This paper analyzes the emergence of Japanese specialized industry, taking the production of Seiko watches at Hattori & Co. in the first half of the twentieth century as an example. It shows that the competitiveness of this industry, which established itself on the world market during the 1960s, was due to a process of technological hybridization between the American mass production system and the Swiss specialized production system. Starting in the 1910s and 1920s, Hattori selected a few high-precision Swiss watches and set itself the goal of producing them in mass using imported machine tools. Yet this hybrid production system ran into problems because parts were not interchangeable, as a result of which assembly continued along traditional lines until the end of the Second World War. It was only when the company hired many production engineers who had graduated from Japanese engineering faculties and when it began to work with outside research institutions, such as the Department of Precision Engineering of the University of Tokyo, that Hattori was able to implement fully a hybrid production system in the 1950s.