A Study into Characteristics of Software Vendors in Japan from a Competitive Environment and Resource-Based Viewpoint

The objectives of this research are to describe the competitive environment in the software industry in Japan and to understand the characteristic differences among manufacturer spin-offs, user spin-offs and independent vendors. Based on management frameworks such as Porter’s five forces and Barney’s resource-based view, we developed a model to measure environmental threats and competitive strengths/weaknesses. We then conducted factor analysis of the data collected from 100 major IT vendors in Japan. On this basis, we extracted eight threat factors, e.g., industry stagnation, difficulty in recruiting bright people, ROI/quality demands from clients, price cutting/quick delivery demands from clients, and adoption of new technology. We also identified six strength/weakness factors, e.g., human capital, advantage of scale, expansive business, inimitability, and stability. Regression tree analysis suggested that manufacturer spin-off vendors tend to significantly expand their business with well-resourced R&D, while user spin-off vendors seem to depend heavily on demand from parent companies, as a result of which some of them are thought to gain inimitable capabilities. On the other hand, many independent vendors supply temporary staff to principal contractors and do not show specific strengths; even so, some independent vendors with inimitable assets are thought to be role models for software vendors in Japan.