Just as a good deal has been written about the microelectronics industry, so the subjects of strategy and core competencies have been discussed and analysed at great length. With specific regard to strategy, the doyen of thinkers on this topic remains Michael Porter, whose work on competitive strategy especially continues to provide an effective framework for the analysis of corporate and industrial performance. This is not the place to review all of Porter's work, given its breadth and depth.[21] At the same time, in noting how some of his thoughts can be applied directly to an analysis of the British microelectronics industry's performance, one can provide an instructive framework that helps us to understand the role played by technology transfer in this unfolding scenario. In the first place, as Porter notes, effective strategic management involves the design of policies and actions that provides the basis for one firm to achieve a competitive advantage over its rivals. It is by no means a static process, because competitive advantage can only be sustained by a dynamic and constant rate of innovation, either in technological or broadly managerial senses.
Looking at this issue in greater detail, it is apparent that management must pay especially close attention to product life-cycles and how the firm'sproduct range is positioned in the marketplace. This assessment involves differentiating between a variety of choices that Porter classifies as generic strategies. These are:

1. Cost Leadership (lower prices of medium-quality goods)
2. Differentiation (high quality at premium prices)
3. Cost Focus (simple products at low prices)
4. Focused Differentiation (specialized products at premium prices)

• Technology Leadership
• Technology Followership

3. The British Microelectronics Industry.

While British firms were amongst the first to acquire the Bell Lab'stransistor patents in the early-1950s, encouraged by the provision of government grants (supplied principally by the CVD operations of the Ministry of Supply),[29] it is clear that until the 1960s a substantial market for semiconductors failed to materialise. This is surprising, given that the British mainframe computer industry was the largest in Europe and demand for domestic appliances like televisions and radios was booming. Although British semiconductor production had expanded from virtually nothing in 1952 to almost £15 million by 1963, this contrasts sharply with the scale of American production (£350 million). Moreover, imports already accounted for 27% of British consumption, while by that time Texas Instruments, Fairchild and Motorola had established manufacturing plants in the UK in anticipation of future market growth.[30] With the successful development of new production techniques like the diffusion and planar processes, firms were also faced with rapidly-escalating capital costs, as well as the need to spend profusely on R&D. As a consequence of this increasingly difficult market environment, by 1968 six of the seventeen British semiconductor manufacturers had pulled out of this sector, starting a trend that accelerated over the following fifteen years.[31] It is also noteworthy that by 1968 four US firms (Texas Instruments, Fairchild, STC and Motorola) accounted for 50% of British semiconductor consumption, further exacerbating the challenges faced by British operations when faced with direct competition from the world's major players.
Of course, this brief summary of post-war trends in British semiconductors fails to do justice to the many attempts made by both government ministries and corporate planners to exploit this revolutionary new technology. After all, British electronics firms were faced with exactly the same problems that encouraged Bell Lab's and its counterparts to investigate the potential in semiconductors, especially the 'tyranny of numbers' imposed by the first generation of component, the thermionic emission valve. Government ministries like the Ministry of Supply and the various defence-related sections of Whitehall had also come to realise that semiconductors offered designers a more effective means of building robust and compact circuits. The Ministry of Supply's CVD group was an especially important body in this context, funding most of the British trips to Bell Lab's symposia in 1952 and 1956, as well as providing the licence fees. The aviation and army branches of the defence establishment were also willing to fund research into microelectronics. This also led to some pioneering work at the Royal Radar Establishment, where in 1952 Professor Dummer devised the world's first laboratory IC. Yet this was, in retrospect, the key issue: as McCalman notes, British government support for microelectronics concentrated excessively on fundamental research, rather than fundamental development.[32] Experimental programmes there were aplenty, but this prevented management from identifying the key product markets for a technology developed elsewhere. It was a highly confusing situation for corporate planners, with state policies emphasising original research and US firms dominating the end-user markets.
In spite of these experiments with semiconductors, it is clear from Golding's data that British electronics firms failed to keep pace with their US counterparts. In fact, Golding has estimated that when one considers the seventeen major semiconductor innovations between 1951 and 1965, on average British firms were 1.6 years behind in bringing out a commercial product.[33] Furthermore, when one considers both the scale of the US market and the pump-priming prices offered at the beginning of the product cycle by major customers like NASA and the USAF, it is clear that British firms were placed at a considerable competitive disadvantage. It is also important to stress that in the 1950s British firms producing either electronic appliances or capital equipment were slow to convert from first-generation to second-generation components, undermining the potential advantages one might have expected from having Europe's largest computer industry and booming consumer markets. Needless to say, neither the military nor the space programmes in Britain matched those of the USA, limiting the prospects of forging a similar pump-priming relationship to that enjoyed by the likes of Texas Instruments and Fairchild.
While these market-cum-technological limitations undoubtedly help to explain why by the early-1960s British firms were falling behind their American rivals, in analysing this decisive trend one must also assess the corporate landscape. In particular, it is apparent that once Bell Lab'shad made its initial contribution to semiconductor technology, the US industry advanced on the basis of small, aggressive firms clustered in Silicon Valley, California. This characteristic can best be demonstrated by looking at Fairchild Semiconductors, because this operation was started in 1957 by eight young scientists who had originally worked for the firm created by William Shockley after he left Bell Lab's in 1955.[34] At the centre of this team were two of the most influential microelectronics engineers of that era, Robert Noyce and Gordon Moore, who were responsible for creating Intel in 1968. As Saxenian has outlined in her study of the US microelectronics industry, by their very nature firms like this were highly fragmented, alternately communicating with rivals and competing for both market share and skilled engineers and management. Stanford University in Palo Alto also played a key role in this scenario, feeding knowledge and personnel into a highly innovative industrial cluster that by the 1960s had become the symbol of the USA's lead in microelectronics.[35]
In stark contrast to this clustering and networking, the British-owned microelectronics industry was dominated by highly diversified firms that lacked any geographical focus. While it was clearly useful for semiconductor research teams to have access to an internal market for its components, this rarely provided anything other than a specialised source of custom that would appear to have distracted engineers from the need to cater for a mass-market. This is best illustrated by looking more closely at the firm that came to dominate the British electrical and electronics industries, GEC.[36] This highly diversified firm was provided with two opportunities to establish a competitive microelectronics division, firstly when in 1961 it merged its semiconductor activities with Mullard, to create Associated Semi-conductor Manufacturers (ASM), and secondly, when in 1967 and 1968 it acquired its two major rivals, respectively, AEI and English Electric. Unfortunately, though, while ASM had at its disposal the considerable resources of Mullard's parent company, Philips, it took until 1967 before IC's were being produced. This placed ASM at such a competitive disadvantage to its established rivals, especially the US firms and British rivals like Plessey and Ferranti, that GEC's financially-oriented chief executive, Arnold Weinstock, withdrew from the partnership in 1968. Although it was just at this time that GEC acquired the well-respected microelectronics research activities of AEI and English Electric, Weinstock had become so disillusioned with the commercial prospects in this sector that he closed two semiconductor factories (at Witton and Glenrothes), relegating the firm to a relatively minor position in the microelectronics industry.[37]
The reluctance of Britain's leading electrical-electronics firm to take on the American and European leaders in microelectronics typified the risk-averse approach of its chief executive, Arnold Weinstock, and finance director, Kenneth Bond. One might argue that this position was based on a highly rational assessment of the commercial prospects in a sector that was already dominated by global players, especially given the costs involved in both R&D and capital expenditure on production facilities. On the other hand, GEC's preference for the more commercially-safe markets associated with power plant, telecommunications or defence severely constrained its ability to pursue a technology-leadership strategy, or indeed a technology-followership strategy. A belated attempt to rebuild GEC's microelectronics efforts was made in 1978, when a joint venture was launched with the US IC pioneer, Fairchild. However, by that time Fairchild had lost its technical and commercial lead to Intel and several Japanese corporations, leading to its acquisition by a French firm, Schlumberger, and the collapse of the GEC arrangement. The obvious British 'national champion' had failed once again to exploit its inherent advantages by choosing a partner that was no longer capable of injecting the kind of technological capabilities that would then have been required to compete with the best.
Briefly summarising this section, it is clear that the British microelectronics effort lacked focus and dynamism. As a consequence, of the seventeen firms operating in the British microelectronics market by 1977, only four were British-owned, while together they accounted for less than 15% of domestic consumption.[38] Even though the British government provided much less funding than its American counterpart, considerable sums of taxpayers' money were spent acquiring American technology and familiarising British engineers with what firms like Bell Lab's, Texas Instruments and Fairchild were doing. The key issue, though, is how this synchronised with the strategies pursued by those British firms that contemplated maintaining a microelectronics presence, given the market and institutional characteristics that operated at that time. By focusing on the firm of Ferranti, it will be possible to assess in greater detail how these factors coincided to undermine the competitive strategies pursued by British microelectronics manufacturers.

4. The Leading European player: Ferranti.

Although never capable of matching those American (General Electric and Westinghouse) or German (Siemens and AEG) firms which gained first-mover adv antages in the fields of electrical and electronic engineering, over the course of its history, from an inauspicious launch in 1882 to an ignominious collapse in 1993, Ferranti built up a world-wide reputation for technological innovation in a series of important niche markets.[39]From the early decades, it pioneered (at least in Europe) a wide range of products, from large generators, transformers, high voltage cables and meters in the first five decades, to avionic equipment, computer systems and microelectronic components more recently. Even when in 1975, following a major liquidity crisis, the firm was virtually nationalised and a professional manager was brought in to replace the family regime, Ferranti retained a character which was essentially built on the technology-led strategy first established by Sebastian Ziani de Ferranti (1864-1930) during a highly productive career. This culture was maintained by both the founder's son (Sir Vincent de Ferranti) and grandson (Sebastian de Ferranti) while they were running the business, respectively, from 1930-63 and 1963-75, substantiating Schein's view on the crucial role of first generation owner-managers in fashioning company traditions.[40] Of course, it is well known that pursuing a technology-led strategy can be dangerous, especially for firms which rely largely on internal financial resources. One should also record that while under Sir Vincent de Ferranti (1930-63) the business established a degree of financial stability, largely because of its commitment to flourishing defence-related markets, Ferranti suffered two crises (in 1903 and 1975) which were caused by liquidity problems. Nevertheless, the family continued to pursue a technology-led strategy that resulted in some remarkable advances in a series of key areas.
Of central importance to our study of Ferranti is the essence of its corporate culture, namely, a technology-led strategy fashioned around a highly devolved approach to departmental (from the 1950s, divisional) management. Although up to 1975 the firm was owned and managed at the top by the de Ferranti family, as early as the 1890s decision-making took on an 'organic' pattern which gave managers most of the responsibility for their department's destiny.[41] This structure was purposely designed to encourage entrepreneurial flair, particularly with regard to product development, and right up to the late-1980s Ferranti persisted with this open style. At the same time, because of a heavy reliance on self-generated finance (and short-term bank borrowing), managers were left in no doubt that if departments consistently reported losses they would have to be closed. Indeed, the history of Ferranti is littered with divestments of this kind. For example, prior to 1939 Ferranti moved out of cables (1891), generators (1903), and switchgear (1917), while in the period 1945-79 the firm disposed of domestic appliances (1957), mainframe computers (1963), numerical control (1969) and transformers (1979). Decisions on these disposals were not always as swift as conditions dictated. On the other hand, the family argued that because they did not have professional shareholders `breathing down their necks' it was possible to take a longer-term view than companies which were owned by City institutions.
The willingness to give departmental managers some leeway in implementing the firm's technology-led strategy was consequently a consistent feature of Ferranti from the 1890s right through to 1987. It was this culture which was principally responsible for the growth depicted in Table 1. One must remember that especially after 1935 a heavy defence bias emerged in both the product range and profit outturns, emphasising how in competitive civil markets like domestic appliances, radio and television Ferranti failed to develop appropriate marketing and production strategies. Indeed, in the late-1950s these departments were closed and the factory was turned over to guided weapons production, provoking criticism of the allegedly risk-aversionist approach management took to product development.[42] Of course, this strategy was by no means unusual for British electrical firms, as we have already noted. Furthermore, even when Ferranti was able to establish a competitive advantage in advanced technology products like mainframe computers or numerical control equipment there was insufficient domestic demand to justify substantial investments in either development or production facilities. Ferranti consequently acted entirely rationally in exploiting the buoyant Cold War defence market, especially as it was well-equipped to cater for service requirements in areas like avionics and computer systems.
The de Ferranti family had clearly succeeded in building what by the 1950s and 1960s was a flourishing high technology, defence-oriented business. While liquidity problems had occasionally limited their freedom of action, short-term lending facilities provided by the Westminster (later, the National Westminster) Bank and progress payments secured from government customers ensured that family hegemony was not threatened. In this context, it is important to stress that Ferranti representatives attended the first Bell Lab's semiconductor symposium in 1952 as a direct result of encouragement from CVD, the Ministry of Supply's agency responsible for stimulating research into electronic componentry. Ferranti were also at that time involved in the development of what would eventually become Britain'smost successful guided missile of that era, Bloodhound, a project initiated by the Ministry of Supply. This prompted CVD to fund the acquisition of a licence from Bell Lab's, at a cost of £9,000, as well as the formation in 1953 of a semiconductor development team, providing Ferranti with a significant fillip.
Although this team was headed by the manager of the electronic components department (Peter Hall), the key individuals were recruited from university research laboratories. The principal appointment was Dr. Alan Shepherd, a physicist trained at the University of Manchester, while Dr. D. Mason was recruited from the University of Birmingham's solid-state research team. Together with a small group of Ferranti engineers, Shepherd and Mason conducted a series of experiments in the laboratories of the firm's guided weapons factory at Wythenshawe, south Manchester. It is not possible to say how much money CVD pumped into these experiments, but the Ferranti budget was a mere £35,000 per annum over the following two years. This indicates how in stark contrast to the much larger sums spent by US first-movers, not to mention the support provided by CVD, Ferranti was unwilling to risk large amounts on this immature technology. In spite of this, however, by 1955 the Ferranti team had developed Europe's first silicon diode, establishing a prominent position in the industry at an early stage.