover, requireslongtimeto gaintheskill it a necessary useit" to [Suzuki, 1994:p. 156].



Recognizing lengthy the development periodnecessary construct to a competitive automatic loom, Sakichiturnedhis attentionto raisingthe investment funds required continued for automatic loomexperimentation. He renewed focus the development, his on manufacture, saleof the power and loom.By 1905he hadinvented higher a performance andwoodnarrow iron loom,theModel38 power loom(named the38thyearof theMeijiperiod). for In addition its greater to durability, 85 yenthe iron 38 loomwastwiceas at expensive the earlier as all-wood framemodel.A weaver couldoperate or six seven Model38 loomscompared onlytwo or threeof the earlier to models [Suzuki, 1994,p. 157]. The following twonewloommodels year weremarketed: Model39 the powerloom,usedfor weaving coarse yarn,anda ModelL, "simplified" light loom(kei-ban) narrow, for thin-weave cottonandjutefabrics. With the assistance MitsuiBussan's of Osaka branch manager Kamenosuke Fugino, Sakichi secured loan of 130,000 a yen from MitsuiBussan finance to expansion. In 1906in an areawithinNagoya, Sakichi established Shimazald the Factory, consisting botha weaving-machine with a production of factory capacity of 150 powerloomsper month,and a pilot cloth factory. The sales record

summarized below confirms the looms' commercial success as the Shimazaki

Factory operating capacity was near [47-48; Toyota, 1988, 28]. p.

Table 2: Sales Summary 1905-March,1909

Loom Model






L (kei-ban)


Concerned about sustaining ToyodaTradingCompany's strongfinancial

foundation thefuture, into Sakichi began recruiting technically employees. able In 1903 he hired two engineering university graduates (Kogakshi), two

graduates from a post-secondary technical education program (Kotokogyo), andseven eighttechnical school or high graduates Sakichi's [49]. recruitment

of suchhighlyeducated employees very exceptional was amongsmall


The success Toyoda's of power loomwasevident early 1906, as as whenFugino visited Sakichi hisproduction and facility recommended and that Toyoda convert a joint-stock to company. Sakichi, reportedly resistant first at to sharing control, aware the importance his relationship his but of of to creditors, agreed incorporationsecure to to large-scale oemancing cooperand ated in establishing Toyoda Loom Works (Toyoda-shiki the Shokki Kabushiki Kaisha). president the Toyoda The of LoomWorkswasFusazo Taneguchi, wasalso president thegiant who the of spinning theOsaka firm Spinning Company. Sakichi theoperating was manager theToyoda of Loom Works.Seishu Iwashita, important an arranger the business in world,was amongthe other top managers, additional and consultants included the renowned TakeoYamanobe (mostclosely linked with the OsakaSpinning


Company) Fugmoof MitsuiBussan. Toyoda and The TradingCompany ceased operation 50-51]. [pp. The capital investments the ToyodaLoom Workswere madeby in fmancial leaders Tokyo,Osaka, in andNagoya [lzumi,1980,p. 18].Though Sakichi Hachirojiro and Mitsui, president Mitsui the of Bussan, thelargest were shareholders 5 percenteach,therewere 143 additional with shareholders.

Sakichi's managerial control considerably was diluted [Yamazaki, 1987,p. 47]. Toyoda sold morepower looms thananyof itsdomestic rivals, the and Toyoda LoomWorks soon became dominant thenarrow-cloth in power loom marketsegment, servicing smallandmedium-sized clothmillsselling the to domestic market.Its leading position emerged with its pioneering improvements manufacturing in methods, theToyoda and LoomWorks quickly turned to the challenge broadloomproduction the directchallenge the of and of dominant foreign loomsuppliers. Sakichiturnedto the task of developing wide loom suitedfor a integrated millsproducing broadclothfor export markets. developed He the H-model,an all-ironwidepowerloomin 1908.Sakichi realized H-model the

loom had to be made of metal to be able to withstand the increased vibration

resulting fromthegreater loomwidth.All previous attempts manufacturing at a workable widepowerloomhadfailed, mainly because Japanese machining capabilities were inadequate producing for sufficiently accurate component parts[p. 52]. The Introductionof the AmericanSystem and the Originsof Advanced

Manufacturing in Japan

At the first general meeting the ToyodaLoom Worksin 1907, of president Taniguchi explained:

It is most regrettable that at the presenttime we still do not have

sufficient equipment completely to manufacture Ioom...The this iron framenarrow looms installed Nagoya at Clothwereprovided byToyoda weremanufacturedtheOsaka but at KimotoIron Works asourShimazaki Factory incomplete. poorresults is The stemfrom

a failure in the manufacture of the loom. As a result of these failures

and accidents, Toyoda Loom and its associated the patented equipment reachedstage which isunwanted. only a in it Not Nagoya ClothCompany at othercompanies but using Toyoda's iron frame loom,theresults uniformly are bad.

The problems KimotoIron Workswerenot uncommon at among manufacturers iron powerlooms othercountries well asin machine of in as manufacturing elsewhere Japan. KimotoIron Works in The wasnot engaged in themanufacture interchangeable Almost twomachines in of parts. no used the manufacturing processwere alike. In large-scale operations looms inevitably brokedown. Without interchangeability, broken each partrequired a newpiece be specially to made[Suzuki, 1994,p. 161].



Sakichi's search solutions improvements himto hireCharles for and led A. Francis, American an teacher mechanical of engineering the Tokyo at HigherTechnical School who hadalsobeenemployed an engineer the as for Pratt and Whitney Company. From 1905 to 1907, Francishad provided guidance aJapanese at leading machine company, tool Igekai Ironworks, where he "trainedworkersin the basic techniques machinemanufacture," of including useof indicators gauges, cutting highprecision "the and the of gears

and screws, theadjustment main and of the [lathe] spindle... introduced [Hie

to the company batchproduction standard of models. taughtengineers He about...thedesign jigsand fixtures, the layoutof equipment the of and on production line," and advised managers essential, on high-quality machine toolsto consider purchasing [Nakaoka, 25-26,1994].However, Igekai pp. the Ironworks lacked resources implement full planfor reorganization the to the andwithina halfa yearFrancis dismissed was [Suzuki, 1994, 162]. p. In confronting difficulties themanufacture Toyoda the with of looms at the Kimoto Iron Works foundry particular, in Francis redesigned 'tools, developed standardized specifications, thoroughly standardized gauges, the and drewup an overall planfor the factory. Whenthe management Toyoda at Loom Works provedreluctant pay Francisthe full salarySakichihad to promised, Sakichi themdeduct required had the amount (halfof Francis' pay) fromhisownsalary chiefengineer executive as and director. Beforeaddressing manufacturing methods the KirnotoIronworks, at Francis firstdesigned directed construction a machine and the of tool manufacturing plantthatproduced lathes othertoolsrequired production and in in 1907.Other than a single tool installed the IkegaiIronworks, the by all machinery installed the factory themostmodern machinery in was iron from England, Germany, the UnitedStates. and With thisequipment, factory the madethe approximately gauges 300 required loomproduction. for With its own tool factory, Toyodacouldestablish system standards begin a of and manufacturing interchangeable Workers parts. were trained accord in with a newdivision labor,ending craftorganization manufacturing of the of where

skilled metal workers made, owned, and used their own tools. The

commitment establishing technological to new capabilities reflected the was in decision forgo to paying dividends shareholders 61; Suzuki, out to [p. 1994,

pp. 162-63].

The Toyoda LoomWorkssoon developedseries newiron-frame a of models both narrow for looms(theK model 1908andthe moresuccessful in

L model 1909) broad in and looms (model in 1908). H These Toyoda ironframe looms were mass produced thefactory Francis at that designed, first the production system employing modernengineering technology Japan in [Toyowa, 1967, 8-11]. pp. Two newfacilities soon were established. Because pilotweaving the plantat Shimazaki beenconverted a warehouse, had to Sakichi sought to establishnewexperimental a factory. builtanother weaving He pilot factory, theToyodaKikui Weaving Factory, a shop as independent theToyoda of


LoomWorks.Sakichi's brother, Sasuke, managed newclothmill testsite the [p. 52]. They initiallysubcontracted iron work to Kimoto,but a new their casting foundry wasestablished 1908.New and higherqualitystandards in werenecessary achieve to interchangeability, theworkers but sought meet to quantity output goals. Conflicts emerged also among managers the responsible for meetingthe new qualitystandards for implementing and new work organization practices. and Despitesignificant turnoverof both managing engineers workers, Toyoda and the LoomWorkssoon developed loyalgroup a of engineers workers and who achieved interchangeability partsand who of differentiated theirpractices from the restof the metal-working industry. At leastin part because thesechanges, of Toyodawas able to doublefactory output between 1908and1910 without increasing workforce its [Suzuki, 1994, pp. 166-68]. Start-upproduction problems and difficulties operating in Toyoda looms undermill conditions prompted Spinning Mie (latermerged Toyo into Spinning) senda technical to manager inspect operation Toyoda's to the of pilot factory in October 1909. Three Mie directorshad been major stockholders the startof theToyoda from LoomWorks.Underthe direction of an ImperialUniversity-trained engineer, Aisaburo Mano, the Mie textfile engineers operatives experience operating and with in imported looms(both automatic non-automatic) improvements thenewmodelToyoda and made in looms they tested.Toyoda'swide iron power looms were evaluated in comparison with Platt Bros.looms,and the results demonstrated overall no performance difference between them.In 1913thepriceof theToyoda broad loomwas160yen,20 percent thanthe costof a comparable less imported loom.With orders widelooms for beginning arrive to fromintegrated spinning companies, turningpoint had beenreached the international a in competitiveness theToyoda of looms[p.59;Suzuki, 1994,p. 165].Not surprisingly, this earlyperiodof new product and process development rife with was customer complaints from both mills purchasing narrowlooms and the growing numberof mills ordering wide looms[Toyowa,1967,pp. 10~12]. Continued difficulties manufacturing in exacerbateddeveloping between a rift Sakichi president and Taneguchi. By 1910the highdevelopment costs andthe investments required to scale production up showed promise reaping of substantial returns, much but of the periodfrom 1907leading to World War I wereyearsof relatively up sloweconomic growth.Still,from the second half of 1910,ToyodaLoom Worksbegan paying dividends its stockholders. rift emerging to The between Taneguchi Sakichi and deepened, they as disagreed about appropriate the scale of R&D expenditures. Extensive mechanical testing particular in required large capital investments. a result, As Sakichi resigned from the company that was builtuponthecommercialization inventions thatcontinued carry of his and to

hisname hisdeparture62;Suzuki, p. 168]. after [p. 1994, Alffiough Sakichi

Toyodaended formalmanaging his relationship Toyoda with Loomin 1910, he in fact continued a director as evenafterhe establishedrivalcompany. a


More important, Sakichi continued provideguidance, to especially during difficult times, theToyoda to Loommanaging engineers hadputin place he in thecasting facility. The ToyodaLoom Workscontinued development the iron broad of loom and its production capacity. Aisaburo Mano of Toyo Spinning and Sakichi Toyodaprovidedcrucialguidance the formerin productdevelopmentand the latterin manufacturing to ensure ToyodaLoom Works' success. Difficulties coordinating in large-scale testing narrowloomsat of Nagoya ClothCompany prompted amalgamation thetwo companies the of in 1913 and the subsequent re-equipping both facilities of with wide looms. Assisted AisaburoMano, now the manufacturing by supervisor Toyo of Spinning, ToyodaLoomWorksdeveloped English-style wide loom an iron thatwasdelivered Toyoin 1914and1915. to The success thisN-typeof of broad loomledto thevirtual cessation loomimports Japan 1920. of in by MitsuiBussan's Fugino repeatedly urged theKimotoIronworks that be the nextfactory introduce to interchangeable technology,goalthatit parts a fitfullyattempted eventually achieved and fully under newmanagement. The combination Kimoto'songoingfinancial of difficulties, continuing supply problems confronting Toyoda Loom,andToyoda's needfor expanded production capacity MitsuiBussan mediate acquisition Kimotoby the led to the of Toyoda LoomWorks 1916. in The coregroup connected Sakichi to Toyoda, including chiefengineer the (Fuguro Tsuchiya), heads design the of (Iwataro Okabe)and casting operations (Chotaro Kubota), and key technicians at Toyoda Loomwerereassignedsimilar in capacities theKimotoIron Works to [Suzuki, 1949, 150; p. Suzuki, 1994, 166-70; pp. Toyowa, 1967]. 2 A survey theinstalled of stock 49,354 of looms integrated in spinning companies 1920identified percent foreign in 63 of origin (two-thirds which of were from Platt Bros.),and out of the 36 percentof loomsthat were

domestically produced, 90 percent these over of weremade theToyoda by Loom Works [Yanagihara, 1979,p. 43]. Table 3 provides evidence the of increased success the Toyoda of LoomWorksafterBritish imports were interrupted World War I [Yanagihara, by 1979, pp.52-53].International competitiveness secured thebasis loommodels was on of developed of and manufacturing capabilities attained Sakichi's after official departure, asthe even company relied hispatented on inventions hisunofficial and guidance key of manufacturing personnel.

2Oneimportant consequence merger thedeparture Kimoto of the was of IronWorks' chief engineer Fuguro Sakamoto, thelaunching hiscareer and of toward becoming head the of Enshu Loom,thechief rivalof Toyoda Automatic Loom. The history Enshu of Loomwill

bebriefly discussed below.


T·ble 3.' Toyoda LoomWorks, LoomSales

Total Year Number of

Classification Type

Narrow Width

Narrow Width

Developed Construction Looms Sold









Narrow Width






Broad Width G 1907 Wood-iron



Broad Width

Broad Width










Total as of October 1935



Learningfrom a Trip Abroad

On May 8, 1910Sakichi along with hischildhood friendandemployee Akiji Nishikawa, practical a textile mill engineer, departed a tourof textile on districts the UnitedStates Europe. in and After arriving New York, Sakichi in wastaken around textile to facilities surrounding Boston, New Bedford, Fall River,Providence, Worcester the New York-based and by machine branch manager Mitsui Bussan. of Sakichi gainedconfidence from evaluating the construction operation American and of looms lightof whathe hadlearned in from his own factoryexperiments inventions. comparison, and In the Americanlooms' speedof revolution was slower,the vibrationlevel was higher, Draper the bobbin-changing mechanism too complicated, the was and highrate of warp breakage resulted an unsatisfactory in numberof cloth defects 63-64]. [pp. Believing theinvention a competitive that of automatic loomhadhigh worldwide value, Sakichi Ishibara,technical had a expert from Japan, him. join Sakichi Ishibara and proceeded England, to whileNishikawa the Mitsui and Bussan representative followed through theU.S.patent on application process. Sakichi recorded U.S. patents six duringthe years1909-1914,including inventions related a warplet-offanda circular to loom (1909),an automatic shuttle-changing mechanism a pickercheck(1910),a shuttle-changing and loom(1912), a protecting and device shuttle for replenishing (1914)[Annual Reports the Commissioner Patents, of of 1909-1914]. Sakichi reportedly thathistechnical felt capabilities superior the were to U.S. loommakers he left New York for England October1910.He as in



investigated spinning weaving in Manchester thenvisited and mills and mills

on the Continent another for monthbeforearriving backin Japan January in 1911 [p. 64]. In the widelycirculated prescient and reportof his Britishtravels, Saldchi madea dkectlink between development the automatic the of loom

and the Japanese abilityto capture Britishexportmarkets, possibility a requiring much additional industrial development twentyyearsto and

accomplish Mass Lazonick, (see and 1990).

On firstseeing Manchester,realized making industry I that our the biggest wouldbe a fairlyeasy task. England, average In the number of machines eachfemale operator monitors only4.5. Moreover, is there are no factories equipped with automatic looms.For this reason,holdgreat I hope ourindustry. for Additionally, wages the of British workers overfourtimes are those ourworkers. Japan, of In

the number of machines our workers on double width looms can

operate gradually is increasing. production of onepound, For costs ouroutput slightly is higher thanthatforBritain. we manufacture If

our automaticloom, and the number of machinesour workers

operate rises eight, is estimated ourlaborcosts pound, to it that per will dropto 23%of British costs. we cando this, will gradually If we overtake British, the culminating certain in victory[p.64].

Ready eager renew manufacturing development and to his and efforts, Saldchi this time avoidedchallenges his managerial to controlby securing personal sources financing. andhisfamily of He relocated a newtextile to mill in Nagoya, whichexpanded from 100to 200 looms between 1911and 1914. Saldchi's intense efforts automatic in loomdevelopment him to focuson led minimizing extentof yarnbreakage. the first time, he decided the For to complement his research improvedloom operationwith large-scale on research spinning into technology. In effortsto minimizereliance outside on capital, Sakichi established the Toyoda Automatic Weaving Factory,a privately financed and closely heldclothmill thatmanufactured commercially wassimultaneously cloth and dedicated loomexperimentation. to Although there wereno dominant outside financial partners, Mitsui Osakabranchmanager the FuginoKamenosuke served the executive on boardof thecompany. Sakichi's initialfinancing was, however, insufficient realize planned to his goalof equipping looms 200 with automatic shuttle-changing mechanisms. Instead only 100widepowerlooms werepuxchased, onlyeight these and of wereequipped automatic with shuttlechanging mechanisms the start. at Needingthe other 100 loomsin order to maintain the combined commercial viability his mill and loom experimentation, of Saldchi secured additional financing a remarkable in manner. October1912,he renegofiated In the termsof the original contract transferring loompatentrightsto the his Toyoda LoomWorks. According the original to contract, aftera 10percent profitwaspaidoutasdividends Toyoda to LoomWorks'shareholders, one-


thirdof the remaining profits wereto be awarded Sakichi. to Willingto forgo his share futureearnings, of Sakichi agreed tradethe remainder his to of revenue claims a lump-sum for settlement 80,000yen.Sakichi ableto of was purchase additional the looms andthereby sustain momentum his to the on automatic loom experiments well. Sakichi's as commitment securing to the funds necessary prevent short-run to the diminution hisexperiments of proved extraordinarily in thelongrun.Themagnitude thefuture costly of earnings he traded away on a scale could possibly foreseen. was he not have From1914to 1919 the ToyodaLoomWorksearned millionyen that wouldhavebeen 3 turned overto Sakichi royalty as payments. However, Sakichi sustain did the viability hismillconcern of during period a when didnotwantto relinquish he sole control hisenterprise 65-67]. of [pp. As Table 3 shows, ToyodaLoom Worksdeveloped the increasingly popular iron wideloomsastheWorldWar I economic boomextended their market. The useof widepowerlooms smaller-scale at weaving millsbegan at this time as well. "The war stopped flow of European the and American cottongoodsinto Asia, and Japanese spinning and weaving manufacturers surged fill thevacuum" to [Hayashi, 1983,p. 13]. Meanwhile, Toyoda the Automatic Weaving Factory manufacturing was cloth,with a cornerof the facilitydedicated loom experiments. to Sakichi foundthatthepurchased wasproneto frequent yarn breakage, problematic for weaving with an automatic loom. He therefore decided integrate to his operations backward spinning. confront into To (andsolve) fundamental the technicalproblemsinvolved in automaticweaving, Sakichi needed to consolidate complementary the technical organization and linkages between weavingand spinning operations. plannedto begin an experimental He spinning department Nagoya 1914with only6,000ringspindles, much at in a smaller facility thanthe average of 50-60,000 mill spindles. thispoint he At deepened alliance his with IchizoKodama, manager Mitsui's the of Nagoya branch, who provided him assistance establishing in spinning operations [pp.67-68]. Sakichisteadily expanded integrated his facilities response in to increased sales stimulated the World War I economic by boom. Sakichi's daughter Aiko married Kodama's younger brother Risaburo 1915.At the in

timeRisaburo thebranch was general manager C. Itoh& Co.,a leading for raw cottontrading company. Toyoda-Kodama The familyalliance joinedtextile technological capabilities marketing with expertise critically in essential input

and product markets: cotton and cloth. The alliance had dramatic consequences withinthe Toyodafamilyaswell.Following Japanese custom, Sakichi adopted Risaburo, thereby who became eldest supplanting his son, his biological Kiichiro hisprimary [10p. son as heir 68-9]. One autoindustry historian, Michael Cusumano, citedthe adoption has of Risaburo a primaryreasonfor Sakichi's as enduring commitment to business expansion othermajor into growth areas such automobiles. as Sakichi wanted provide corporate to a legacy large enough both heirsandtheir for



families. With a sufficiently largeinheritance, Kiichiro couldreceivehis due and familyresentments mightotherwise that thwarteffective development of theproductive potential thealliance of could avoided be [Cusumano, 58-59]. pp. The periodfrom 1912to 1915provedto be a veryproductive period for automatic loom invention and patenting. Most important, Sakichi made notable advances patenting improved in an let-off device. research But and experimentation automatic on looms subsided theToyoda as textile enterprises provedincreasingly successful.

After fouryears war-time of growth, Toyoda the Automatic Weaving Factory replaced ToyodaCottonSpinningand WeavingCo., Ltd., was by in 1918.The new company was established Sakichi president with as and Risaburo managing as director. company capitalized 3 millionyen The was at ($1.5million). The newly incorporated entity had 34,000 ring spindles, 1,000 powerlooms (only eight which of wereequipped automatic with shuttlechanging mechanisms), 1,000employees principal and and shareholders (see Table4) [pp.V0-1].

Table4:Toyoda CottonSpinning Weaving and Ownership, 1918

Stockholders % shares

Sakichi Toyoda FujinoKamenosuke (Mitsui) Risaburo Toyoda

Kodama Yoneko

48.0 29.4 10.0


Kiichiro Toyoda

Kodama Ichizou



5 OtherToyoda Relatives

15 Unrelated Individuals



Total Shares

In October


1918 Sakichi traveled with Nishikawa to the Chinese

mainland investigate prospects establishing to the for a new spinning and weaving enterprise a project would three there, that take more years bring to to fruition. expressed His reasons seeking offshore for an production were site two-fold:First, Sakichi that beyondbusiness fek considerations, would he develop production abroad whenother Japanese spinning companies would not, serving national the interest improving by relations with China.Second, Japanese livingstandards wages and wereincreasing, Sakichi aware and was thatJapanese advantages notcontinue wage could indefinitely, thismove so was a strategic also decision produce a lower-wage to in economy 73]. [p. Sakichi up a personally set controlled enterprise China. in After 1920 whenChinese tariffs wereraised, other Japanese spinning companies began setting Chinese up subsidiaries. Sakichi responded expanding China by his operations established Toyoda Spinning& WeavingWorks in and the Shanghai. Capitalized5 million (approximately at Yo 5 million Sakichi yen) was president AkijiNishikawa the general and was manager. mill had60,000 This spindles 400 looms. and Sakichi moved family Shanghai ensure his to to that


the venturewould be a success. Nishikawa was askedto manage textile the company operations 78]. [p.

Joined his son,Kiichiro, 1920andwith his financial by in situation better than ever, Sakichionce again engaged loom researchand in development thescale on fromwhich hadpulled he back 1914. in Soon after theShanghai company established, was Sakichi devoted energy a circular his to weaving machine inventive (an effortthatwasneversuccessful, although a prototype the centerpiece the mainlobbyof the newly is in opened Toyota Museum) and automatic loom invention. Sakichi traveled back and forth between Shanghai Nagoyaand oversaw expansion the Nagoya and the of experimental facility fromeight 32 automatic to shuttle changing looms 81]. [p.

Kiichiro AssumesHands-on Research Leadership

Kh'chiro a mechanical was engineer trained the University Tokyo. at of He workedfor hisfatherupongraduating from college 1920.Althougtl in his thesis dealtwith pneumatic pumps, a member the company's as of technical staff he became a specialist castingtechnology in and machine-parts manufacturing ToyodaSpinning Weaving for and [Cusumano, 1985,p. 58]. Kiichiroplayed central the role in the intensified research activities, which rapidlyachieved many improvements. new automatic A shuttle-changing mechanism developed, was differentfrom the two central inventions that Sakichi patented 1903and1909. had in In 1903 Sakichi had designed automatic an shuttle-change motionin whichthe shuttle change occurred belowthe "race" uponwhichthe shuttle traveled fromoneside the loomto the other.Duringthe shuttle of change the newshuttle pushed was frombelowthe race, forcing exhausted the shuttle from theshuttle at theendof therace. box Thisapproach notsuccessful. was Sakichi developed alternative an design 1909in whicha pushing horizontally in rod moved newshuttle theshuttle during shuttle the into box the change. One advantage thesecond of approach theincreased allowed was time to execute shuttle the change. Mostshuttle-change mechanisms morecomwere plex,requiring loomto stopoperation, start again the then up afterthe shuttle exchange occurred. Sakichi's simpler motionoccurred moreslowly thanother non-stop shuttle exchangers operated precision athigh and with even speed. The fundamental inventiondeveloped Kiichiro and patentedin by 1925, described follows: mechanism is as "[A] linking frontandrearpanels the of the shuttle box, ensures asthe new shuttle pushed that is into the shuttle box, both the front and rearpanels movesimultaneously; because this of improvement motion's this shuttle changes became smoother required and less power. Sakichi's invention, whichthe frontandbackpanels the In 1909 in of shuttle opened box independentlyhighspeeds, at delayed opening theback of panel caused mischanges occur"[pp.S14-1S]. to Justasimportant successful for commercializationthe fundamental as patented inventions, essential modifications were made on the other basic loommechanisms asthewarplet-offdevice thewarp-stop such and motions.


Sakichi finally decided operate ownautomatic to his loomfactory a as pilot phnt, but the 32 experimental loomswereinsufficient effective for development management of practices worker and training. addition, In the warp preparation processes requiredfurther modification automatic for weaving, Sakichi and recognized successful that development would require a separate production facility. automatic pilotplant builtin Kariya, An loom was AichiPrefecture, 1923.With potential in capacity 500 automatic for looms, production begun was withtwohundred looms purchased theToyoda from LoomWorksandnewlyequipped automatic with devices. loomtesting The stimuhted increased of invention, measured an accelerating an rate as by rate of patent applications. 1903through From 1921there beenfiveToyoda had shuttle-changing patents; additional nine patents thiskeymechanism in were developed between 1922and1929. Yarnwassupplied theToyoda by Spinning & Weaving factory. Earlyon, testresults made apparent limitations yarn the of quality the parent at company. became It critically necessary manage to the spinning process itself, whichrequired establishmenta new,dedicated the of spinning department. minimum The efficient scale a spinning for factory was 20,000ring spindles costing millionyen,a scale operation was 2.5 of that

reached Kariya 1926[pp.82-84]: at by Sakichi asked Toyoda the LoomWorksto produce 1,000 powerlooms, on which he would attachhis automatic mechanisms. However,a dispute eruptedover the interpretation the renegotiated of terms of the 1912 agreement regarding actually who retained control overSakichi's 1909patent rights theirapplication theshuttle-change and to mechanisms Sakichi intended to install. effect, In before cooperating Sakichi's with experiments, Toyoda the LoomWorkswanted him formally sign to overto themthe 1909patentrights, a step Sakichi not taken partof the 1912settlement. disagreement had as The andconcern distribution potential over of returns fromfuture development of the 1909patents prompted Sakichi improve automatic to the loomandat the same time to strengthen patent his claims independent the Toyoda of Loom Works.Meanwhile, evenas the dispute over patentrightsintensified, the Toyoda Loomemployees producing looms which automatic the to the shuttlechangemechanisms were attached worked directlyunder Sakichi[Suzuki, 1994,p. 170]. In October1924,Sakichi dramatically gathered employees his the of company asked and themto put forthgreater exertions sustain to operations profitably, whilehewouldensure inventive that efforts theautomatic on loom would be intensified. The resultswere immediateand just as dramatic.In Novemberand December therewere ten new patents, including most the importantsinglepatent,which would governthe designfor the shuttlechanging system it was developed as (Kiichixo's 1925 shuttlebox). The automatic loom design was sufficiently perfected allowpreparations to to begin mass for production 84]. [p. In thisfirstphase, however, factory notadequate. the was Sakichi leased an ironfactory Hioki fromhisclose in friend, Nozue,andasked long-time his


associate Kubota to construct foundryand casting a facilityin the Hioki

foundry. During 1925 automatic was the loom redesigned mass for production and successfully testedin a pilot plant of 350 looms.In 1926 Sakichi established Toyoda Automatic Loom Works in Kariya,next to the the experimental spinning weaving and mill. Soonafterits establishment, fttst Kuboto,then manyother engineers skilled and technicians from Toyoda LoomWorkstransferred the new company. to This group, longattached to Sakichi, became nucleus building production the for up capabilities, particularly in casting, requixed theproduction automatic as in of looms, thenof high-draft tingspinrang frames, eventually automobiles and of [Suzuki, 1994, 170]. p. The ToyodaAutomatic Loom Workswascapitalized 1 millionyen at ($460,000) produced and 1,203 automatic looms withinthefttstyear.Of these, 520looms wereplaced theKariya in experimental factory; wereplaced 528 in the mainbranch plantof Toyoda Spinning Weaving; automatic & 124 looms wereplaced the Kikui Spinning Weaving in & Company closely (a affiliated millestablished 1918); in theToyoda in 24 KikuiWeaving Factory; thelast and seven, only earlyloom models the operated outside Toyoda-controlled of

facilities, went to Kanebo.

The needfor andactual testing alterations the yarnpreparation of in andspinning processes became matterof utmost a importance successful for automatic weaving. Toyoda The approach entailed extensive testing a large on scale gainan understanding the linksbetween to of materials processing and machinery design. Risaburo Toyodareviewed history 1929in a textile this in

tradejournal[Toyoda, 1929,p. 9-10): R.

For example, insufficient attention paidto preparatory is processes. Thisis the primary enemy automation. is eventhe case of This in reformed factories which in automatic looms have been successfully adopted. Even there,one frequently hearscomplaints aboutbad yarn. Toyoda At Automatic Loomalso, fromtheverybeginning, we devoted greatest to thisproblem, the care spinning fromlong yarn fiber cotton.However,because improvements the above of in mentioned preparation process, is possible to useraw cotton it now hardlydifferent from thatusedby the standard powerlooms...An important pointin researching problem how to adaptthe the of loom to Japanese conditions that the generalapplication is of automatic loomsto textile manufacture stillin its infancy...Itis is our company's greatest desire produce loom adapted the to a to currentstateof our cottoncloth industry, and in the future to accompany development more and more advanced this of cotton weavingtechnology with the productionof these looms. For example, recently have we been testing loomfor extended a periods of time and getting results 220 picksper minute. of Recently in England, whether American an bobbin changer a shuttle or changer cotfid exceed 160-70 picks per minute provokedstormsof controversy. However, the operational in experimentation carried outat ourKariya factory, becausesmall sample no goodfor a test is



ensuring observation each every the of and typeof design flaw,two hundred five hundred thirtymachines usedin testing. to and are Initially, assigned operator looms, we havegradually we each six but increased so that now eachoperator this handles over fifty looms, with theexpectation thisnumber soon that will exceed sixty looms

per operator.

The ToyodaAutomatic Loom Worksassumed pride of placeas the central concern among growing the number firmsm the Toyodagroup. of Kiichixobecamea managing directorm chargeof loom production. A founds, an ironworks,anda woodworking shopwerebuilt,andsales the of ToyodaG-typeautomatic loombegan 1927.The newautomatic m loom cost 3.3 timesas much as the 200 yen princeof a conventional power loom. However,the differences staffnag in requirements dramatic. were One expert described typical the comparison the difference as between weaverwho a could operate automatic 25 looms oneoperating two to threepower and only looms,yieldinga commensurate nine- or ten-foldincrease productivity m

[Ishii, 1979]. The automatic loom was an immediate successm the marketplace. Table 5 indicates As sales wereconcentrated the integrated with spinning mills.

TaMe $: Salesof AutomaticLooms,ToyodaAutomaticLoom Company (Hioki FactoE· 1924to mid-1931) m

Total Domestic Market













Sakichi's options raising capital the newcompany for the for included participation oneor a combmarion the following by of organizations: Mitsui Bussan, Toyoda LoomWorks, theToyoda and spinrang Weaving & Company. The issues included sharing financial risk, securing familyand managerial autonomy, avoiding and potential patent conflicts between Toyoda the Loom Worksandthe Toyoda Spinrang Weaving & Company. August In 1926the ToyodaLoomWorkssuedto forcea change the nameof recordon the in disputed patent. 1909 Thisaction ended possibility cooperation the of between Sakichi the company originally established. patentsuitwas and he had The

resolved after 18 months with the direct mtervenrion of Aichi Prefecture's

governor, the termsof thisresolution not known. but are The shareholding interests theToyoda in Automatic LoomWorks shown Table6 andthe are in composition thefirstcustomers shown Table5 [84]. of is m


Table6.'Toyoda Automatic LoomWorks, Ltd. Ownership, 1927 Stockholder timeof establishment) (at % of shares ToyodaSpinning-Weaving Inc. 61.5 Saldchi Toyoda 5 KiichiroToyoda 5 Risaburo Toyoda 5 2 OtherToyoda Relatives 5

Ichizou Kodama 9 Others 5 13.5

Total Shares


The company president Risaburo, Kiichirowasthe general was and manager. Saldchi was a counselor, he returned assuming as to primary responsibility overseeing in invention. alsorenewed effort to inventa He his circular loom.In addition producing to cotton spinning weaving and machines profitably, expressly the stated primary and purpose theToyoda of Automatic LoomWorks, Ltd.,was research develop to and textile machinery. Sakichi suffered mild cerebral a hemorrhage 1927.For a time he in appeared be recovering, acutepneumonia in and he died on to but set October30,1930.The Toyodaenterprises continued expand, to with the establishment the Shonaigawa Worksin 1928andToyodaOshikiri of Dye Spinning Weaving and Company Chuo and Spinning Weaving 1929. & in

Indigenous Development of JapanesePower Loom Manufacturing Capability:A "SocialPhenomenon" and Competition

Although Toyoda the Loom Works anearly was industry leader it had manyrivals- so many,in fact, that TetsuroNakaokahasreferred the to activities loominventors entrepreneurs of and during latenineteenth the to

earlytwentieth century a "sort of socialphenomenon" as widespread throughout weaving the regions [Nakaoka, p. 55].In 1733, 1982, John Kay,a

Lancashire weaver, invented flyingshuttle, the called batten,and doubled a weaver productivity. hadmodified picker Kay the stick motionthatthrewthe

shuttle fromoneloomside theother attachingto a handle thetop to by it at of theloom.Theweaver simply pulled handle the withonehand movethe to shuttle fromside side. to Twoweavers a loommaker, bytheKyoto and sent prefectural governmentLyon, to France 1873, in spent year a studying Western weaving technology, themost and important expertise brought they back to

Japan theirknowledge thebatten. was of The battenspread gradually throughout weaving the districts and marked turning a pointin thepace extent continued and of improvements to the traditional handlooms. The battenis significant the evolution for of weaving technology ks function the pivotal in the transition was as link from hand power to looms. various At points thedecades in surrounding turnof the thecentury, weaving each region itsownleading had loom inventors. Skigejiro



Matsuda Mie invented pedal-operated loomin 1885,the f·rststep in a hand toward development a practical the of power loom.Soon thereafter Tochigi, in Kozaburo Terasawa redesigned pedaloperated the loom in a mannerthat closely prefigured earliest the powerlooms.Theseimproved hand looms diffused widely the 1890s. in The transformation pedal from loomsto power looms principally required mechanical new devices thewarplet-offmotion for thatwouldcontrolandmaintain constant tension the warpyarns, cloth on a rolltake-up motion, power a drive mechanism, several and parts modifications of lesser significance. twoinventors, These along withothers including Sakichi Toyoda, developed locally suited power looms varied theincorporation that in of the devices needed transform to increasingly complex handloomsinto


Forming de factotechnological a community, these inventors learned from eachotherandat the same timedeveloped differentiated loom designs. Sakichi Toyoda's early efforts IgetaTrading at Company Aichihavealready in beendescribed. of the earliest All models varieties powerloomswere and of narrow looms constructed woodexcept thegears, from for pulleys, a few and othermetal parts. Ishimatsu Kubota Osaka of produced f·rst the Japanese iron loom in 1903.Masajiro Suzuki establishedloommanufacturing a business in Enshuandconstructed iron narrow an powerloomin 1908.Sakichi Toyoda

made the transition first to mixed wood-iron and then to all-iron looms in the

1907-9 period.MichioSuzukifounded Suzuki LoomWorks(thepredecessor of Suzuki Automobile Industry) developedpower and a loomin 1913. The indigenous development powerloom manufacturing of capability in itsinitialstages advanced productivity thetraditional in sector specialized of weaving mills.Spunfrom domestically grown,shortfiber cotton, Japanese yarnwas coarse (defined a yarn"count"below20). Domesticconsumers as preferred narrowcloth,whichwasusedfor kimonos and appredated its for suitability dye absorption for (especially indigo). effect,domestic In market standards created barrierto oemer, a imported yarnand cloth.(Direct tariff protectionwas also in place.)As higherincome consumers purchased imported cottontextiles, part as a substitute nativesilkproducts, in for the tastes thebroader of consuming public changed. a history thechanging (For of product quality choices theJapanese in textile market, Nakaoka, see 1982]. Changes thequality yarnsupplied the spedalized in of by spinners and woven by the specialized, traditional weavers necessarily changed a in complementary manner. Over timethe specialized weavers learned useyarn to madeby mixingsilkandcottonfibers, by mixing or longer, imported cotton fiberwith domestic cottonstock. Eventually weavers the became capable of fullyincorporating domestically yammadefromwholly the spun imported raw cotton into their cloth. The specialized weavers maintained competitive a advantage providing in narrowclothmadefrom coatset yarn for domestic customers thewidespread until adoption Western of dress afterWorldWar II. During this transition, the traditional Producing Center (Sanchi) weaving


sectors adapted the changing to fashion increasingly by adopting broader power looms(see Table7 below). The integrated spinning millscontinued buy the majority their to of loomsfrom foreign manufacturers the successful until domestic development of ironbroadpowerloomsduring WorldWar I. Duringthe 1920s, large the integrated, export-oriented mills increasingly purchased domestically manufactured looms. 1929theToyoda By LoomWork's14 bestcustomers (those buyingmore than 1,000Toyodapowerlooms)were integrated mills,12 of whichwereJapanese two of whichwerebased China. and in They purchased 24,781 non-automatic Toyoda power looms between 1923 and 1929, equivalent 52 percent their1929stock looms. to of of

Table Z' Chssification PowerLoomsusedby the Members the Enshu of of ExportCotton Textile Industry Trade(March, 1937)

Less More More More More More

Company/Inventor Than






Model (Location)

Toyoda Model















Suzuki Model (Hamamatsu)








Iida Model









Nisshin Model 364 368 330 4 16 1,082

















The Toyoda Loom Works continuedto confront significant competition fromrivaldomestic power loommanufacturersselling the in to independent weavers, were who increasingly oriented making to broadcloth for domestic (expanding) and foreign sales. Withtheimmediate market success of automatic looms theintegrated market theirfounder in mill by Sakichi's new firm, the ToyodaLoom Works futuresales would become increasingly dependent capturinglarger on a share thegrowing of market broad for power loomsin the specialized weaving production centers, Sanchi. the Table 7 shows the extentof competition amongdomestic loom producers the in


export-oriented Enshu districtin 1937, with the largestsingleshare 0 7 percent) being heldby theToyoda LoomWorks the growing in broad

loomsegment [Izumi,1980,p. 15].

The Toyoda Automatic Shuttle-Changing Loom: CorporateIndustrial Research, Indigenous Development, Technology Transfer and

International Competitiveness

Sustained Japanese research automatic into looms began 1898 in whena technologist Osaka from Spinning Company, Takeo Yamanobe, returned from America 1898with an automatic in loomfrom theDraperCompany. 1900, In the majorspinning companies senta groupof technical specialists the to United Statesto studythe automatic loom that had been invented by J.H. Northrop and commercially introduced his employer, Draper by the Company, 1895.Inventing Draperautomatic in the loominvolved numerous complementaqr inventions a scale industrial and of research resulted a that in rateof patenting Drapersurpassed by the mostinventive at only American companies the turn of the century at suchasGeneral Electric andWestinghouse. twomostfundamental The inventions theDraperautomatic were loom weft-replenishing mechanism thewarp-stop and motion. The former pushed a yam-filled bobbin place into withina shuttle pushed theempty and out bobbin whenits supply yarnwasexhausted of without stopping operation the the of

loom.Because bobbinwasinserted the withoutstopping evenslowing or the operation the shuttle of and the loom, the Draperloomwascalleda bobbinchanging automatic loom.To enable weaver operate larger the to a numberof loomsnow that the time-consuming of changing weft supply task the was

mechanized, key complementaqr a invention was the warp-stop motion, invented ease weavers' to the "mental anxiety" frommonitoring action the and preventing faulty clothresulting frombreakage thewarpyarn[Mass, in 1989]. The Osaka Spinning Company, Calico Fimshing Weaving, the and and Mie Spinning Company installed Draperlooms theirmillsasearlyas 1900. in (Outside the UnitedStates, DraperCompany of the inventions were more frequentlyknown as Northrop looms, primarily becausethe Drapers participated establishing moreexport-oriented in the BritishNorthropLoom Company market to theirinventions Europeandelsewhere.) in Japanese mills had experimented both Draper(U.S.)andNorthrop(British) with automatic looms. Becausethey had difficultymaintaining the looms in operating condition, usually they used looms simple the as powerlooms afterremoving theautomatic attachments [Hayashi, 1983, 12.These p. three companies failed in theirearlyefforts operate to automatic looms, theyamalgamated but over timeto formoneof the sixmajorspinners, ToyoSpinning. Sakichi's attempts develop loomthat couldautomatically to a replace theweft whenexhausted began 1902soonafterthese in firstautomatic looms arrived Japan. Sakichi in But pursued development an automatic the of shuttlechanging ratherthan striving imitateor furtherdevelopNorthrop's loom to


design. Interestingly, automatic shuttle-changing weredeveloped looms and introduced Britain, they in but wereeven commercially less successful the than meager penetration the loom marketby the BritishNorthropLoom of Company's bobbinchanger. (Lessthan 5 percentof Britishloomswere automatic theeveof WorldWar II.) [Mass Lazonick, on and 1990]. In addition theDraper Northrop to and automatic looms, otherforeign models automatic of looms imported Japan into included Stafford, the Henry Bayer, Ruchi, Hartmann, Kip-Baker and looms. Domestic rivals included the

Ariuma, Sakamoto,Suzuki, Noue, Kimoto Steel, and Osaka Machinery automated looms. Contrasting differences technology the in strategies across

all thesecountries enterprises beyond scope thispaper.The and is the of principal concerns addressed are related the technology here to strategy at Toyoda. In a 1929articlepublished the Japanese in tradejournal,TheTextile Review, I·'chiro Toyoda explained history research development the of and for an automatic shuttle-changing at ToyotaAutomatic loom LoomWorks.The centraldetermining factor aroundwhich other importantconsiderations revolved the significantly was greater machine precision required integrate to the bobbin-changing mechanism the restof loomoperations with compared with the shuttle-changing mechanisms. Because bobbinwasinserted the into the operating shuttle the formercase, in whereas muchlargershuttle the was replaced the latter, the bobbin-changer in required machinetolerances no greaterthan 1/16 inch compared 1/8-inch tolerances the shuttleto for changer. The implications thedifferences precision of in standards dramatic were in a numberof areas: the extent of complementary inventionrequiredfor integrated operation with the restof theloom'scomponent parts; extentof the machine vibration, increasing breakage machine yarn and wear;the costs of loom manufacturing; extentof mechanical the expertise required both for installation machine and maintenance machine as integrity degraded use; with andtheextent retraining of required weavers. each these for For of issues, the differences favored automatic the shuttle-changer. Notingthe differences in cotton and yarn qualityin Japancompared the United States, to Kiichiro explained, "Because looms Japan in mustbe ableto weave using thissortof yarn,thisissue structured research automatic on machinery, especially the in design thewarpstopandlet-offmotions" Toyoda, of [K. 1929, 20]. p. The mainadvantages the bobbinchanger of werethat:1) lessenergy wasrequired change muchlighter to the bobbinthanthe heavier shuttle, a difference slight of economic consequence; 2) thesmaller and bobbin could be storedin largerquantities the bobbin-magazine in compared with a smaller number shuttles of requLdng morefrequent refRling morelabortimein and preparation before installing theshuttle in magazine. A mill with a 1,000 normal power looms requiredmore than

300 weavers out of a total mill work force of four to five hundred workers. A

mill with 1,000automatic shuttle-changing loomsrequired only 30 weavers



(only under ideal 20 the conditionstheToyoda mill)and total only at pilot a of $0 mill workers. The additional savings mill laborin a mill with 1,000 on bobbin-changing loomswas possibly much as 12 workers. as However, Toyoda developedlarger a shuttle could that carry larger a bobbin, requiring less frequent refilling the shuttle of magazine. the larger With shuttles, the

difference in the number of mill workers was reduced to seven fewer workers

on bobbin-changers.either In case laborsavings small the were relative the to otherfactors influencing relative costs, and the laborcostsavings of was course less of consequence in lower-wage Japan thanin theUnited States. Even thoughthe shuttle-changer required redesign material less and change therestof a non-automatic thanwouldabobbin on loom changer, the required complementary invention improvements manufacturing and in were considerable. theirfirstefforts the Kariyaexperimental In at plant,Kiichiro attachedshuttle-changing mechanisms two hundred normal looms to produced the ToyodaLoomWorks.His summary the experience at of was that, "It was a monumental failure...Withhindsight, this projectappears stupid, at the timewe wereworking but hardto understand calibration the of automatic looms.As one mightexpect, loomsran as if possessed the by demons.They repeatedly broke down and refused to run smoothly" [K. Toyoda, 1929,p. 23]. Over the years, effortsat redesigning exchange the weft mechanisms provided important an stimulus moreextensive to inventive activity. Sakichi's inventions were not a soloeffort,but increasingly reliedon an a groupof contributors whomhe andKh'chiro assembled. Although company a the lists totalof 85 patents 28 utilitymodels and registered Sakichi for Toyoda, the listingexplained that, especially Sakichi's in later years,Kh'chiro and two employees also were involved inventive in activities. Research IshiiTadashi by of theJapanese Patent office andShoji Okumura, independent an historian of technology, established Sakichi's has that actual wassignificantly than role less hewascredited in thecelebratory with biography issued shortly afterhisdeath, which was editedby Kiichiro and Risaburo. This biography the source is drawn directly indirectly, all English-language on, or by accounts. Patent The Officelists29 patents awarded Sakichi, manyof the others to with actually obtained Kiichiro[Okumura, by 1985,p. 108-9;Ishii, 1979].It is clearthat Kiichiro principally was responsible thecompany's for inventions 1921. after The increased tendency toward corporate opposed individual as to invention was a more general phenomenon, evenin the area of weaving technology. hasgraphed trends loom-related Ishii the in patents all of for Japanfrom 1907to 1921 for patents registered individuals patents to and registered companies. to Those graphs indicate annual that company patents varied between to tenwithnotrend(butwithanaverage one estimated the by authors around of five),whileindividually patents held dearlytrenddown fromthe60-70peryear range between and30 peryear theendof the to 20 by period. the otherhand,corporations 65 percent the 131 weftOn held of



replacement motionpatents takenout from 1926to 1932[Ishii,1979,no. 4, p. 27;andno. 5.,p. 17]. Despite these indications significant of corporate efforts derdoping at looms capable automatic replacement, of weft Toyoda Automatic Loom's sole significant surviving competitor duringthe prewarera was the automatic bobbin-changing supplied the EnshuLoom Company. loom by The development the Enshu of loomwasprimarily result President the of Sakamoto's effort. He was an exceptional inventor who did not develop internal an research andorganization staff remotely close the scale to attained thetwo by Toyodafirms.However, Sakamoto developed enduring periodic had an if working alliance with Toyo Spinning, clothmanufacturer the longest a with sustained interest devdoping automatic in the bobbin-changing loom.Toyo Spinning alsomadean exceptional commitment resources of towardthe loom's successful development. Enshu Loomoriginated a single-product, as narrow loommanufacturer in 1920.Having worked chiefengineer theKimotoIronworks, as at Sakamoto wasasked takecharge renewed to of experiments Northropautomatic with loomsat Toyo Spinning 1920 at the request Toyo'smanufacturing in of supervisor, AizaburoMario. Sakamoto hired as an engineer Enshu was at Loomin 1921.He spent five years and20,000yen developing automatic an bobbin-changing loom prototype, adapting Draper design. the During this time,Dr. Manoreattached automatic the mechanisms theoriginal to imported automatic looms 1923,andimtiated four-year in a intensive study (1925-1929) in two Toyo factories ten or more types of automatic of looms and attachments. Enshuautomatic The loomreceived widespread publicattention when529 looms wereinstalled the Nakabayashi at Integrated ClothCompany in October1929with "120 of the leading lightsof the textilemachinery industry attendance" in [Yanagihara, p. 41-42,46;Suzuki, 1979, 1949p. 192-96; Uno, p. 519-20]. In terms market of share overall and prewar competitive performance, sales the Toyodaautomatic of loomincreased from 44 in 1925to a prewar peakof 12,104by 1937,while EnshuLoom had first year sales 1926 of in 1,126 automatic looms and rose to a pre-warpeak of 10,717 in 1935 [Taniguchi, 1985,pp. 63-64]. As wasthe case thedevelopment the Draperautomatic in of loom,the increasing mechanical complexity inventingcommercially of acceptable automated machinery required organizing industrial research a significantly on largerscale, process a reflected the increasing in number technical of high school graduates entering engineering positions thetextile in machinery firms. In 19001.7malegraduates year per weresoemployed, whereas rateof hire the wasat 3.4 peryearby the 1930s. Over the entire period overa thirdof these hires wentinto theToyodaLoomWorksalone. For the period1926-1931 the ToyodaLoom Worksmade18 suchhires,and the muchsmaller, rapidly but growing, ToyodaAutomaticLoom Company hired 14 [Taniguchi, 1985, pp.55-56]. notedearlier, As Toyoda's mainautomatic loomrivalEnshu Loom



had key individual engineers acquired and technical knowledge drawing by from its alliances with leadingmanufacturers, Enshu Loom had no but comparable internal staff for industrial research. Furthermore, the organizational development manufacturing marketing Toyoda of and at Automatic Loom Workswas essential only to makeand sell the new not invention, also a source experience but as of essential further to refinement of

the imtial innovation.

A Merger Attempt and Failed TechnologyTransfer

Havingprovided Japanese the textileindustry with textilemachinery sinceits founding, Platt Bros.wasvery interested the opening the in of Karitani Factory the operation 520Toyoda and of automated looms. Mitsui Bussan, Platt's representatives in Japan, provided full report. a Plattordered 205 automated loomsshipped theirplantin Bombay, to India for close examination. the basis this experience, decided pursue On of they to the purchase theToyoda of patent rights. negotiation The began April1929and in

lasted for several months.

Theresults better were thanToyoda expected. wanted purchase Platt to thepatent rights various in countries outside Japan thebasis a royalty on of contract. Toyoda preferredlump-sum a payment. wanted Platt exclusive access to allloommarkets of Singapore, west including India.Because theextreme of complexity thenegotiations, Bros. of Platt invited Toyoda Kiichiro Britain. to At thetime, however, Kiichiro in theUnited was States, showing two looms thedominant to American loomproducers, Draper Crompton and & Knowles. response thePlattnegotiations, hurried In to he backto Japan and

then off immediately Britain. set for Kiichiro withhisemployee met Chosaku

Suzuki and Aoki of Mitsui Bussan. He closed the deal after two months on

December 1929. 24, According theterms thecontract, Bros. to of Platt gained theproduction marketing and rights every for market except those Japan, of China, theUnitedStates ·100,000. and for A keyToyoda engineer, Suzuki accompanied automatic one loomto Britain January in order assist Bros. starting production. in 1930 to Platt in up Suzuki spent anda halfyears Britain. one in Aftersome seven months, Suzuki was able undertake to testingprototype a loom. report asfollows: His was

The so-called first stepof prototyping machines been two has completed, these and machines nowin actual are operation the at Prestonfactory.This is most heartening. Lookingat the manufacturing itsinitiation thepresent, is altogether from to it like the HiokiFactory period our owncompany's of development. I mostly leave these difficu16es yourimagination. to Moreover, because the increasing of severity the recession, of and various manufacturing practices, still notproduce we can looms

of thesame quality thetwosample as looms from company sent our

in Japan. The exhaustive precise and nature loom manufacture of surprises foreigners everyturn.This pleases that these the at me


Englishmen who refused recognize merit of automathag to the [to produce automatic the] loomarebeginning perceive necessity to the for them.In thisway,we gradually worktowards operation the of looms 244rpm [p.142]. at

One response the severe to decline the Britishcottontradewasthe of concentration textile firms throughan amalgamated of organization, the Lancashke Cotton'Corporation (LCC), created January in 1929. One of the tasks thisorganization therationalization machinery equipment. of was of and In order to assist members their choices equipment, Lancashire in of the CottonCorporation solicited from eachautomatic loom manufacturer forty

machines to be tested between the end of 1931 and 1932. In order to enter this

competition, Bros.rushed start-up production orderto have Platt the of in fortymachines handfor thetest.Suzuki crucial thisprocess. the on was to At endof March1932,fortymachines wereshipped the LCC. The results to of this test demonstrated the Northrop,Vickers-Stafford, that Whitt,aker, and Platt-Toyoda looms wereallcompetitive. Although there wasgreater breakage and wasteon the Platt-Toyoda looms,significant improvement these in aspects occurred thefour-month over test. Qualified these as results mightbe for Platt-Toyoda, wasa notable this achievement, thatsome thelooms given of weretun for the [ttsttimeduring the testing pefiodandthiswas,in effect,the fttstorderof the Toyoda loom design produced Bfitain.In addition, otherthreeloommanufacturers in the andin particular Lancashke the looms included the testwereusing in fully trained workers,which was not the case for the Platt-Toyodalooms [Lancashire Cotton Corporation, 1931]. The factthatthislevel testing in of termsof machines, duration, conditions, independence company and from access experimentation purposes learning couldbecome basis to for of a for assessing technological business and potential, in stark is contrast thehistory to of testing experimentation and atToyoda enterprises described above. In May 1931,with his mission coming an end,Suzukiprepared to to return to Japan. Based on his experiences guidingthe prototype in development the Platt-Toyoda of automatic loom, he wrote up detailed instructions, whichweresubmitted MitsuiBussan thenpassed to to and on

Platt Bros.

SoonafterSuzuki returned Japan, November to in 1931,Platt Bros. contacted Toyoda Automatic Loom,claiming because the errors that of and deficienciestheblueprints, in explanations, models and submitted under article 7 of thecontract, requiring "precise that information detailed and warnings be outlined," would unable market automated they be to the loom.Estimating a loss ·50,000,PlattBros. of demandedreduction thepatent a in fights transfer fee.In December 1931, ·61,500wasto havebeen paid. PlattBros. proposed postponing payment. this Toyoda quickly conductedstudy a evaluating PlattBros. the claims. The results suggested following: the



The errors the blueprints regrettable. in are However, the most for parttheyaretrivial, being largely revisions madeduring prototyping. We do not believethat these errors supportthe extent of the damages. company Our provided PlattBros. two sample looms, and in addition sent Suzuki to guide the prototyping. Had these opportunities been sufficienfiy used,thesedamages shouldhave beenavoided. Thuswe cannotagreeto a reduction the patent in transferfee. However, because the variousserious of problems afflicfngBritainbecause the Depression, should whatwe of we do can to in somesmallway alleviate Platt Brother's the patent fee burden. usbegin Let these discussions 146-7]. [pp.

After extensive negotiations, twocompanies the reached compromise. a Platt had already paid ToyodaAutomaticLoom Companyoe38,500. They negotiated setdement a substitutingsingle a payment oe45,000 fifteen of for payments scheduled over sevenyears, totalingoe61,500 pounds.The renegotiated contract was signed Platt England July and by by in Kiichiro Japan September in in 1934. The production and marketing the Toyoda-Platt of automatic loom wereneverestablished a sustainable on basis. Only 200 looms weresoldover the next two years production. reasons the failureof the Plattof The for Toyoda loomaredisputed thetwosides. by From the beginning negotiations, of Kiichiroconsidered highly it likely that Plattwaspursuing preemptire a strategy purchasing of Toyoda's patent rightsin order to forestall competition. a defensive As technology strategy, buying Toyodapatentrights the wasat leastpartially successful. means By of this agreement, Platt Bros.delayed competition diffusion Toyoda the and of automatic loomsinto their markets Asia,particularly in their largeIndian market, into Europeaswell.By 1936,theToyoda and company began negotiations throughthe Mitsui Bussan London office to allow it to sell its own automatic looms directly whatuntilthenhadbeenPlatt's in exclusive territory. A new agreement negotiated 1937whereby was in Toyodawouldpay Platt3 pounds, shillings everyautomatic 10 for loomsoldin India;outside of India, but within the registered area for patentrights,the paymentwas 1 pound,15 shillings; elsewhere payment onepound. and the was Toyodawas onceagainable to exportits automatic loom directly the wholeworld. to Shortly thereafter Japanese the economy militarized, by thewar'send was and automatic patents loom taken in various out foreign countries expired. had For a timePlattBros.aggressively continued pursue to formalizing its

relationship the Toyoda with Automatic LoomWorksthrough Mitsui its agents. MitsuihadbeenPlattBros.'exclusive agent bothweaving for and spinning machinery imported Japan. thesame into At time, represented it both Toyodas LoomWorksandtheAutomatic (the LoomWorks) domestic in and foreign sales. PlattBros.,anticipating impending its competitive decline, was eager explore possibilities further to the for collaboration possible and merger withtheJapanese companies. MitsuiandtheolderToyoda LoomWorkswere


ambivalent about Platt's proposals, theToyoda and Automatic LoomWorks wasclearly reticent fromthestart. Toyoda The Automatic LoomWorks was the technology driverand the faster growing company, interested less in joining withcompanies mightslow down. that it The development, production, sales automatic and of looms spurred the development spinning of machinery the ToyodaAutomatic at Loom Works.For the period1927-1929, Toyoda the Automatic Loom sales of weaving machinery exceeded millionyen,whereas valueof spinning 7 the machinery wasonly265,000 sold yen.DuringthenextthreeDepression years, thevalueof weaving machinery wasalmost million sales 4 yen,andspinning machinery rose 2.7million sales to yen.Beginning 1933,spinning in exceeded weaving machinery sales continued do so through and to 1938.Duringthis period, annual spinning machinery sales averaged 5 millionyen,nearly over 75 percent greater thenot quite million average annual than 3 yen for weaving machinery [Toyoda, sales 1967]. Mitsui confrontingproblem was a increasingly commonamongtradingcompanies involvedboth in importingand in representing domestic companies hadbecome that increasingly successful in production oriented toward importsubstitution. the early1930s By Mitsui suffered stagnation loss thespinning a and of frame import business similar to whatit hadearlier experienced British with imports Japan. into The problem wasmanaging relations theforeign with client deciding and whenandhowthe

exclusive contract could be broken or amended. In this case Mitsui's exclusive

trading Platt Bros.wascontractually for limitedto spinning equipment, but practically limitations representation generally the on were applied alltextile to machinery. Mitsuibrought bothToyodas the tablewith PlattBros., to where Mitsui was lookingto resolveits own internalconflicts[Taniguchi, 1992,

p. 99].

Policy transitions to be expected circumstances were as changed. The contrast methods managing in of those transitions provides window a into the extent of changes the relativecompetitive in strengths the firms, the of perception thesechanges, theirimpacton business of and strategies. Thus, withinMitsuitherewerediffering perspectives the valueof merging on Platt Bros.,a maturecompany, with the two rapidly emerging Toyodafirms.The manager Mitsui's of textile machinery department, Furttichi, openly stated that "...the two (Toyoda) fLrms havelittle or nothingto gain from Platt Bros. cooperation, theyhavealready that copiedall the bestof Platt Bros.designs andcancontinue do so,thatPlattBros. to have nothing realvalue addto of to the proposed merger that both fro'ns and wouldbe betteroff withoutour participation" Bros. [Platt Archives DDPSL 1/106/37 March30, 1931]. The senior Mitsuimanagers fromOsaka Tokyo,SekoandNanjo, and respectively, saw still value PlattBros.' in participation, although magnitude the of that valuewas opento question. ToyodaLoom'spresident Kanematsu argued PlattBros.mustpurchase that stockshares facevalue. at JohnBissett, the Platt Bros.director responsible technology, in Japan the time for was at negotiating for Platt. Bissettmaintained that "Platt's name, experience,


manufacturing knowledge, research, contact and with the textiletrades all in thecountries theworldhada definite of value would and have be paidfor to by sometangible share recognition that value."In response, Mitsui of the Bussan Tokyosenior manager reported Bisset Kanematsu's to of "certain" beliefthat his company coulddo anything Platt Bros.coulddo, and do it better and cheaper. With this in mind Kanematsu "would not seriously consider Platt'sexpected pricefor participation the merger"[PlattBros. in Archives DDPSL 1/106/37April8, 1931]. Bissett was surprised discover to that one enduring resultof Platt's licensing Toyoda the automatic loompatent a diminution hisJapanese was of counterparts' respect hiscompany's for capabilities. According Bisset, to

Toyoda Automatic Loomis stillwillingto negotiate the priceis but goingup...(O)ur dealwith Toyodafor the manufacturing rights of the automatic loomis acting a handicap. of all it hasfilled as First Automatic loom'smindwith exaggerated of the valueof their ideas loom.Next theyare furrely convinced astextilemachinists that they arenowreally superior Platts otherEnglish to and firms, whichthey sayare withoutnew ideas...Finally, havenot said,but have they doneeverything indicate to withoutactually saying thattheylook it, down on us for havingpaid so muchand havingpaid so litfie discussion, poorbusiness very people! thisis no doubtpart of All thescheme bargaining it is disquieting thinkthere justa of but to is litfierealsubstance it. However, treatit asbargaining in I'll [platt Bros. Archives DDPSL 1/106/37 April23, 1931].

Anotherfactorreflecting conditioning relative and the change in competitivenessthe Britishand the Japanese of franswas the continuing depressionsales Plattmachinery, in of whereas saw recovery sales 1931 a in for bothToyodas. March1931Bissett In reported both companies that were occasionally engaging pricewars. in Duringthe nextmonthtradeconditions hadchanged sufficienfiy thatby lateApril he wrotethat,"...both ·ms so havebooked goodorders. They...(will) busyfor the nexteightor nine be months...This stiffened attitude both fzrrns. has the of They alsoknow the prices whichwe havebeenquoting howfar belowthemtheycansell" and [platt Bros. Archives DDPSL 1/106/37 April23, 1931]. A thixd factor undermining basis corporate the for amalgamation was thelaxge difference therelative in valuation thetwocompanies. of Particularly vexing thedisparity perceptionsthevalue thefixed was in of of assets (land, buildings, factory, machinery, patterns, furniture, officeequipment, so and

forth) theToyoda of Automatic Loom Works. Toyoda Loom Works the put

value at 1.0 million yen, the AutomaticLoom Works self-valuation was 1.67millionyen,andBissett's valuation a fraction was over1.2 million yen. Furthermore, rough the calculations advanced Mitsuito explain value by the basis the two Toyodas of drew on the companies' closely held financial records. Bissett initially was assured these that records weregoing be made to


available him, but the "books"never materialized to [Platt Bros. Archives DDPSL 1/106/37 May 16,31, 1931; Taniguchi, 1992,pp. 114-15]. The largedifferences valuation in were an outcome dramatically of different conceptions howto justify of value determinations.particular, In the Toyoda Automatic LoomWorks notable its lowoperating was for capital and low profitability resulting from its high development costs. Therewas no means establish cormnon to a basis derming terms for the andlevels asset of valuations. a resulttherewas a largespread the participants' As in current capitalization the variouscompanies' of expected futurerevenuestreams. Mitsuimanagers attempted serve intermediaries the negotiations, to as in but thegapwastoo great. Disagreements changing and assessments among Mitsui managers diffused support ability brokeranyshort-term its and to resolution. Meanwhile, negotiations as stretched thechanging on, relative capabilities and performances themachinery of suppliers theMitsuisenior led managers most predisposed valuePlatt'scurrent to strengths backawayfrom supporting to anymeasures might that inhibit development theJapanese the of firms. MitsuiBussan, initiatorof the merger the discussions, at the start was more concerned aboutdamaging relationship its with Platt Bros.,but the negotiations accomplish goalof "strengthening tiesto the two did their their Toyodas orderto morefullyparticipate thedevelopment thedomestic in in of textile machinery market" [Taniguchi, 1992,pp.99, 120].Mitsui's policyshifts andrelative failure guidethe merger to negotiations completion readily to are comprehensible withinthecontext developing of Japanese self-sufficiency and export competitivenesstextile in machinery production. Thus,thenegotiations brokedownbecause twoToyoda the companies disagreed abouttheirrespective market valuations, both refused open and to theirbooks theotherandto Platt. for The older Toyoda company secure was with rising sales specialized to weavers, the newerToyoda and company was beginning high-wireact in pursuing a the development an automobile of business. Toyodas effect The in withdrew fromnegotiations lateMay 1931. by Finally, PlattBros.strategic orientation cannot adequately be assessed without linkingthe overlapping patent and mergernegotiations with the simultaneous formation the leadingBritishtextilemachinery by fLrms of TextileMachinery Makers, Ltd. (TMM). The PlattBros.Boardof Directors approved theirparticipation the amalgamation September 1931.Platt in on 17, wroteto Mitsuibeforethe end of the monthexplaining futuremerger that proposals wouldhaveto be putbefore TMM board. the The letterto Kiichiro with complaints aboutthe technology transfer process the request and for renegotiation the patentlicense soonfollowed November. the of fee in In midstof depressed trade,the effortsto rationalize domestic production and curtail pricecompetition wereaccompanied contraction the resources by in devoted research development. to and Bissett, director the who not onlywas mostactive assessing technologies thetechnological in new and capabilities of the two Toyodas, who alsoserved manager the Experimental but as of and Research Department, newly establishedJune1928, in retired fromPlattBros.



in November1931 at exactly sametime that Platt'scomplaints the forced renegofiafion the Toyodalicensing of fees.Although Platt laterrenewed a proposal merger 1933, for in neither company responded [Platt Bros. Archives, DDPSL 1/91/5 September 24, November 1931;1/91/31 June13,1928, 17, 4, November4, 1931;Taniguchi, 1992,pp. 117]. Technology TransferfromToyodato Toyota As noted earlier,before Kh'chiro traveledto Englandin 1929 to conduct patent the negotiations PlattBros., visited leading with he the loom manufacturers the UnitedStates, in Draper and Crompton Knowles. & The officialandwidelyreported purpose the trip to the U.S.wasto attemptto of sellautomatic loompatent rights at least seta price or to basis comparison for and negotiation with Platt. The British-based headof the textilemachinery division MitsuiBussan, of Furuichi Tsutomu, tellsa different story. Awarethat about70 percent American of loomswere already automatic and that the remainder wereweaving clothmoredifficult adapt automatic to to looms,and believing Toyoda's that asking price double Plattlicensing washighly at the fee unrealistic, Furuichi attempted excuse to himselffrom the negotiating effort. Kiichiro metwithFuruichi privately explained "these and that proceedings are not in orderto sellin the UnitedStates...Ientreat to comewith us [so]I you can act freely." WhereverFumichi and Kh'chirotraveled,Kh'chirowas absorbed the study machine in of tools.Havingalready decided attempt to automobile manufacturing Japan,Kiichiro was using the patent rights in negotiations a pretext hisresearch as for [Fumichi, 1959a, 22]. p. It is well knownthat,with Sakichi's blessing, feesfromPlattBros. the were to be devoted to developingautomobile-related research and development. Kiichiro thepatent left negotiations Fumichi otherMitsui to and representatives, he spent timestudying and his machining machine and tools, v/siting autoassembly plants parts and manufacturerstheUnitedStates in and Britain. Returning fromhistourin March1930, Kiichiro organized group a of engineers and began researchon gasolineengineswithin the Toyoda

Automatic Loom Works.

Simultaneously with his directionof auto researchand product development, Kh'chiro aboutdeveloping company's set the capabilities for precision machining improved and mass production methods, prerequisites for future automobile manufacturing. introduced first assembly He the line conveyer in Japan for loomassembly belt withinToyoda Automatic Loom Works.He alsoimported high-quality German andAmerican machine tools; he installed electric an furnace the foundry provide in to high-grade castings; and he introduced Japan's first moldingmachine. Kiichiro also hired a chemical analyst, constructed facilities chrome and the for plating orderto in improve precision durability theautomatic the and of loom's rotating parts. In effect, Kh'chiro upgrading loommanufacturing was the capability a testbed as and training for developing site automobile manufacturing capabilities. How


effective profitable and these techniques for loommanufacturing well were as is a matterfor future research. Toyoda The Automatic LoomWorks,asshown in Table8, hadmachine orders exceeding current far its production capacity. Instead expanding fill existing of to orders, Kiichiro wasleading company his into a high-risk strategy be in on the startof the Japanese to automobile industry.

Table8,' Toyoda Automatic LoomCompany, Orders Deliveries, and 1932-1937 (Semi-Annual Data)



Spinning Frames









1933 1933

1,043 3,331

1,937 2,096

5,253 6,488

285 645

213 262

702 1,085

1935 1935

1,349 906

2,947 3,437

7,332 4,801

53 399

662 525

1,371 1,245

1937 1937

9,268 1,030

6,459 5,645

26,029 21,414

594 221

504 431

1,718 1,508

In September 1933 ·c·o oversaw completion ·e T·e A ·e of en·e proto·e. In December ·c·o asked ·sab·o to convene emeran gency bo·d of ·ectors mee·g, where·e boardapproved estab·shment the of an AutomobileDepar·ent re=oacfiveto September 1933. At an 1, ex=aor·a· mee·g on Janua· 29, 1934,ToyodaAutomatic ·om Works stoc·oldersvotedto increase company's the capita·afionto 3 ·on yen andto addautomobile manufac·e andstee·a·g to ·e businesses m ·sted its mcles of mco·orafion.In 1935·e ·s· of Co·erce and Indus· anno·ced ·e plan·at wo·d become Law Conce·g ·e Manufac·e ·e of Motor VeNcles, enacted May 1936.·e planmadek cle· ·at onlya m sma·nmber of domestic autoproducers wo·d be ·owed to compete, each participant hamg to pass capaci·h·dle of 20,000cars. a ·e automobile depar·ent at ·e Toyoda Automatic ·om Workscompleted f·st Model its A1 passenger proto·e by May 1935, and m Au·st, the company car increased capita·afion 6 ·on yenafter·e Cab·et decided accept its to to

ß e ou·e of ·e veNcle manufac·e b·.

·e ·st use of the "Toyota"name appeared the Model · on automobile developed 1936.·e ToyotaMotor Co.,Ltd. wasestab·shed m ·th a capital 12 ·on of yen· Au·st 1937.·sab·o Toyoda waspresidentand ·c·o Toyodawasexecutive president. orgamafional ·ce The s·c·e consisted seven of ·ncfion· depaments·clu·g ad·s=afion,


sales, manufacturing, engineering, technical. and Kiichirowasthe headof the research department, he wasalsodirecfiy control the "totalvehicle but in of engineering administration,"department a with responsibility improveall to processes products coordination the otherdepartments. and in with Furthermore,the manufacturing engineering and departments to work closely were togetherin order to build low-price, high-quality vehicles; "the respective managers eachdepartment of weregivensimultaneous managerial controlof the other department" [Toyota,1988, p. 67]. The innovative strategy and structure theToyotaMotor Corporation of continued a timeto drawupon for the capabilities developed through organizational the experience industrial of research, product development, manufacturing the Toyoda and at Automatic

Loom Works in addition to the critical new resources Kiichiro and other

Toyotamanagers integrated orderto "leap"into automobile in production. Not only did the organizational capabilities ToyodaAutomatic of Loom providea resource platformupon whichto attemptanother"leap,"both technological organizational, several and but product generations success of reinforced visionof top managerial technical the and leadership oriented to takeon the challenges integrating of industrial research, product development, andmanufacturinga newindustry. in


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From Textiles to Automobiles: Mechanical and Organizational Innovation in the Toyoda Enterprises, 1895-1933

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From Textiles to Automobiles: Mechanical and Organizational Innovation in the Toyoda Enterprises, 1895-1933