The Watchmakers Who Invented Quartz and Still Lost the Market

In 1967 researchers at a Swiss laboratory in Neuchâtel unveiled prototype wristwatches driven by a vibrating quartz crystal. The invention was Swiss, and the laboratory had been created by the industry itself. Within a few years, however, the commercial benefit went mostly to Japan, where Seiko had put the first quartz wristwatch on sale at the end of 1969.

The usual explanation is complacency. Swiss firms, the story goes, were so proud of their mechanical movements that they could not imagine a rival technology. This account is not quite fair. Swiss makers did bring quartz watches to market in the early 1970s, and they were not ignorant of the threat. Their difficulty lay in the structure of their industry, which was divided among many small specialists, each of which earned a living from a mechanical part that quartz made unnecessary.

Employment in the Swiss watch industry reportedly fell from about ninety thousand in 1970 to fewer than thirty thousand by the mid 1980s. Recovery came only after banks arranged a merger of the two largest groups and a cheap plastic watch, the Swatch, appeared in 1983.

The episode suggests that a firm may see a new technology clearly and still be unable to adopt it, because the arrangements that made it successful are the same ones that stand in the way.