Capability Building and Demand Creation in “Genba-Oriented Firms”

  • Takahiro FujimotoEmail author
Part of the Evolutionary Economics and Social Complexity Science book series (EESCS, volume 12)


This chapter analyzes the behavioral patterns of genba-oriented firms, which pursue both target profit (markup) rates and stable employment, by using a simple evolutionary economic model with Ricardian cost function and design-based product differentiation, called the PXNW model, as opposed to the standard neoclassical profit-maximizing model of firms. Here, genba refers to a manufacturing site where value-carrying design information flows to the customers.

After illustrating the basic logic of the PXNW model, a process analysis is performed to explain the sequence of events and activities leading from a steady state to another steady state with lower prices or higher wages. Finally, we present several actual cases of Japanese local factories or small and medium manufacturing firms (SMEs) in various sectors whose behavior is consistent with the patterns of firm activities predicted by the PXNW model.

The process analysis shows that, when the production prices are stable, a genba-oriented firm can move from one steady state, achieving both goals of target markup ratio and stable employment, to another one with higher wages or lower prices, provided that it can simultaneously improve physical labor productivities (often through process innovations) and create effective demand (often through product innovations).

In brief, certain evolutionary economic models, such as the PXNW model, may better explain what was happening in the real economy with many genba-oriented firms during the Cold War and post-Cold War periods, particularly between the 1950s and the 2010s.


  1. Boyer R, Saillard Y (eds) (2002) Régulation theory: the state of the art. Routledge, London/New YorkGoogle Scholar
  2. Chamberlin EH (1933) The theory of monopolistic competition: a re-orientation of the theory of value. Harvard University Press, Cambridge, MAGoogle Scholar
  3. Fujimoto T (1999) The evolution of a manufacturing system at Toyota. Oxford University Press, OxfordGoogle Scholar
  4. Fujimoto T (2007) Architecture-based comparative advantage: a design information view of manufacturing. Evolutionary and Institutional Economics Review 4:55–112CrossRefGoogle Scholar
  5. Fujimoto T (2012) An economic analysis of architecture and coordination: applying Ricardian comparative advantage to design costs and locations. Evolutionary and Institutional Economics Review 9(1):51–124CrossRefGoogle Scholar
  6. Fujimoto T (2014) Innovation management in Japan. In: Dodgson M et al (eds) The Oxford handbook of innovation management. Oxford University Press, OxfordGoogle Scholar
  7. Fujimoto T (2017) Genba-oriented firms and product-process innovations: a preliminary analysis by the “PXNW model”. Keizaigaku Ronshu, The Society of Economics, University of Tokyo 81(3):2–19 (in Japanese)Google Scholar
  8. Fujita Y, Fujimoto T (2017) Existence condition of “active Genba-oriented (site-oriented) firms”: an endogenous model regarding productivity improvement and demand creation. Keizaigaku Ronshu, The Society of Economics, University of Tokyo 81(4):2–20 (in Japanese)Google Scholar
  9. Hall RL, Hitch CJ (1939) Price theory and business behaviour. Oxf Econ Pap 2:12–45CrossRefGoogle Scholar
  10. Hicks JR (1976) ‘Revolutions’ in economics. In: Latsis S (ed) Method and appraisal in economics. Cambridge University Press, Cambridge, pp 207–218CrossRefGoogle Scholar
  11. Keynes JM (1936) The general theory of employment, interest and money. Macmillan, LondonGoogle Scholar
  12. Ricardo D (1817) On the principles of political economy and taxation. John Murray, LondonGoogle Scholar
  13. Schumpeter JA (1934) The theory of economic development: an inquiry into profits, capital, credit, interest, and the business cycle. Transaction Publishers, LondonGoogle Scholar
  14. Shiozawa Y (2017) An origin of the neoclassical revolution: mill’s ‘revolution’ and consequences. In: Shiozawa Y (ed) A new construction of Ricardian theory of international values. Springer, Berlin, pp 191–240CrossRefGoogle Scholar
  15. Simon HA (1947) Administrative behavior: a study of decision-making processes in administrative organization. The Macmillan Company, New YorkGoogle Scholar
  16. Sraffa P (1960) Production of commodities by means of commodities: prelude to a critique of economic theory. Cambridge University Press, CambridgeGoogle Scholar

Copyright information

© Springer Japan KK, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Graduate School of EconomicsThe University of TokyoBunkyo-KuJapan

Personalised recommendations