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Japan and the Mechanical Pencil Jen Gregory Economics 230 Professor Johnson December 15, 2000

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Page 1: Japan and Pencil

Japan and the Mechanical Pencil

Jen GregoryEconomics 230

Professor JohnsonDecember 15, 2000

Page 2: Japan and Pencil

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Many people prefer the mechanical pencil as a writing tool. Yet people rarely stop to

think about its creation and the innovation behind mechanical pencil technology because the

mechanical pencil is such a small tool and a part of everyday life. But precisely because it does

play a substantial role in people’s daily activities, the mechanical pencil becomes an interesting

object to study. The Pentel Company, Limited paved the way for the invention of the

mechanical pencil. Incorporated in March 1946, the company soon became involved in the

development of Hi-Polymer super lead, which, in turn, led to the creation of the mechanical

pencil.1 Other firms worldwide quickly developed their own pencils. Over time, the form of the

mechanical pencil has changed, allowing for advancements like the side-knock dispension of

lead and eraser dispensers; there is even a patent for a vending machine specifically for

mechanical pencils!2 The creation of new pencils shows no sign of waning. This year alone,

there have been ten new patents for mechanical pencil technology.3 The purpose of this paper is

to examine three different aspects of mechanical pencil technology; all are related some way to

the firms developing mechanical pencils. The first section explores why Japanese firms hold the

vast majority of mechanical pencil patents. The second section discusses the lack of

geographical and industrial diffusion within the technology. The third section explores United

States firms fears about the substitutability of mechanical pencils and their impact on trade

between the US and Japan.

The first important question to ask is what is special about the creation of mechanical

pencils? My data set looks at the location of mechanical pencil technology innovation in the past

twenty-five years. Seventy percent of US patents were granted to firms and inventors in Japan.4

Why has there been such a concentration of geography regarding the development of the

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mechanical pencil? Attila Varga’s argument about time-space patterns of US innovation can be

extended to Japan. According to Varga:

…innovation activities have a predominant tendency to cluster spatially…Sensitivity ofthe transmission of new knowledge to distance provides a principal reason for thedevelopment of regional innovation clusters: the most recent knowledge is usually insuch a complex, uncertain and non-codified form that it cannot be transferred over longdistances via the external innovation networks of firms.5

From my data, it appears that two Japanese firms were able to gain a concentration in the

industry between 1976 and 2000. Proximity allowed these two firms, as well as other Japanese

firms, to feed off of their ideas. As Varga suggests, proximity provided ease in the transfer of

new knowledge. The result is high activity surrounding the creation of mechanical pencils,

which is why seventy percent of patents in the past quarter-century were granted to Japanese

firms and inventors.

For this section, I have gathered data from the USPTO web-site’s bibliographic and full-

text patent databases.6 Looking at the period from 1976-2000, I have put together a table

breaking the patents down by year, patent number, number of references cited by the patent,

number of references to the patent, location of inventor, inventor’s name and firm name (to see

this table, please see Appendix A). From this, I was able to investigate references to firms and

references made by firms, along with firm activity and firm location. Most of my observations

concern relational indicators of innovation. All of the figures, tables and graphs used in the first

part of the paper were created using this data, unless otherwise noted. 36 firms are represented,

including 19 Japanese firms. The firms range in size from “independent” to large. Independent

represents individual inventors unassociated with any firm. There are two independent

categories in the data; one refers to independent inventors in Japan, while the other refers to

independent inventors elsewhere. The most notable large firm is Pentel Kabushiki Kaisha, or

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Pentel Company Limited, with 1419 employees.7 The firms also vary widely in location,

although it should be noted that most locations have several firms associated with them.

Locations include Wisconsin, Massachusetts, Rhode Island, Virginia, New Jersey, New York,

Florida, Texas, Missouri, Georgia, Great Britain, former East Germany, former West Germany,

Taiwan, Korea and Japan.

The majority of the 167 patents were granted to the 19 Japanese firms. To see a

breakdown of these patents, please refer to Figure 1 on the next page. While the average number

of patents per firm is 4.77, the Japanese firms have a higher average of 6.15 patents per firm.

But even within Japanese firms, two firms stand out as exceptional in level of activity. Kotobuki

& Company Limited was granted 37 patents, and Pentel Company Limited was granted 28

patents. These two figures are far above the averages of 4.77 and 6.15 patents. The third highest

firm in the group, Ancos Company Limited, is distant with only 11 patents.

What makes Kotobuki and Pentel stand out among the other firms? Could their

preeminence be due to a similarity in their structures? Pentel is a large, public firm with 1419

employees and 597 shareholders.8 The firm began with the intention to specialize in art

materials, but soon branched into writing instruments and stationary. With capital of 450 million

yen, the firm now sees its four main objectives as the manufacture of fountain pens, fountain pen

nibs and mechanical pencils, as well as the wholesale trade of electrical machinery, appliances

and supplies.9 Kotobuki, on the other hand, is a small to medium-sized public firm that is a

subsidiary of Kotobuki Kabushiki Kaisha.10 The firm focuses on manufacturing fountain pens,

fountain pen nibs and mechanical pencils. Kotobuki only employees 150 people; and with only

5 shareholders and one million yen in capital, Kotobuki appears much smaller than Pentel.11

Perhaps their combined dominance is tied not to similarities in size, but in that the different sizes

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work to each firm’s advantage. Pentel is an established large firm that has long been part of the

industry and has managed to gain dominance by continually coming up with new ideas, while

also being able to build up the size of the company through other ventures. Kotobuki, however,

has remained small and has a narrower focus, allowing the possibility of greater innovation for

mechanical pencil technology.

But for how long have the two firms been dominant in the field? Have they both been

intricately involved in new inventions in the past twenty-five years or have they recently entered

the industry? To answer this question, we can look at a graph comparing patents per year for the

industry overall with patents per year for both Kotobuki and Pentel (see Figure 2 on next page).

The average number of patents per year is approximately 6.96. As a whole, the number of

patents per year appears somewhat cyclical; for several years the number of patents rises and

then peaks, followed by a year or two with very few patents, and then another increase in the

number of patents begins. Pentel seems to demonstrate steady activity, receiving about zero to

two patents a year with notable peaks in 1985 (4 patents) and 2000 (5 patents). Kotobuki, on the

other hand, received an initial patent in 1979 and then became inactive until a peak of 4 patents

in 1986. Decent patent activity for Kotobuki has continued since then with an average of 2.4

patents per year. It is also notable that two peak years for Kotobuki, 1986 and 1990, were also

peak years for patents granted as a whole. It appears that Kotobuki is a relatively new player in

the industry, when compared to Pentel.

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However, Kotobuki has been in the industry for several decades, making it a stable firm

in mechanical pencil technology. With 37 patents, Kotobuki claims 31.62% of all patents

granted in the past twenty-five years. Pentel, with 28 patents, holds 23.93% of all patents.

Together, these two firms hold 55.55% of all patents (see Table 1 below). Clearly, for two firms

to hold such a large majority of patents in an industry of 36 firms shows their preeminence.

Table 1. Patents by Japanese Firm

Firm Number of Patents Percentage

Ancos 11 9.4017094

Iwasaki 1 0.85470085

K&Co.Ltd. 2 1.70940171

Kabushiki 3 2.56410256

Kabushikikaisha

1 0.85470085

Kokuyo 1 0.85470085

Kotobuki 37 31.6239316

Micro 2 1.70940171

Midori 1 0.85470085

Mits. PencilCo.

5 4.27350427

Pentel 28 23.9316239

Pilot Man. 2 1.70940171

Pilot Precision 5 4.27350427

Platinum Pen 1 0.85470085

Sakura 1 0.85470085

Sailor Pen 1 0.85470085

Tombow 4 3.41880342

Yugen 1 0.85470085

Zebra 6 5.12820513

Independent 4 3.41880342

117

We can also see the dominance of Pentel and Kotobuki when we examine the citations

among patents. Counting citations can not tell us the quality of a particular patent, but it can tell

us if it is a notable patent, be it either good or bad. To look at the breakdown of citations to

Japanese firms versus citations to non-Japanese firms within Japan, I took the top 25 Japanese

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patents in terms of number of citations to other patents and I split the citations into two groups,

citations to Japanese firms and citations to non-Japanese firms. Within this sample, 11 of the 19

Japanese firms are represented (see Table 2 below).

Table 2. Citations to Japanese vs. Non-Japanese Firms

Year Patent Number Ref Cited Firm Cite Jap. Firms Cite Non-Jap. Firms

1981 4,270,870 20 Ancos 5 15

1982 4,358,210 11 Ancos 2 9

1981 4,281,939 13 Independent 1 12

2000 6,099,182 24 Kotobuki 14 10

1986 4,603,990 17 Kotobuki 2 15

1991 5,062,727 15 Kotobuki 4 11

1993 5,207,193 15 Kotobuki 4 11

1997 5,702,193 15 Kotobuki 10 5

1991 4,998,837 12 Kotobuki 6 6

1993 5,193,927 12 Kotobuki 1 11

1986 4,620,811 11 Kotobuki 5 6

1993 5,236,271 14 Micro 6 8

1991 5,033,894 12 Mitsubishi 3 9

1994 5,306,085 12 Mitsubishi 8 4

1997 5,642,953 12 Mitsubishi 12 0

2000 6,089,775 14 Pentel 9 5

1983 4,411,543 13 Pentel 8 5

1985 4,504,163 11 Pentel 4 7

1986 4,571,105 11 Pentel 0 11

1980 4,202,641 11 Pilot Kabushiki Kaisha 2 9

1990 4,976,560 14 Sailor Pen 3 11

1992 D324,070 14 Tombow 5 9

1992 D325,045 12 Tombow 3 9

1982 4,343,558 16 Yugen 6 10

1999 5,927,888 13 Zebra 6 7

344 129 215

37.5 62.5

37.5% time cite other Jap. Firms

On average, 37.5% of the time, a Japanese firm cites another Japanese firm in its references.

Considering that Japanese patents constitute 70%, this figure seems low. If spatial clustering had

occurred, then wouldn’t Japanese firms want to cite each other more, since other Japanese firms’

Page 8: Japan and Pencil

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knowledge is more accessible than non-Japanese firms’ knowledge? It should be noted that the

two main firms do have a larger share of Japanese citations (see Figure 3 on next page).

Perhaps because they apply for so many patents Pentel and Kotobuki are more likely to take

advantage of their own resources and, therefore, cite previous inventions from their respective

firms.

Page 9: Japan and Pencil

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Citations can also be categorized by the number of citations to a specific firm. Firms

with a high number of references to themselves can be seen as noteworthy in innovation. In the

following table, I have determined the number of times each firm is cited (see Table 3 below).

Table 3. Number of References to Individual Firms

Firm # Ref. To

A.T. Cross Company 0

A.W. Faber-Castell 44

Ancos Co.,Ltd. 61

Concept, Inc 3

Hallmark Cards, Incorporated 0

Independent-I 74

Independent-J 14

Iwasaki Kinzoku Kogyo Co., Ltd. 2

J.S. Staedtler 13

K&Co.Ltd.,A.T.CrossCompany 3

Kabushiki Kaisha Pilot 11

Kabushikikaisha Kotobuki 8

Kokuyo Kabushiki Kaisha 0

Kotobuki&Co,Ltd. 96

Micro Co.,Ltd. 5

Midori Co.,Ltd. 9

Mitsubishi Pencil Company,Ltd. 15

Nicolet Instrument Corporation 1

Parker Pen (Benelux) B.V. 9

Parker Pen Products 0

Pentech International, Inc. 0

Pentel Kabushiki Kaisha 103

Pilot Man-Nen-Hitsu Kabushiki Kaisha 9

Pilot Precision Kabushiki Kaisha 21

Platinum Pen Co,Ltd. 0

Platinum Pen of America, Inc. 3

Saint Island International Patent and Law Offices 0

Sakura Color Productions Corporation 6

Scripto Inc. 7

T&T Mfg. Company 1

The Gillette Company 5

The Parker Pen Company 2

The Sailor Pen Co.,Ltd. 1

Tombow Pencil Co.Ltd 32

Walgan Corp. 1

Yugen Kaisha Tokyo Kinzoku Seisakusho 3

Zebra Co.,Ltd 18

Page 10: Japan and Pencil

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Total Number References= 580

Number of References to Japanese Firms= 417

Number of References to Other Firms= 163

Mean= 16.11

Mean for Japanese Firms= 21.94

Mean for Other Firms= 9.59

The firms that stand out are A.W. Faber-Castell, Ancos, Kotobuki, Pentel, and Sailor Pen. All

but one of these firms are located in Japan, supporting the idea that Japanese firms represent

greater innovation in the industry. I have included two different categories for independent

inventors, one for Japanese inventors (denoted Independent-J) and one for other inventors

(denoted Independent-I for international). Information about the importance of firms can also be

determined by averages. The overall average is 16.11 citations per firm. However, the average

for Japanese firms rises to 21.94 citations per firm, while the average for other firms falls to 9.59

citations per firm. Because the Japanese average is so much higher than the average for other

firms, this data also suggests that there is more innovation within Japanese firms.

Since the 1940s, mechanical pencil technology has been steadily developing. New

inventions continue to be created each year. In my data set of 36 firms, the 19 Japanese firms

appear, at first glance, to be more innovative, because they collectively hold seventy percent of

the patents granted in the last twenty-five years. This could be interpreted as evidence for

Varga’s argument about spatial clustering and the problem of transferring new knowledge over

long distances. However, it is quickly apparent that much of the dominance can be explained by

the activity of two particular firms. Although Pentel Company Limited and Kotobuki &

Company Limited differ in size and purpose, these differences may give them advantages over

other firms. Pentel has been in the industry since the beginning, giving it plenty of time for

development of new technology. It is also a large firm, allowing for fewer financial worries

Page 11: Japan and Pencil

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because multiple ventures can be undertaken simultaneously. Kotobuki is much smaller, but

since it has a narrowly defined purpose, it can concentrate much of its effort solely on the

development of mechanical pencils. Although Kotobuki’s interest in mechanical pencils is

newer than Pentel’s interest, both firms have existed for at least several decades and continue to

produce; this only adds to their dominance. In fact, the two firms combined hold over fifty

percent of the patents, which is quite notable considering the number of firms in the industry.

Citation evidence casts some doubt on the hypothesis that Japanese firms are unusually

innovative. The percentage of times a Japanese firm cites another Japanese firm is lower than I

would expect if there were strong spatial clustering. However, overall, the average number of

citations to Japanese firms is well above the average number of citations to a firm. Finally,

although the Japanese firm citing other Japanese firms figure is low, this figure does rise when

looking exclusively at the two main firms. Perhaps Japanese firms are more innovative, as a

whole, than non-Japanese firms, but much of the difference in innovation and number of patents

held is really due to a market concentration of two firms, Kotobuki and Pentel, which are located

in the same country. While close proximity helps with the spread of knowledge to the other

firms, clustering may be slow to occur or relatively knew to the industry.

However, Japanese firms, while not necessarily highly innovative, are more innovative

nationally than other countries. Even if spatial clustering revolves around only two firms, some

spatial clustering has occurred in the last twenty-five years in Japan. What is the explanation for

this geographical phenomenon? Did industrial factors play a part in determining the location of

mechanical pencil manufacturing? In this section of the paper, we can see that spatial clustering

theory holds for mechanical pencil technology by examining geographic data and international

patent classifications. External economies and path dependence determined not only

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geographical diffusion but industrial diffusion as well; ultimately, the industry has experienced

little diffusion in either realm, partially because of the nature of the technology and its innovation

process.

The data used in this section come from the same source as my first section of the paper,

the United States Patent and Trademark Organization web-site. For the geographical part of the

paper, the same 167 patents from the first section are examined. However, an adjusted number

of patents are used to analyze the industrial aspects of diffusion. Appendix B shows the

breakdown of these patents by listing year, international patent classifications, patent number,

location of invention and firm name. One important difference in the two parts is that the

number of patents used in the second part is smaller; in the geographic part, all 167 patents are

used, but in industrial part of the analysis only 138 patents are used. This is because some of the

patents are not conducive to international patent classifications. These patents differ from others

in that they were assigned for a limited term of fourteen years rather than the standard seventeen

years; these patents were assigned either a four-digit number for an IPC or no IPC at all. The

reasons behind limited terms and no IPCs are unclear from reading the patents themselves. But

as a result of not having an IPC, these patents could not be included in the breakdown of IPC

classes.12

The locations of production have shifted slightly over the past twenty-five years, but

Japan’s dominant presence holds for most of the time period. For every year except 1976 and

1996, Japan has been granted at least one patent. The shifts in location and Japan’s preeminence

are also apparent in the graph “Number of Patents per Year by Location” (see Figure 4 on next

page).

Page 13: Japan and Pencil

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Korea, Taiwan and Great Britain combined are virtually inactive, except for six of the twenty-

five years. Germany starts out as a fairly active participant, but this begins to change around

1980. In fact, 1987 is the last year that Germany is granted a patent. The United States and

Japan, on the other hand, hold the most patents and they received patents over the entire time

period. But Japan is distinct from the United States because it holds such a large majority of the

patents, about seventy percent. Although it took a few years for Japanese mechanical pencil

patents to get off the ground, by 1980 Japanese firms had pulled ahead with six patents granted

for the year. After 1980, for every year except one (1996) Japan received more patents than any

other nation. For half of the twenty-five years, Japanese firms received five or more patents.

The Japanese average of 7.08 patents per year is far above any other country’s average. The

second closest country is the United States with an much lower average of only 1.32 patents per

year (see Table 4 below).

Table 4. Total and Average Patents per Country

Japan United States Germany Great Britain Taiwan Korea

Total 220.1 59.32 13.4 4.08 6.12 1.04

Avg. 7.08 1.32 0.4 0.08 0.12 0.04

Clearly, there is a long-standing geographical concentration of mechanical pencil patents

in Japan. Spatial clustering theory provides some explanation for the phenomenon. Attila Varga

argues that when innovation activities tend to cluster in geographic areas, then regional

innovation systems often form.13 I believe that a regional innovation system has developed in

Japan, thanks to a market concentration achieved by two Japanese firms in the last twenty-five

years. Creating mechanical pencils is neither a labor-intensive nor a capital-intensive process.

In many respects, the physical process of creating a pencil is simple. Rather, innovation depends

Page 14: Japan and Pencil

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heavily on the minds of the people inventing the pencils. Varga also argues that “the most recent

knowledge is usually in such a complex, uncertain and non-codified form that it cannot be

transferred over long distances via the external innovation networks of firms.”14 If the

innovation process behind mechanical pencils relies primarily on the thought process of

inventors, then we can understand how it is difficult to spread these ideas over distances through

formal external networks.

On the other hand, having other inventors in close proximity suggests that external

economies could be advantageous because a local network can be set up to spread ideas. Since a

market concentration exists, we know that there are inventors in Japan who could easily

exchange information. According to Norton:

external economies encourage the agglomeration of firms in a particular place or regionby lowering firms’ costs of production….The larger supply of…inputs in the area, thelower the costs of production to all the firms in the industry. Also, as these inputsbecome more specialised, they may become more productive. So each firm in the area ismore competitive than if it had operated in isolation.15

This argument makes sense for the traditional inputs of capital and labor. If we treat thought

process as an input as well, then we can see an additional reason why regional location of firms

can affect costs. Japanese inventors in close proximity can exchange ideas, enabling a greater

flow of knowledge. If inventors have increased access to new thoughts and thought process is an

input necessary for the production of mechanical pencils, then costs will be lowered. External

economies provide appealing benefits for the key inputs of the technology.

Market concentration provides another possible explanation for spatial clustering.

Market concentration was consolidated early on in the creation of the technology; as a result,

path dependence (standard-setting) may have developed. If a firm in a competitive environment

gains an advantage in the technology and becomes capable of setting an industry standard, it can

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“lock-in” the industry into a certain region.16 People tend to fall into patterns of behavior

quickly, making path-dependence appealing. If one firm has set good protocol, then why should

other firms not want to follow? Following an effective protocol could be less costly than

creating one’s own standards. Not only will firms within the region look to the standard-setting

firm, but also other firms entering the industry will choose to locate near the dominant firm so

that they can take advantage of easier transfers of knowledge.

By looking at what has happened within the industry in the last twenty-five years, we can

see how the mechanical pencil industry could be susceptible to both external economies and

path-dependence. To do this, it is necessary to analyze international patent classifications.

Within the 138 patents, 202 IPCs are cited. Out of the 202, 188 fall within one category, B43K

(see Appendix B). For the vast majority of the IPCs to belong to the same category shows how

narrowly defined innovation is for the industry. A few IPCs fall under the sections of “human

necessities” or “physics”, but the remainder belong to the “performing operations;

transportation” section. According to IPC definitions, the B43K classification contains

“implements for writing or drawing with core and a feeding-mechanism”, as opposed to writing

implements without feeding-mechanisms.17 Following the category is a four-digit code

representing one of the different subclasses within the category. Even here, the classifications

are concentrated in seven subclasses out of 130 possible subclasses.18 To see the subclasses

cited, refer to Table 5 (below).

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Table 5. Citation of Subclasses

Subclass Number of Times SubclassAppears

.5/16 1

.7/00 1

.9/00 1

15/00 1

19/14 1

21/00 13

21/02 12

21/03 1

21/04 3

21/06 8

21/08 8

21/10 2

21/14 1

21/16 34

21/18 1

21/20 6

21/22 39

21/24 1

23/08 1

24/00 1

24/02 1

24/04 5

24/06 1

24/08 2

24/10 4

24/14 1

24/16 1

24/18 1

25/00 4

27/00 3

27/02 2

27/12 2

27/14 2

27/20 1

29/00 3

29/02 13

29/10 1

31/00 1

Totals

38 184

Average 4.842105263

Out of 38 codes and 184 citations, the average number of times a particular code appears is

roughly five. Any code that appears more than eight times has been highlighted in red. Two

codes in particular stand out: they are B43K 21/16 with 34 citations and B43K 21/22 with 39

citations. Out of the seven most common subclasses, five focus on writing-core feeding

mechanisms, further narrowing the inventors’ field of innovation.19 Table 6 (on next page)

shows year and the codes cited in that year. The seven most common subclasses are highlighted

in red. For any given year in the chart, these subclasses make up a substantial portion of the

subclasses cited.

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Table 6. IPC Codes Cited in a Given Year

Year Code

1976 21/22

1977 21/00, 21/16, 29/10

1978 21/20, 21/22

1979 21/02, 21/08, 21/16, 21/22, 24/06, 27/00, 27/12, 27/14

1980 21/00, 21/16, 21/22, 23/02, 24/10, 24/16, 24/18, 27/02, 27/12

1980 .5/16, 21/00, 21/08, 21/16, 21/22, 24/02, 24/10, 27/14, 27/20

1981 .5/16, 21/22, 24/02

1982 21/00, 21/10, 21/16, 21/22, 24/10, 29/00, 29/02

1983 21/16, 21/22

1984 21/02, 21/08

1985 .9/00, 21/02, 21/04, 21/08, 21/16, 21/20, 21/22, 24/00, 24/08

1986 21/00, 21/06, 21/08, 21/16, 21/20, 21/22

1987 21/00, 21/02, 21/04, 21/16, 21/20, 21/22, 21/24

1988 21/06, 21/16, 21/22, 24/04

1989 .9/00, 15/00, 21/00, 21/02, 21/16, 21/22, 24/10 27/00, 29/00, 31/00

1990 21/02, 21/06, 21/08, 21/14, 21/16, 21/20, 21/22, 24/04, 24/08, 29/02

1991 19/14, 21/00, 21/02, 21/04, 21/06, 21/20, 21/22, 24/04, 29/02

1992 21/02, 21/06, 21/22, 24/04, 29/02

1993 21/03, 21/22, 29/02

1994 21/16, 21/22, 24/14, 29/02

1995 21/06, 24/04, 29/02

1996 21/00

1997 21/08, 21/10, 21/16, 21/22, 25/00, 27/00

1998 7/00, 21/02, 21/16, 21/22, 29/02

1999 21/02, 21/06, 21/18, 21/22, 23/08, 25/00, 29/00

2000 21/16, 25/00

The narrow range in IPCs suggests that mechanical pencil technology is not industrially

diffuse. Also, the fact that the majority of patents focus on feeding-mechanisms provides

additional support for spatial clustering. The concentration surrounding feeding-mechanisms

supplies evidence for Norton’s assertion that “as…inputs become more specialised, they become

more productive.”20 If, once again, we view thought process as an input, then focusing the

formulation of new ideas around one specific area—feeding-mechanisms—specializes the input,

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making firms more productive. Ideas about feeding-mechanisms could have been set by one

firm (an example of standard-setting) and then they were spread around the region for other

firms to refine (an example of external economies).

It would be difficult to argue that spatial clustering of mechanical pencil technology

hasn’t happened to some degree in Japan. This clustering results from an early market

concentration gained by two Japanese firms. A regional innovation system developed, leading to

a greater flow of information between firms in Japan. External economies provided benefits to

firms regarding inputs; costs were lowered and specialization of the thought process around

feeding-mechanisms made the firms more productive. Market concentration also led to path-

dependence. It was easier for other firms to locate near the two main firms and to adopt their

standards than to create separate protocols. In the end, clustering in Japan and an emphasis on

the further development of feeding-mechanisms have led to little geographic or industrial

diffusion in mechanical pencil technology.

Moreover, not only has mechanical pencil technology shown little diffuison

geographically and industrially, but American fears have played a part in limiting the diffusion

of the technology as well. These fears have an interesting impact on the balance of trade

regarding writing implements. In his discussion of facsimile technology, Henry Petroski draws a

comparison to the development of the mechanical pencil. Describing American firms’

dissatisfaction with fax machine sales, Petroski explains:

The situation was not unlike the way some American pencil manufacturers deliberatelychose not to pursue the development of fine-line mechanical pencil technology, althoughin that case it was not just a question of return on investment, for it was feared that thenewer product might compete with the established wood-cased pencil market. Thus,Japanese firms developed the American-invented technology, and eventually virtually allfine-line mechanical pencils sold in America were made in Japan.21

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American firms feared that the mechanical pencil would become a cheaper substitute for

traditional pencils, a good for which markets were already firmly established. US fears that the

mechanical pencil would be a cheap substitute for wood-cased pencils led US firms to abandon

development projects; as a result, the balance of trade shifted towards Japan, where firms began

exporting more mechanical pencils to the United States. In addition, US imports of writing

implements increased at a much faster rate than Japanese imports.

The data collected for this section of the paper come from two sources. One is Appendix

A, specifically looking at the firms that were granted patents. Information on exports and

imports comes from the International Trade Statistics Yearbooks. Here, I looked at the

commodity matrix tables. The table for commodity 8952 provided the value of exports and

imports of pens, pencils, and fountain pens for the United States and Japan. The table for

commodity 89521 provided the value of exports and imports of pens. By taking the differences

between the two commodities, I created a table for the value of pencil imports and exports. All

three tables contain information for the years 1976-1993 (see Appendix B).

Evidence for Petroski’s argument comes from United States patents for mechanical

pencils. While it has already been established that two Japanese firms dominated the market,

what was the employment status of Japanese and US mechanical pencil inventors? Were

inventors more likely to be working for firms or did they work independently? Only 4 of 117

patents were granted to independent Japanese inventors while 18 of 34 patents were granted to

independent American inventors (see Appendix A). This means that Japan had an independent

inventor rate of 3.4% compared to a US independent inventor rate of 52.9%. It seems that US

inventors preferred to work independently; or, that they were unable to get any backing from

firms for their inventions. If Petroski’s argument holds true, then the lack of firm support makes

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sense. If a firm fears the possible substitution of mechanical pencils for wood-cased pencils,

then why should it provide financial backing for the inventors of mechanical pencils? The fact

that so many US inventors worked independently, while Japanese inventors found financial

support from firms, shows that US firms were afraid of the substitutability of mechanical pencils.

In fact, while Japanese inventors hold 70% of all patents, US inventors hold only 20% of all

patents. Of these patents, about 52% were granted to independent inventors (see Appendix A).

Fewer mechanical pencils have been developed in the United States; when they were developed

in the US, half the time firms weren’t involved.

How did US fears affect trade? The first way to answer this question is to look at the

trade balance for writing implements. Looking at volume per year of pencil and pen, pen, and

pencil imports, it is clear that the United States has always had a larger volume (see Figures 5-7

on the following pages). For the most part, the value of imports has been increasing for both

countries. However, in the early to mid-1980s, the rate at which US volume increased rose

sharply. Today, US imports continue to increase at this higher rate. The Japanese rate of

change, in comparison, has remained fairly steady. Because fewer substitutes for wood-cased

pencils were developed in the US and they continue to remain undeveloped, then there is little

reason why the Japanese rate of increase should have changed. During the mid-1980s for all

three categories, the Japanese import rate was relatively low and constant, compared to US rates,

which all underwent steep increases. As Japanese firms invent more and more different pencils,

and US firms continue to not invent them, then the US will need to import more writing

implements at increasing rates to meet increasing demand for the new types of writing

implements.

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A similar analysis can be applied to export volume. First expectations would be that US

exports should remain steady or decline, while Japanese exports should increase considerably.

This is because Japanese firms provide a preferable substitute to traditional pencils while US

firms refuse to provide the same substitute. However, the changes in volume of exports are not

this simple in explanation. In the end, Japanese exports are increasing at a faster rate and have a

value than US exports. However, there is variation within the entire period that must be

examined. Regarding the exports of pens and pencils, the United States had a slight lead for the

year 1976, but after that, Japan always had the higher volume. The value of exports climbs from

about $100 million dollars in 1976 to above $600 million in 1993. US exports start at about

$100 million as well, rise comparably with Japanese exports until about 1981, then remain

constant and face a sharp decline in 1985, ending with a gradual increase in volume to about

$250 million in 1993 (see Figure 8 on following page).

With pen exports, the US has a greater value until 1978, followed by a gradual decline

and then increase in value; the overall change in value from 1976 to 1993 is a little over a $100

million. However, Japanese exports increase throughout the time period, with an initial value of

roughly $70 million and an ending value of somewhere over $500 million (see Figure 9 on

following page). While it is clear that the value of exports in categories has increased for both

countries, the Japanese change is more striking in both cases.

Pencil export volume can be divided into three periods. From 1976-1980, Japan exported

more pencils than the United States did. However, in 1981, US pencil exports soared. From

1981-1985, US pencil exports remained well above Japanese exports in volume. This changed in

1986 when exports fell dramatically from $160 million to under $20 million. By 1993, US

exports had only increased to $40 million. From 1986 on, Japanese pencil exports have

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maintained a higher volume. Over the entire time period, Japanese exports increased form about

$20 million to just over $80 million (see Figure 10 on following page).

While it seems that overall, Japanese writing implement exports have increased in

volume and far surpassed US exports, the 1981-1986 period in pencil exports is difficult to

explain. Some explanation may come from examining patent activity. A particularly active

period of Japanese innovation (measured by number of patents granted in the period) would lead

to more pencil exports, and perhaps more exports of writing implements as a whole. Or,

conversely, a dormant period in Japanese mechanical pencil innovation would lead to more US

exports. In the mid-1980s, there was an increase in the number of patents granted to Japanese

firms (see Figure 2 following page 5). Beginning in 1986, both Pentel and Kotobuki &

Company were regularly being granted patents. 1986 is also the year when US pencil exports

dropped to its lowest level and pen and pencil exports also dropped by over a million dollars.

Japanese patent activity didn’t start to pick up until about 1985 which can explain the increased

rate of Japanese exports, as well as the decline in US exports, from 1986 onward. However, the

1980-1986 boom in US exports still remains unexplained. The 1980-1986 period of Japanese

patent activity is no less dormant than the 1976-1979 period. Low levels of US patent activity

during this ten-year period remain relatively constant as well. In the end, it appears that there is

little correlation between number of patents granted and US export values from 1980-1986.

Perhaps a better analysis would examine patent citations, not just the sheer number of

patents granted. The more a patent is cited, the more likely its content holds some significance

in the advancement of the technology. If a number of US patents were heavily cited in the late

70s and early 80s, then the sudden increase in US exports could be a result of US innovation. If

more Japanese patents were cited in the early 80s, the rapid increase in volume of Japanese

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exports could also be explained. The average number of times a patent is cited is roughly three.

In the period leading up to 1980, no US patents are cited more than the average number of times,

suggesting that those patents are not particularly meaningful and that patents alone can not

account for the unexpected increase in US pencil export volume. The explanation for this

phenomenon most likely lies in outside factors not considered in this paper.

Japan, on the other hand, was granted a number of patents with citations significantly

above the average from 1980-1985, the year before US exports fell (see Table 7 below). If the

number of patents is more than double the average, it has been highlighted in red.

Citations to Japanese Patents 1980-1985

Table 7. Number of Citations to Japanese Firms 1980-1985

Year # of Citations Firm

1980 9 Pentel Kabushiki Kaisha

1980 10 Zebra Co.,Ltd

1980 6 Ancos Co.,Ltd.

1980 1 Pentel Kabushiki Kaisha

1980 6 Pilot Precision Kabushiki Kaisha

1980 7 Pilot Man-Nen-Hitsu Kabushiki Kaisha

1981 4 Pentel Kabushiki Kaisha

1981 4

1981 5 Zebra Co.,Ltd

1981 2

1981 13 Ancos Co.,Ltd.

1981 1 Zebra Co.,Ltd

1981 10 Ancos Co.,Ltd.

1981 6 Sakura Color Productions Corporation

1981 8 Pentel Kabushiki Kaisha

1982 4 Ancos Co.,Ltd.

1982 2 Pentel Kabushiki Kaisha

1982 9 Ancos Co.,Ltd.

1982 10 Mitsubishi Pencil Company,Ltd.

1982 3 Yugen Kaisha Tokyo Kinzoku Seisakusho

1983 0 Pentel Kabushiki Kaisha

1983 26 Pentel Kabushiki Kaisha

1983 3 Ancos Co.,Ltd.

1984 4 Pentel Kabushiki Kaisha

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1984 8 Pilot Precision Kabushiki Kaisha

1985 2 Ancos Co.,Ltd.

1985 14 Pentel Kabushiki Kaisha

1985 5 Pentel Kabushiki Kaisha

1985 6 Pentel Kabushiki Kaisha

Twelve patents had seven or more citations. Two exceptional patents were granted to Pentel in

1983 and 1985, right before the turning point in exports. These patents are cited 26 and 14

times, respectively. In Japan’s case, it is more apparent that a number of significant Japanese

patents helped Japanese firms continue to export pencils and could have had an impact on US

exports by 1986. If Japanese firms were making more significant advances in a technology that

US firms weren’t wholeheartedly pursuing, then Japanese developments could have provided US

firms with the incentive necessary to decrease export levels of all pencils. Japan would then

have the opportunity to export even more pencils.

In the period between 1976-1993, Japanese exports of both pencils and pens have

increased considerably. From US patents, we can see that American firms did indeed shy away

from developing mechanical pencils; this is because they were afraid that mechanical pencils

would become a cheap substitute for wood-cased pencils, and therefore, affect their profits. In

fact, half the time US patents were granted to independent inventors, not firms. Both imports

and exports in Japan and the US were impacted by American firms’ lack of innovation.

Although imports in both countries increased, around the mid-1980s, US imports began to

increase at a much faster rate. By 1993, the gap between import values for pencils was about

$100 million dollars. Exports for both countries show an overall increase in volume as well.

However, by 1993, Japanese exports were much higher in value than US exports. Changes in

1985-1986 gave Japan an advantage in trade. The unexplained American boom in pencil exports

ended, significant patents were granted and Kotobuki began developing more pencils,

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demonstrating that Japanese innovation in mechanical pencils was strong. In addition, US

exports of writing implements declined—most likely because firms decided to develop even

fewer substitutable writing implements for traditional pencils. By 1993, Japan had a clear

advantage in the trade of writing implements.

In conclusion, mechanical pencil technology has been developing for more than half a

century; industry structure and advancements made in the technology have impacted both the

diffusion of the technology and the trade situation of writing implements. Early on in the

development process, two Japanese firms, Pentel Company Limited and Kotobuki & Company

Limited, achieved market concentrations. Their dominance continues today; in the past twenty-

five years, the two firms combined have been granted over 50% of all mechanical pencil patents.

Spatial clustering has its roots in the market concentrations of these two firms. Although other

Japanese firms have been slower to cite Japanese patents, nevertheless, citation practice has

begun and an innovation network has formed within Japan. External economies surrounding the

input of thought process led to lower costs and higher productivity. Protocol set by Pentel and

Kotobuki also created a situation of path-dependence. As a result, little industrial and

geographical diffusion occurred within the industry. The majority of mechanical pencils are

developed in Japan, and technological advancement centers around improving feeding-

mechanisms. Japanese preeminence in development has only been exacerbated by American

fears about the substitutability of mechanical pencils. From 1976-1993, both imports and

exports of pencils and other writing implements have increased in the US and Japan. However,

around the mid-1980s, US imports began to increase at a much faster rate. Today, US writing

implements imports far surpass Japanese imports. By 1986, Japan had clearly eclipsed the US in

pencil exports. Citations amongst Japanese firms also showed that significant patents were

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granted in the 1980s, suggesting that Japanese innovation in mechanical pencils was strong.

Today, Japanese firms still maintain their lead in the market and continue to create more

innovative patents than American firms do. In the end, changes in mechanical pencil technology

depend more upon the actions of Japanese firms than those of American inventors.

1 From “Pentel Profile”, found at: http://www.pentel.com/2prof.html “Pentel Company Info”, found at: http://web.lexis-nexis.com/universe/document?_ansset=GeHauKO-EZYRMsSEZYRUUWRAEB-ABCB-A-WRBUREDAYYYUADRURARARURBU&_docnum=25&dateseg=1&_startdoc=1&_fmtstr=FULL&_dltype=CITE&_session=15d42626-a517-11d4-b209-8a0c5822aa77.608323915.3149340766.54905.%20.0.0&_state=_lastsearchpage%25a4%2funiverse%2fform%2facademic%2fs_cofin.html%25a3AD_FORM%25a4s_cofin%25a3S1%25a4CompanyName%25a3T1%25a4Pentel%25a3T2%25a4%25a3srccat%25a4COMPNY%3bINTLCO%25a3_source%25a4$srccat%25a3date%25a4AFT%25a3after%25a40%3aALL%25a3frm_rng%25a4%25a3to_rng%25a4%25a3&wchp=dGLStV-lSlzV&_md5=a96b524923d7e650d492848ff1234644

2 Patent Number 5,240,143, found at: http://patents.uspto.gov/cgi-bin/ifetch4?ENG+PATBIB-ALL+0+989490+4+3+285722+OF+48+167+1+%22mechanical+pencil%22

3 From a boolean bibliographic search on the USPTO.gov web-site for year 1999-2000; term 1: “mechanical pencil”:http://128.109.179.23/cgi-bin/bool_srch4?INDEX+0

4 See Appendix A attached at the end of the paper.5 Attila Varga. “Time-Space Patterns of US Innovation: Stability or Change.” Innovation, Networks and Localities.Eds. Manfred M. Fischer, Luis Suarez-Villa and Michael Steiner. New York: Springer, 1999, 215.6 At the USPTO.gov web-site I performed a bibliographic boolean search to find my data. I searched for patents forall years; term 1: “mechanical pencil” for all years. From the list given to me, I looked up each individual patent tofind location, inventor, firm, references to the patent and references to other patents. I organized all this informationin a table which can be found at the end of the paper. The list of patents can be found at: http://128.109.179.23/cgi-bin/bool_srch4?INDEX+0. All the tables and graphs in the rest of the paper were created using this data.

7 “Pentel Company Info”8 Ibid.9 Ibid.10 I owe thanks to a Wellesley student, Pam Pontius, for explaining to me how subsidiaries in Japan work and forconfiriming that Kotobuki & Company, Limited is a subsidiary of Kotobuki Kabushiki Kaisha, even though thecompany names translate to roughly the same thing in English.11 From “Kotobuki Company Info”, found at: http://web.lexis-nexis.com/universe/document?_ansset=GeHauKO-EVERMsSEVERUUWRADV-AABB-V-YRWVAREDAYYYCBBRURARARURWVA&_docnum=92&dateseg=1&_startdoc=76&_fmtstr=FULL&_dltype=CITE&_session=41bafa0c-a518-11d4-92db-8a0c583baa77.613491155.3149341270.54906.%20.0.0&_state=_lastsearchpage%25a4%2funiverse%2fform%2facademic%2fs_cofin.html%25a3AD_FORM%25a4s_cofin%25a3S1%25a4CompanyName%25a3T1%25a4Kotobuki%20%25a3T2%25a4%25a3srccat%25a4COMPNY%3bINTLCO%25a3_source%25a4$srccat%25a3date%25a4AFT%25a3after%25a40%3aALL%25a3frm_rng%25a4%25a3to_rng%25a4%25a3&wchp=dGLSlS-lSlzV&_md5=0185426f4fa3ed5b5364a0592fc8dc68

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12 Information found from a boolean bibliographic search on the USPTO.gov web-site for year 1976-2000; term 1:“mechanical pencil”: http://128.109.179.23/cgi-bin/bool_srch4?INDEX+013 Varga. 215.14 Ibid.15 R.D. Norton, “Where Are the World’s Top 100 I.T. Firms And Why?” Innovation, Networks and Localities. Eds.Manfred M. Fischer, Luis Suarez-Villa and Michael Steiner. New York: Springer, 1999, 247-8.16 Ibid, 252.17From “International Classifications”: http://classifications.wipo.int/fulltext/new_ipc/index.htm18 Ibid.19 Ibid.20 Norton, 252.21 Henry Petroski., Invention by Design. Cambridge: Harvard University Press, 1996, 113.Petroski, 113.