¹ Lazonick, William, “The New Economy Business Model and the Crisis of U.S Capitalism,” Capitalism and Society 4, no. 2 (2009)CrossRefGoogle Scholar (online journal); and Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States (Kalamazoo, Mich., 2009).Google Scholar

² See, for example, Mandel, Michael, “The Failed Promise of Innovation in the United States,” BusinessWeek, June 3, 2009.Google Scholar

³ Hall, Peter and Soskice, David, eds., Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (Oxford, 2001), 27.CrossRefGoogle Scholar

⁴ William Lazonick, “Entrepreneurial Ventures and the Developmental State: Lessons from the Advanced Economies,” World Institute of Development Economics Research, dp2008/ 01; available at http://www.wider.unu.edu/publications/working-papers/discussion-papers/2008/en_GB/dp2008–01/.

⁵ Chandler, Alfred D. Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977).Google Scholar

⁶ Chandler, Alfred D. Jr., Inventing the Electronic Century: The Epic Story of the Consumer Electronic and Computer Industries (New York, 2001), chs. 2 and 3.Google Scholar

⁷ Platzer, Michaela and Harrison, Glennon, “The U.S. Auto Industry: National State Trends in Manufacturing Employment,” Congressional Record Service Report, 7–5700, 3 Aug. 2009;Google Scholar“U.S. Vehicle Sales Market Share by Company, 1961–2008,” at WardsAuto.com, http://wardsauto.com/keydata/.Google Scholar

⁸ Kalafsky, Ronald and MacPherson, Alan, “The Competitive Characteristics of the U.S. Machine Tool Industry,” Small Business Economics 19, no. 4 (2002): 355–69.CrossRefGoogle Scholar

⁹ Giarratani, Frank, Gruver, Gene, and Jackson, Randall, “Clusters, Agglomeration, and Economic Development Potential: Empirical Evidence Based on the Advent of Slab Casting by U.S. Steel Minimills,” Economic Development Quarterly 21, no. 2 (2007): 148–64.CrossRefGoogle Scholar

¹⁰ Burgelman, Robert, “Fading Memories: A Process Theory of Strategic Exit in Dynamic Environments,” Administrative Science Quarterly 39, no. 1 (1994): 24–56;CrossRefGoogle ScholarOkimoto, Daniel and Nishi, Yoshio, “R&D Organization in Japanese and American Semiconductor Firms,” in The Japanese Firm: Sources of Competitive Strength, ed. Aoki, Masahiko and Dore, Ronald (Oxford, 1994), 178–208.CrossRefGoogle Scholar

¹¹ Lazonick, “The New Economy Business Model”; and Sustainable Prosperity in the New Economy?

¹² Lazonick, William, “The Chandlerian Corporation and the Theory of Innovative Enterprise,” Industrial and Corporate Change 19, no 2 (2010): 317–49; and Sustainable Prosperity in the New Economy?CrossRefGoogle Scholar

¹³ The stock market can perform fi ve functions in the operation of the company that can be summarized as creation, control, combination, compensation, and cash. See Lazonick, “The New Economy Business Model.”

¹⁴ Under the new-economy business model, most companies list on NASDAQ, which has less stringent listing requirements than the New York Stock Exchange, thus tending to shorten the duration of time from company formation to initial public offering (IPO), which in turn tends to increase the prevalence of owner-entrepreneurs who still exercise a degree of control over the allocation of resources of the company after the IPO. Nevertheless, the participation of venture capital and the use of broad-based stock option plans in the new-economy model contribute to the separation of ownership from control at the IPO, and the tendency remains for the complete separation of ownership from control over time under the new model.

¹⁵ For the main characteristics of the U.S. old-economy business model, see Noble, David F., America by Design: Science, Technology, and the Rise of Corporate Capitalism (New York, 1977);Google ScholarMowery, David and Rosenberg, Nathan, Technology and the Pursuit of Economic Growth (New York, 1989);CrossRefGoogle ScholarChandler, Alfred D. Jr., Scale and Scope: The Dynamics of Industrial Enterprise (Cambridge, Mass., 1990);Google ScholarHughes, Thomas P., American Genesis: A Century of Invention and Technological Enthusiasm, 1870–1970 (New York, 1990);Google ScholarLazonick, William, Competitive Advantage of the Shop Floor (Cambridge, Mass., 1990), chs. 7–10;Google ScholarLazonick, William, “The Innovative Firm,” in The Oxford Handbook of Innovation, ed. Fagerberg, Jan, Mowery, David, and Nelson, Richard (Oxford, 2004), 29–55;Google ScholarBrody, David, Workers in Industrial America: Essays on the Twentieth Century Struggle (Oxford, 1993, 2nd ed.);Google ScholarRosenberg, Nathan and Nelson, Richard, “American Universities and Technological Advance in Industry,” Research Policy 23, no. 3 (1994): 323–48;CrossRefGoogle ScholarHounshell, David, “The Evolution of Industrial Research in the United States,” in Engines of Innovation: U.S. Industrial Research at the End of an Era, ed. Rosenbloom, Richard and Spencer, William (Boston, 1996), 13–85;Google Scholar and O'Sullivan, Mary, Contests for Corporate Control: Corporate Governance and Economic Performance in the United States and Germany (Oxford, 2000), chs. 3–6.Google Scholar

¹⁶ Nonsalaried employees are classifi ed as “hourly” (or “nonexempt”) workers because of the stipulation of the Fair Labor Standards Act of 1938 that requires employees who are paid an hourly wage to receive 150 percent of that wage if they work longer than the normal working hours. The overtime work of salaried personnel is exempt from this provision.

¹⁷ This section draws on the following works: Hadley, Eleanor, Antitrust in Japan (Princeton, 1970);Google ScholarYonekawa, Shinichi, “University Graduates in Japanese Enterprises before the Second World War,” Business History 26, no. 3 (1984): 193–218;CrossRefGoogle ScholarAbegglen, James C. and Stalk, George Jr., Kaisha: The Japanese Corporation (New York, 1985);Google ScholarCusumano, Michael, The Japanese Automobile Industry: Technology and Management at Nissan and Toyota (Cambridge, Mass., 1985);CrossRefGoogle Scholar and Gordon, Andrew, The Evolution of Labor Relations in Japan: Heavy Industry, 1853–1955 (Cambridge, Mass., 1985).CrossRefGoogle Scholar See also the following works by Dore, Ronald: Flexible Rigidities: Industrial Policy and Structural Adjustment in the Japanese Economy, 1970–1980 (Stanford, 1986);Google ScholarTaking Japan Seriously: A Confucian Perspective on Leading Economic Issues (Stanford, 1987);Google ScholarBritish Factory, Japanese Factory: The Origins of National Diversity in Industrial Relations (Berkeley, 1990, 2nd ed.);Google Scholar and Stock Market Capitalism, Welfare Capitalism: Japan and Germany versus the Anglo-Saxons (Oxford, 2000).Google Scholar See also: Clark, Kim and Fujimoto, Takahiro, Product Development Performance: Strategy, Organization, and Management in the World Auto Industry (Boston, 1991);Google ScholarAoki, Masahiko and Dore, Ronald, eds., The Japanese Firm: Sources of Competitive Strength (Oxford, 1994);CrossRefGoogle ScholarOkimoto, and Nishi, , “R&D Organization in Japanese and American Semiconductor Firms”; Sako, Mari and Sato, Hiroki, eds., Japanese Labour and Management in Transition: Diversity, Flexibility, and Participation (London, 1997);Google Scholar and Morikawa, Hidemasa, A History of Top Management in Japan: Managerial Enterprises and Family Enterprises (Oxford, 2001).Google Scholar And the following by Lazonick, : “Strategy, Structure and Management Development in the United States and Britain,” in Development of Managerial Enterprise: Proceedings of the Fuji Conference, ed. Kobayashi, Kesaji and Morikawa, Hidemasa (Tokyo, 1986), 101–46;Google Scholar“Cooperative Employment Relations in Manufacturing and Japanese Economic Growth,” in Capital, the State, and Labour: A Global Perspective, ed. Schor, Juliet and You, Jong-Il (Aldershot, 1995), 70–110;Google Scholar“Organizational Learning and International Competition,” in Globalization, Growth, and Governance: Creating an Innovative Economy, ed. Michie, Jonathan and Smith, John Grieve (Oxford, 1998), 204–38;Google Scholar“The Japanese Economy and Corporate Reform: What Path to Sustainable Prosperity?” Industrial and Corporate Change 8, no. 4 (1999): 607–33;CrossRefGoogle Scholar and “The Institutional Triad and Japanese Development” [in Japanese], in The Contemporary Japanese Enterprise, ed. Hook, Glenn and Kudo, Akira (Tokyo, 2005), 1: 55–82.Google Scholar

¹⁸ These institutions are conventionally labeled “cross-shareholding,” “lifetime employment,” and “the main bank system,” respectively. For reasons elaborated in Lazonick, “The Institutional Triad and Japanese Development,” these conventional terms are misleading.

¹⁹ When in fi nancial distress, a company might raise cash by selling some of its stable shareholdings to other companies at the going market price, but with an understanding that the shares would be repurchased, also at the going market price, if and when its fi nancial condition improved.

²⁰ The value of shares held by foreigners increased from 6 percent in 1992 to over 13 percent in 1998 to almost 28 percent in 2008. Tokyo Stock Exchange, Fact Book 2009 (2009), 61, available at http://www.tse.or.jp/english/market/data/factbook/index.html.Google Scholar

²¹ Hence, my use of the more modest term “main bank lending,” rather than the grandiose term “main bank system,” to describe this institution.

²² This section draws upon Lazonick, Sustainable Prosperity in the New Economy? and references contained therein.

²³ On the historical role of the U.S. government in the development of the computer industry, see Braun, Ernest and MacDonald, Stuart, Revolution in Miniature: The History and Impact of Semiconductor Electronics (Cambridge, U.K., 1982, 2nd ed.);Google ScholarFlamm, Kenneth, Targeting the Computer: Government Support and International Competition (Washington D.C., 1987),Google Scholar and Creating the Computer: Government, Industry, and High-Technology (Washington, D.C., 1988);Google ScholarLeslie, Stuart, “How the West Was Won: The Military and the Making of Silicon Valley,” in Technological Competitiveness: Contemporary and Historical Perspectives on the Electrical, Electronics, and Computer Industries, ed. Aspray, William (New York, 1993), 75–89;Google ScholarMowery, David and Langlois, Richard, “Spinning Off and Spinning On(?): The Federal Government Role in the Development of the U.S. Computer Software Industry,” Research Policy 25, no. 6 (1996): 947–66;Google ScholarNorberg, Arthur and O'Neill, Judy, Transforming Computer Technology: Information Processing for the Pentagon, 1962–1986 (Baltimore, 1996);Google ScholarNational Research Council, Funding a Revolution: Government Support for Computing Research (Washington, D.C., 1999);Google Scholar and Abbate, Janet, Inventing the Internet (Cambridge, Mass., 1999).Google Scholar

²⁴ Lazonick, Sustainable Prosperity in the New Economy? 30–31.

²⁵ Lazonick, “The New Economy Business Model.”

²⁶ U.S. Congress, “Democrats Tell Big Oil: Spend More on Production and Renewable Energy, Less on Stock Buybacks before Making Demands for New Drilling Leases” (Washington, D.C., 31 July 2008);Google Scholar see also Hays, Kristen and Ivanovich, David, “Politicians Fume as Exxon Profi ts,” Houston Chronicle, 1 Aug. 2008.Google Scholar

²⁷ U.S. Congress, “Democrats Tell Big Oil.”

²⁸ American Energy Innovation Council, “A Business Plan for America's Energy Future,” June 2010, available at http://www.americanenergyinnovation.org/full-report/.

²⁹ Broder, John, “A Call to Triple U.S. Spending on Energy Research,” New York Times, 9 June 2010.Google Scholar

³⁰ Milberg, William, “Shifting Sources and Uses of Profi ts: Sustaining U.S. Financialization with Global Value Chains,” Economy and Society 37, no. 3 (2008): 420–51; Lazonick, Sustainable Prosperity in the New Economy?CrossRefGoogle Scholar

³¹ “U.S. Could Lose Race for Nanotech Leadership, SIA Panel Says,” Electronic News, 16 Mar. 2005.Google Scholar

³² In 2008, the NNI (national nanotechnology infrastructure) budget was $1.55 billion with an estimated budget for 2009 of $1.65 billion, and a proposed $1.64 billion for 2010. See the Web site www.nano.gov/html/about/funding.html.

³³ U.S. Could Lose Race for Nanotech Leadership.”

³⁴ William Lazonick and Öner Tulum, “U.S. Biopharmaceutical Finance and the Sustainability of the Biotech Business Model,” Research Policy (forthcoming).

³⁵ AFL-CIO, Executive Paywatch (2009). See the Web site http://www.afl cio.org/corporate watch/paywatch/pay/index.cfm.Google Scholar

³⁶ Lazonick, William, “The Explosion of Executive Pay and the Erosion of American Prosperity,” Entreprises et Histoire 57 (2010): 141–64.CrossRefGoogle Scholar

³⁷ Ibid.

³⁸ Lazonick, Sustainable Prosperity in the New Economy? ch. 2.

³⁹ Ibid., ch. 5.

⁴⁰ Ibid.; Lazonick, “The New Economy Business Model and the Crisis of U.S. Capitalism.”