n the summer of 1989, and that they were, to a great extent, offset by price increases on the 1990 models.6
Technological innovation is expected to play a major role in the development of the automobile industry over the coming 10 years. This development will occur in an industry which, in the past, has relied more on superficial innovation than on technological innovation, but which is, at the same time, one of the most highly sophisticated industries in the context of manufacturing technology.
For most of the twentieth century, the American automobile industry was the most productive in the world. Over the past 20 years, however, the American industry has lost its compara tive advantage. By 1983, Japanese automobile manufacturers, on the average, could produce an automobile for $2,500 less than could American manufacturers.7
The Japanese automobile manufacturers were thought to have acquired a comparative advantage over the American manufactur ers through the widespread introduction of robot technology. The new technology helped the Japanese automobile manufacturing industry to become the most productive in the world. Technol ogy is one means of developing specialization, and creating a comparative advantage.
In response to the actions by the Japanese automobile man ufacturers, the American automobile manufacturers implemented a massive program to convert their production facilities and pro cesses to "highly automated, state of the art" operations that would "put the Japanese to shame."8 The actions taken by the American automobile manufacturers were intended not just to catch up with the Japanese manufacturers, but to actually restore a comparative advantage to the American automobile man ufacturing industry.
The problem for the American automobile manufacturers, however, was that the initiative did not work as it was
7R. Mitchell, "Detroit Stumbles on Its Way to the Future," Business Week, 16 June 198...