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Japan's Growing Technological Capability: Implications for the U.S. Economy Technology Assessment in the U.S.-Japan Context GEORGE GAMOTA INTRODUCTION At first glance, Japan hardly can be found on the globe—a series of small islands scattered along the Eastern side of Asia, stretching for almost a thousand miles. However, economically speaking, Japan's technological and industrial shadow covers the globe, and economically it is the second largest power in the world, the largest still being the United States. Japan's land mass is approximately the size of California, although its useful land comprises only a third of that due to rough, mountainous terrain. The population, estimated to be 123 million in 1989, is almost exactly half that of the United States. Japan was not always an economic superpower. In the late 1950s and early 1960s, Japan was a poor country having few, if any, natural resources, still recovering from the devastating effects of a world war. Worldwide, Japanese products were synonymous with inexpensive and unreliable trinkets and toys, but not for very long. Japanese products continued to be inexpensive, but at first products such as cameras and calculators, then electronics, and finally automobiles, became the standard by which the quality and price of all products were being judged. Much of the success of the Japanese can be traced to their investment in technology, long-range view of return on investment, leverage strategy of market penetration, and just plain hard work. Their products were not magic; in fact, most if not all of the early technology in those products originated in the United States. In the years following World War II, the Japanese came to the United
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Japan's Growing Technological Capability: Implications for the U.S. Economy States to look at our factories and how we manufacture. Now, we go there to look at their production lines. The Japanese have also come to look at our technology, but now is the time for Americans to look and learn from Japanese technology. In a global environment, no country can sit idly by and ignore the rapid progress being made in other countries. The Japanese appreciate the importance of information. They have almost a passion for information of all kinds. They love studies and they believe in making assessments, quantitative comparisons of all kinds of factual data. Much more than in the United States, the Japanese believe in, and use, statistical data to make predictions. I was particularly impressed by their use of the Delphi method to make predictions. A good example is Future Technology in Japan-Forecast to the Year 2015. It was published by The Institute for Future Technology (4th technology forecast survey of the Science and Technology Agency (STA)). It is updated regularly, with the last version being printed in 1988. The closest parallel to this work in the United States is the annual critical technologies report issued by the Department of Defense. However, no such unclassified report existed prior to 1989, while the Japanese have been publishing their reports for at least 15 years. Unlike us in the United States, the Japanese spend much time and money learning what others are doing. In fact, they are proud of the type of assessments they are able to make of other people's work, and often have chided us for not paying attention to their work. One of the surprising comments made to me by a Japanese colleague back in 1984 when I started the Japanese assessment program called JTEC, was "It is time that you Americans are starting to pay attention to what we are doing. We have been following your work for some time now, but you don't even pay attention to our technical journals published in English." Just how interested the Japanese are in foreign technology is illustrated in Table 1. The data was published in 1987 by the General Affairs Agency TABLE 1 Trade in Technology Information in 1987 (million dollars) From Japan To Japan United States 479 1,343 Western and Eastern Europe 335 654 Asia, and other continents 746 <30 NOTE: Technology information includes all forms of information transfer: books, journals, newspapers, video and audio tapes, and compact disks. SOURCE: Wall Street Journal, November 14, 1988.
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Japan's Growing Technological Capability: Implications for the U.S. Economy of Japan. Japan purchases nearly three times the amount of technical information from the United States than does the United States from Japan. Japan has negative trade in technology information only with Third World countries. Gaining information about Japan is actually not very difficult. One of my preconceived notions about Japan and the ability to gain information was that Japan was a closed society, that the best work was published in obscure Japanese journals, and that the technical community was unwilling to share its results with the rest of the world. After eight years of being intimately involved in technical exchange, I have come around 180 degrees in my thinking. I believe there is more information available on Japanese technology—in English—than we can honestly hope to use effectively. The problem is not its availability or access but our desire and willingness to delve into that resource and utilize it more fully. For example, there is a publication circulated by the Japan Center for Information and Cultural Affairs that provides a list of English publications by various Japanese government and quasi-government organizations. The title is List of Foreign Language Publications by Japanese Government and Related Organizations. Under government organizations, there are 23 divisions. Under the Ministry of International Trade and Industry (MITI), there are 17 publications listed. Included are such reports as Obtaining Industrial Property Rights in Japan; MITI (which includes a description of the agency, what it does, and advice on how to do business with it); Statistics on Japanese Industries ; etc. Under the Ministry of Construction, there are 43 reports in English. To obtain many of these reports, all one has to do is go to the government bookstore, which is located across the street from MITI in downtown Tokyo, or order them directly from the agency by mail. At this point, I would like to share with you the background of how I got involved in assessments, particularly assessments of Japanese technology. By training, I am a physicist who, after eight years at Bell Laboratories as a scientist, went on to serve in the federal government. My last position there was Director for Defense Research; that is, I had overview responsibility for all the research being sponsored by the military departments. During my nearly six-year tenure there, one of the most pressing problems was identifying and assessing foreign technology. Quite frankly, our information was inadequate. I am not referring to information on weapon systems. Information on that was quite good, but reliable knowledge and understanding of the status of foreign technology were lacking, whether it be European, Soviet, or in particular, Japanese. The requests for this type of foreign technology information come from many sources. Let me give you a typical example. The president makes a visit to some foreign country, and an agreement is made to cooperate in technology. The country in question has a specific agenda in mind, whereas
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Japan's Growing Technological Capability: Implications for the U.S. Economy the United States generally has no clear goals. Once the president returns home, a call from the Office of Science and Technology Policy (OSTP) goes out to poll all agencies about what they know of that particular country and asks what areas the agencies want to cooperate in. While this process produces many inputs, most of these inputs are on-the-spot assessments. Some might be good, whereas others are impressionistic judgments based on memory rather than on reliable sources of information. Since all of this is done at the last minute and is a reaction to a specific request, once the drill is over, people, including me, go back to what they were doing before and forget about this problem until the next time. Unfortunately, this problem did not disappear but became worse as we all started to realize that U.S. technological superiority was shrinking, and foreign technology was becoming increasingly important. Japanese technology, in particular, started to emerge as singularly important in the impact it had on the U.S. economy. Unfortunately, identifying this as a problem is not synonymous with solving it, particularly if the problem is so pervasive that it is viewed as everyone's problem, yet not high enough on a priority list to be considered any particular agency's problem. In late 1982, after numerous discussions at various agencies, I got the attention of the Commerce Department. This was significant since Commerce generally has limited resources and its personnel turn over so rapidly that it is usually difficult to attract someone's attention, have that person do something, and still be around to see it implemented. Fortunately, at that time there was a lineup of people who understood the problem and were eager to solve it. They included the following: Lionel Olmer, Clyde Prestowitz, and William Finan from Commerce; John McTague and Maurice Roesch from OSTP; and Frank Huband from the National Science Foundation (NSF). Thus the Japanese Technology Evaluation (JTECH) program was born. Commerce initiated an interagency effort to assess and evaluate Japanese technology on a continuing basis. The birth of JTECH was not as smooth as we would have liked. By the time all the wheels of the procurement process were in place and interagency coordination was completed, nearly half of the proponents were gone, and for a while it looked as if JTECH would be stillborn, or die in its infancy. Thanks to OSTP and NSF, the program survived and has had a fairly good base of support since at least 1987. In an eight-year span, the JTEC1 program has completed over 22 studies of Japanese technologies. Each JTEC study is, by itself, a composite, in-depth look at the current state of a particular Japanese technology. It is also a snapshot in time of a particular technology and its relationship to a 1 The name was changed slightly, from JTECH, to JTEC, when NSF set up a center at Loyola College. JTECH was managed by Science Applications International Corporation.
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Japan's Growing Technological Capability: Implications for the U.S. Economy possible range of products. Since the intent is to look at Japanese R&D from the Japanese rather than the American point of view, the JTEC panels are usually made up of an interdisciplinary team headed by a chairperson who has broad knowledge of the subject. We in the United States are often very compartmentalized, whereas the Japanese are known for their teamwork; thus we try to emulate "their team" in our panels. Typically, the life of the panel continues past its JTEC responsibilities, which end with the publication of a report. Several panels have held special sessions at technical association meetings to discuss their findings and have published articles in leading technical magazines. Results have appeared in the popular press. For example, the results of the nuclear power panel's work appeared in The New York Times. These activities are intended to encourage more scientists and engineers to recognize the importance of monitoring Japanese technical developments on a regular basis. As part of the process, comparisons are made with U.S. programs whenever possible to provide benchmarks.2 JTEC also encourages the panel members to go beyond reporting ongoing research activities and to discuss the significance, either scientific or commercial, of those activities. Finally, the panelists are asked to discuss the direction in which the work is going and the rate of change. Each panel chairman is asked to assemble a chart summarizing Japan's current capability and rate of change. A sample chart is shown in Table 2. This summarizes the assessment carried out recently by the advanced computing panel. Some have criticized this type of reporting as being simplistic. While I agree that such a chart could be misinterpreted or, worse, used sometimes in a manner that it is not intended for, the positive virtue overwhelms the negatives. First, it forces the technical community to summarize its assessment in a manner that the lay community can better understand. Living in a headline-driven society, the technical community must adapt to society as a whole; otherwise, our advice will not be heeded, and we will not be understood. JTEC's purpose is not only to educate and make U.S. researchers aware of foreign technology, but also to help educate the American people in science and technology. The reports are reviewed both in the United States and in Japan. Early on in the JTEC process, we learned that the best way to ensure accuracy is to let the Japanese experts review our drafts. Some might argue that this could compromise the assessments. Nothing could be further from the truth. It actually makes the reports more accurate since both the reviewer 2 For example, in the superconductivity report, a comparison is made of U.S. and Japanese work on digital and analog electronic devices, and predictions of their success in applying the technology for commercial purposes.
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Japan's Growing Technological Capability: Implications for the U.S. Economy TABLE 2 The Overall Comparison between U.S. and Japanese Advanced Computing Technology Area Position Rate of Change Electronic components + Data storage Computer architecture - Software - Scientific calculations and supercomputers Computer/human interface - Multimedia + NOTE: A plus (minus) means that Japan is ahead (behind) the United States; means that Japan is pulling away from the United States, while means that the relative position is not changing; means that the United States and Japan are roughly equal. SOURCE: M.A. Harrison, E.F. Hayes, J.D. Meindl, J.H. Morris, D.P. Siewiorek, R.M. White, Advanced Computing in Japan, JTEC, 1990. and the author know that the work is going to be scrutinized by the other. In case of irreconcilable differences, the author's statement stays, but the reviewer's comments are recorded in a footnote. A JTEC study is staffed by a panel of experts, a different group for each technology, and has been coordinated for the last several years by Loyola College in Baltimore, Maryland. The principal investigator at Loyola is Professor Duane Shelton and the current NSF program director is Paul Herer of the engineering directorate. The panel of experts is specifically tasked to stay within the boundaries of its expertise. Panelists are not to deal with broader political or economic issues that they have views on, because they may lack experience or have strong biases. What is desired is a solid technical assessment backed by firsthand knowledge. It is up to government policymakers, not outside experts, to make specific recommendations. The experts can best serve by providing us with the best information upon which the policymakers can base decisions. Beyond government, the main customer for the JTEC technology reports is the U.S. R&D community. This includes universities, ''not-for-profits,'' and industry. One could argue that industry has other means of obtaining this information and therefore it is not needed. After all, there are a large number of U.S. companies that have set up listening posts in Japan. Why duplicate the effort and spend U.S. taxpayers' money on it? The answer to this is very simple. U.S. industry generally, like the U.S. government, looks at things from a near-term perspective and does not invest in the kind of work that the Japanese particularly excel in—
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Japan's Growing Technological Capability: Implications for the U.S. Economy information gathering. Additionally, while large companies might be able to invest in foreign outposts, small-and medium-sized companies do not have the resources. One sign of this need is the overwhelmingly positive response from industrial people interested in participating in the panels. Participation is not an honorary title; it means hard work on the part of the panelists, probably four to six weeks of their time. AT&T Bell Labs, IBM, Apple Computer, Hewlett-Packard, MCC, and Rockwell are just a few of the corporations that have provided some of their top technical experts to participate in this program. By participating, panelists put in a lot of time and put their reputations on the line. Each panelist has to write his or her own evaluation and is bylined as an author. This is not an assessment in which a panel is formed, comes to Washington to spend a day or two discussing a topic, and leaves, and then a staff person picks up the pieces and writes a summary essay. That process might be adequate on topics in which a panelist is, in fact, an expert and has firsthand knowledge. However, in areas where people do not have firsthand knowledge, this is a potentially dangerous method of assessing technologies and their implications, and often leads to serious misconceptions about the real situation. Experience with JTEC shows that respected American technologists often begin with biased viewpoints and change their attitudes after their trips to Japan. I have two examples in mind: one involves a respected expert from a prestigious university, and the other a senior technical manager from a premier industrial laboratory. Both people were reluctant to join the team since they felt they already knew what was going on. Upon visiting Japan, their attitudes changed completely. The industrial person, prior to JTEC, had been in Japan once and, since his JTEC experience, has been going there at least twice a year and has continued his contacts. Several studies (i.e., in the area of computer science) have been repeated due to the great interest in the subject as well as the rapid changes in the technology. Because of the continuity and corporate memory of several individuals involved with the JTEC program, it is now possible to assemble a fairly good picture of the progress of Japanese technology development and commercialization and compare it to that in the United States. Because of the time span between the earlier reports and the current studies, it is also possible to see which of the predictions made came through, which ones did not, what was missed, and, finally, why some predicted events did not come to pass. The Institute for New Generation Computer Technology (ICOT) Fifth Generation project, for example, is considered by many to be a disappointment, although I personally feel that while it did not achieve all its goals and some predictions did not come to pass, it did teach the Japanese many things that are critical to the next phase of advanced computing. The
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Japan's Growing Technological Capability: Implications for the U.S. Economy 1987 study on advanced computing dealt almost exclusively with the Fifth Generation program, while the 1990 study reflected on the successes and failures of that project. According to a study done by Cecil Uyehara, JTEC has performed about half of the openly available government-sponsored studies on Japanese technologies.3 I have organized the executive summaries into groups of related technologies to provide some perspective on the wide range of studies undertaken by JTEC. This will allow the reader to make correlations more easily between similar areas and to compare changes reported by similar studies done at different times. I have chosen the National Critical Technologies List as a template for grouping the JTEC studies.4 That list is comparable to some of the other lists currently being utilized. For example, other studies include the Department of Defense (DOD) Critical Technologies Plan,5 the Department of Commerce list, the Council on Competitiveness list, MITI's list of Emerging Technologies, etc. Most of these lists have many common themes and, not surprisingly, include most topics that were studied by the JTEC teams. Table 3 lists and compares the JTEC studies with both the National and DOD critical technologies lists. The JTEC studies listed in italics indicate that only part of the JTEC study is relevant to that technology. The number after the title lists the year a report was published; one asterisk indicates a report is in preparation but not yet available and two asterisks indicate that a study is planned but not yet started. It is clear that JTEC's sponsoring agencies have been emphasizing technologies related to information services, although a fair amount of work has been done in the materials area, manufacturing, and space technology. However, no studies have yet been done on pharmaceutical, medical, and environmental technologies. One JTEC study was unlike the others in that it looked at a Japanese initiative in basic research. The program is called ERATO, which stands for Exploratory Research for Advanced Technology Program. It is a novel program, and although it has been in existence for some time now, it actually was not reviewed by the Japanese until our JTEC team came to Japan. Its successes or failures are hard to judge, since the main objective is to develop a cadre of people in certain areas, to do good work, and then to disperse the scientists and engineers throughout the Japanese technical community. 3 Cecil H. Uyehara, "Appraising Japanese Science and Technology," in Japan's Economic Challenge, Joint Economic Committee, Congress of the United States, 101st Congress, 2nd Session, October 1990, pp. 289–307. 4 Office of Science and Technology Policy, "National Critical Technologies List," (Washington, D.C.: Executive Office of the President, 1991). 5 Department of Defense, "Critical Technologies Plan" (Washington, D.C., 1991).
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Japan's Growing Technological Capability: Implications for the U.S. Economy TABLE 3 JTEC Studies Compared with National and Department of Defense Critical Technologies National Critical Technologies JTEC Studies DOD Critical Technologies MATERIALS Synthesis and processing Advanced Materials (1986) Superconductors Superconductors (1989) Membrane Separation (1992)** Electronic and photonic materials Opto-and Microelectronics (1985) Semiconductor materials and integrated circuits Superconductors (1989) ERATO (1988) Ceramics Advanced Materials (1986) Composites Advanced Composites (1991) Composite materials High-performance metals and alloys MANUFACTURING Flexible computer-integrated manufacturing Computer-Integrated Manufacturing and Computer-Assisted Design (CIM and CAD) for the Semiconductor Industry (1988) Machine intelligence and robotics Space Robotics (1991) Intelligent processing equipment Mechatronics (1985) Machine Intelligence (1992)** Micro-and nanofabrication Nanostructures (1992)** Systems management technologies Nuclear Power (1990) Construction (1991) Materials Handling (1992)** INFORMATION AND COMMUNICATIONS Software Computer Science (1984) Software producibility Advanced Computing (1987, 1990) Machine Translation (1991)* Database Systems (1991)* Machine Intelligence (1992)**
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Japan's Growing Technological Capability: Implications for the U.S. Economy National Critical Technologies JTEC Studies DOD Critical Technologies Micro-and optoelectronics Opto-and Microelectronics (1985) Integrated circuits and materials (devices) Telecommunications (1986) ERATO (1988) Photonics X-Ray Lithography (1991)* High-performance computing and networking Advanced Computing (1990) Parallel computer architecture High-definition imaging and displays High Definition Systems (1991) Displays (1992)** Sensors and signal processing Advanced Sensors (1989) Data fusion Passive sensors Signal processing Sensitive radars Data storage and peripherals Advanced Computing (1987, 1990) Database Systems (1991) Computer simulation and modeling CIM and CAD (1988) Simulation and modeling Advanced Computing (1990) Computational fluid dynamics Space Propulsion (1990) BIOTECHNOLOGY AND LIFE SCIENCES Applied molecular biology Biotechnology (1985) Biotechnology materials and processes ERATO (1988) Bioprocess Engineering (1991) Medical technology AERONAUTICS AND SURFACE TRANSPORTATION Aeronautics Advanced Composites (1991) Air-breathing propulsion Space Propulsion (1990) Displays (1992)** Surface transport technologies Materials Handling (1992)** Superconductivity (1989)
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Japan's Growing Technological Capability: Implications for the U.S. Economy National Critical Technologies JTEC Studies Technologies DOD Critical ENERGY AND ENVIRONMENT Energy technologies Nuclear Power (1990) Nuclear Instrumentation and Controls (Europe) (1991)* Pollution minimization, remediation, and waste management NO NATIONAL OR DOD CRITICAL TECHNOLOGIES COUNTERPARTS Telecommunications (1986) Space Robotics (1991) Machine Translation (1991)* NOTE: * denotes study in progress; ** denotes study planned; italic type designates partial overlap. SOURCE: George Gamota. The work falls into two major categories: physical and biological. Nearly half of the projects have been in biotechnology, which indicates the importance that the Japanese attach to this area for the future. JAPANESE STRENGTHS AND WEAKNESSES It is difficult to make categorical statements about the strengths and weaknesses of a nation in a technology without using many caveats. Unfortunately, the more caveats cited, the less persuasive the argument. Nevertheless, it is necessary to synthesize data and to present it in such a form that policymakers and the nontechnical community can easily understand the importance of the findings and their implications. To this end, comparisons between Japanese and American technology are presented in a graphic way in Table 4. The table shows only a few highlights. For a more in-depth description, the reports themselves should be consulted. As one peruses this chart, one can see common threads. Products are the single most important Japanese strength. This is true, not only in electronic components, but in many other areas. Another interesting factor is that in many cases, Japanese R&D is competitive with the United States. Japan is weak in many basic research areas, but even there, government and industry are taking steps to overcome this deficiency.
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Japan's Growing Technological Capability: Implications for the U.S. Economy TABLE 4 Japanese Strengths and Weaknesses Japanese Position Technology Strong Competitive Weak MATERIALS Carbon-fiber Products R&D Basic research Carbon-carbon composites R&D, manufacturing High-strength polymers R&D, products Basic research Electronic (Si and GaAs) Products R&D II–VI materials Biopolymers All processes (but gaining) Superconductors Processing R&D Theory ELECTRONICS AND INFORMATION TECHNOLOGIES Microelectronics Memory chips Logic chips Microprocessors Lithography Optical and X-ray Displays Products Machine translation Products R&D European languages Data bases Image and multimedia Products Memory storage Optical Magnetic Computers Laptop components Supercomputers, hardware Workstations, PCs Software Factories Software engineering R&D, products Sensors Charge-couple devices Products Research Telecommunications Component and fiber optics Mobile Networks ENERGY AND PROPULSION Nuclear power Instrumentation and controls Construction R&D Computer code Rocket propulsion Liquid rocket Scramjet technology turbopumps
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Japan's Growing Technological Capability: Implications for the U.S. Economy Japanese Position Technology Strong Competitive Weak MANUFACTURING Flexible manufacturing systems Products Software Human-machine interface (but gaining) Manipulators Products R&D Precision engineering Products R&D Robotics Products Systems Computer-integrated manufacturing R&D, products Computer-assisted design Applications New concepts and tools SOURCE: Compiled by George Gamota from JTEC reports. METHODOLOGY OF ASSESSMENTS I have focused on JTEC here and made only passing references to other studies. Clearly, since I had a major role in getting JTEC started, I believe it is one of the best programs around. For the amount of money being invested, it is probably the best we can do, but it pales in comparison with the effort foreigners make in assessing U.S. technology. After all, MITI's original charter was to look for and transfer foreign technology. It has resources that are several orders of magnitude larger than those expended by the United States on JTEC and other, similar efforts. MITI's studies are much more detailed, top-down arranged, and followed closely on a timely basis.6 A weakness of JTEC is its inability to easily review technologies repetitively due to its funding mechanisms. There are many technologies that the JTEC staff would like to follow up on, but where funds from interested sponsors are not forthcoming. Additionally, a JTEC report is really the first step. It should be followed by a more intense, focused study, 6 Ministry of International Trade and Industry, Trends and Future Tasks in Industrial Technology (Tokyo: MITI, 1988).
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Japan's Growing Technological Capability: Implications for the U.S. Economy possibly including a visit to Japanese laboratories. There are many mechanisms in place for this to happen, but, unfortunately, there are no systematic processes for this to occur. Europe also takes technology assessments seriously and pays attention to them.7 DOD's Critical Technologies Plan is, in my opinion, the closest parallel to some of the better foreign assessments. The plan tries to paint roadmaps for weapon systems and makes references to dual-use technologies. Its positive virtues are that it is updated annually and utilizes various sources of information. Its limitations are that it is not in-depth enough and many of its references are not listed. Input is drawn entirely from DOD's personnel, including the intelligence community. LESSONS LEARNED Japan's technology investments have produced an amazing number of success stories. That is not to say that Japan is always successful. The Japanese tend to be conservative, but they also are willing to take chances if there is a consensus that the investment will pay off in the long run. Although sometimes gaining consensus is time consuming, once the Japanese decide to do something, they move rapidly, and without further discussion. One of the most interesting aspects of Japanese technology is that technology is of signal importance to the government. However, less than 20 percent of the funds available for R&D in Japan comes from the public sector, as compared to 50 percent in the United States. Assisting the prime minister in setting the course for science and technology policy is a small group of senior people, within the government and outside. The top group includes the president of the Science Council of Japan. In judging from anecdotal evidence and from my own experience, it appears that it is common for Japanese manufacturing companies to be headed by engineers; by contrast, in the United States many companies are headed by MBAs and lawyers with little or no technical expertise. As a result, input from industry to government tends to be much more "business" and less "technology" oriented in the United States than in Japan. Chief executive officers (CEOs) who personally do not understand technology tend to either underestimate or overestimate its importance, in contrast to those who deal with it on a firsthand basis. In areas where risk taking and timing are important, it is very difficult to ask people to risk much money on a project that they technically do not understand. It is this lack of being fully willing to make a commitment in science and technology, other than 7 See Commission of the European Communities, EC Research Funding: A Guide for Applicants (Brussels: Commission of the European Communities, 1990).
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Japan's Growing Technological Capability: Implications for the U.S. Economy to basic research, that has shaped U.S. government science and technology industrial policy for many years. Japanese research and development activities remain rock steady: total spending continues to rise healthily, and spending patterns show little change from an overview perspective. However, on closer examination, it is clear that those responsible for Japan's science and technology policies are actively wrestling with the conflicting requirements of budget pressures and increasing calls for Japan to contribute more to the world's stock of basic scientific knowledge. Internationalization of Japanese R&D will not be an easy process either for the Japanese managers, who must alter their way of doing things, or for the foreigners, who are concerned with Japan's competitive challenge and are suspicious of ulterior Japanese motives. Nevertheless, the process has begun and could have a profound global impact in the long run. Pork-barrel projects are just as popular in Japan as they are in the United States, with one major difference. In the United States over half of the R&D dollars come from the taxpayers, while in Japan, it is less than 20 percent. Most of the R&D funds are provided by a technically-oriented industry and are focused in areas they think have the highest payoff. Much has been written about technology transferred from the United States to Japan. This pattern continues today as Japan taps into U.S. basic science. To the dismay and chagrin of many scientists, this process not only continues but has been accelerating. For example, leading Japanese computer and electronics companies are opening laboratories to do basic research in the United States, luring some of the most creative American computer scientists to work for them. Some researchers and economists see this as a direct threat in the one area of computer science—software—where Americans still have a distinct advantage. These critics say the Japanese effort could reduce the quality of research at the universities and damage the competitive position of the United States in a critical field that frequently produces the striking innovations that translate into tomorrow's products, but others say the competition for the relatively few stars in the field of theoretical computer science is natural and could be beneficial for science. Reactions to this vary from those who say the Japanese are wasting their money because they do not know what to buy, to those like Massachusetts Institute of Technology computer industry analyst Dr. Charles Fergusen who say that "it's closer to the end of the world." The NEC Corporation has opened a research laboratory in Princeton, New Jersey. Matsushita is going to open one next year near San Francisco. Canon is starting one in Stanford, California. Mitsubishi is talking about starting one near the Massachusetts Institute of Technology in Cambridge. American scientists say they have also received recruitment inquiries from
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Japan's Growing Technological Capability: Implications for the U.S. Economy administrators at two other Japanese companies Fujitsu and Ricoh, which have told some computer scientists that they are considering starting laboratories in this country. As a footnote, I should note that this is not exclusively a Japanese idea. American companies have had R&D laboratories in Japan for a few years now and have hired Japanese researchers to do much of the work. As of 1989, there were 42 U.S. companies operating laboratories in Japan, the largest being IBM. A few others include DuPont, Eastman Kodak, Honeywell, W.R. Grace, and Xerox. There are many examples where the Japanese have followed through on American ideas and have done extremely well with them. They are not reluctant to acknowledge where their success is based on someone else's work and are proud to honor foreigners responsible. For example, in 1990, Dr. George Heilmeier, who is now CEO of Bellcore and previously was a senior executive with Texas Instruments, was honored for his pioneering work on liquid crystals, the backbone of flat panel displays. Dr. Heilmeier as a young researcher at RCA Laboratories showed that images can be formed by applying electric fields to a liquid crystal, an organic material—first used in digital watches. Unlike the RCA Laboratories, which supported the early work but did not recognize the full potential for over 20 years, the Japanese continued to research and develop liquid crystals, and now plan to make them the centerstone for a multibillion dollar business. In contrast to the many examples of technology going to Japan, over the last 10 years a new trend started to emerge—Japanese technology coming to the United States. This comes in two forms: joint partnerships, where both the U.S. and the Japanese partners share in bringing technology, manufacturing, and marketing to the table; and less common, but potentially even more important, direct licensing agreements, whereby a U.S. firm obtains rights to use or manufacture Japanese-developed technology. This latter form is, of course, the one most commonly used by Japanese companies in the past in acquiring U.S. technology. There are several explanations for this trend. First, even many in the United States have now come to realize that Japanese efforts in applied research, and certainly in development, are on par with or are ahead of those in the United States, and that partnerships and/or direct licensing makes business sense. One need only look at who is patenting in the United States. In 1979, the three top companies being awarded patents in the United States were General Electric, Westinghouse, and IBM. In 1989, the three top companies were Hitachi, Toshiba, and Canon. Second, there is a fair amount of political pressure being put on Japan by the U.S. Congress and, to a lesser extent, the administration, to share its technology. Third, as Japan becomes a global economic power and Japanese firms
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Japan's Growing Technological Capability: Implications for the U.S. Economy expand their operations beyond Japan, firms must open facilities located in their markets; otherwise the products will continue to be perceived as foreign and will be subject to possible constraints—nationalistic, political, economic, and social. A good example is that Honda's automobile assembly facility in Ohio is now shipping some cars to Japan. Since cars are driven on the left in Japan, the Ohio facility had to be designed early on to handle the changes, so this was not a last minute action attributable to slow car sales in the United States. The interesting question is, are these Hondas being exported to Japan American or Japanese cars? JOINT VENTURES While there is a thin line between some partnerships and licensing agreements, I want to concentrate here on partnerships and to discuss licensing next. Partnerships have become an important way of doing business in recent years. They often take the form of two companies, one from the United States and one from Japan, sitting down and pooling forces to set up a venture. Each brings something to the table and, if successful, each makes a profit. It can be a win-win (or lose-lose) situation. Here are a few examples. One of the prominent joint ventures, and still probably one of the biggest, is the Toyota-General Motors New United Motors project in Fremont, California. Both companies profited from the deal. General Motors learned the Japanese way of building cars and used the experience to launch its own Saturn line, while Toyota learned how to do business in the United States with an American labor force. A more common type of joint venture is represented by Sumitomo forging an alliance with a promising young company, Southwest Technologies, Inc., in the Midwest. For the American company, it represents an easier entry into Japan. As part of the deal, Sumitomo will attempt to obtain all necessary Japanese approval of Southwest Technology's products. The Kansas City, Missouri, company has developed a glycerin and water gel for hot and cold use in physical therapy and as a wound dressing.8 In another typical example, Monsanto and Tokyo-based Toray Industries have established Montor Performance Plastics Company, to produce and sell nylon resin products primarily to Japanese automotive manufacturers in the United States. The venture, which is based in Detroit, will also sell products to U.S. auto manufacturers in cooperation with Monsanto.9 Another recent example unites IBM and Omron Corporation from Kyoto. IBM teamed up with Omron to develop a range of user-specific automation 8 See The Japan Times, February 17, 1990. 9 Chemical and Engineering News, February 1990.
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Japan's Growing Technological Capability: Implications for the U.S. Economy equipment. The agreement will enable the two firms to consolidate their product lines in a joint push into Japan's financial, distribution, and public sector markets. Omron has been establishing itself in the Japanese markets for automatic teller machines, point-of-sale equipment, and automated ticket gate systems. Cooperation is expected in systems installation and employee education. LICENSING-JAPANESE TECHNOLOGY TRANSFER TO THE UNITED STATES Partly because of the debt they feel, and partly because they would like to start assuming the role of teachers, the Japanese have started to play a role in sharing their technology. It also makes good business sense. There is some evidence from industrial activities that indicates a shift in thinking. The evidence is anecdotal, and the level of effort and its impact are as yet unclear, but a change is definitely occurring and could be a signal for future events. Specific examples are hard to come by, except from newspapers and some company brochures. Often, it is not the kind of news companies publicize. The number of actual exports of technology licenses from Japan to the United States is tracked by the Statistics Bureau of the Management and Coordination Agency of Japan. It cites 398 licenses being exported to the United States in 1989. This is double the number in 1984, although it is important to remember that the United States is still exporting much more technology to Japan than vice versa. Some agreements have been reported. A few examples can be cited. Mitsubishi and AT&T announced that they have signed an agreement to design and manufacture static random-access memory (SRAM) chips. Under the agreement, Mitsubishi will supply SRAM chip design and manufacturing technology to AT&T, which, in turn, will gain manufacturing and sales rights to market Mitsubishi's SRAM products worldwide. Mitsubishi is willing to license its technology in return for banking on AT&T's enormous distribution network in the United States and Europe, thus improving its worldwide market share in semiconductors.10 While there certainly is a movement in Japan to start sharing technology, many more activities focus on joint ventures for cooperative R&D. A call for joint development of the next generation of computers, the so-called Sixth Generation or Real World Computing project, is an example of possible future trends. With some fanfare at an international computer conference held in Tokyo on March 14, 1991, the Japanese government invited leading computer companies in the United States and Europe, along with 10 The Japan Times, February 17, 1990.
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Japan's Growing Technological Capability: Implications for the U.S. Economy top research universities, to participate with them in a 10-year project to develop advanced computers for the next century. MITI is leading the effort. Proprietary questions, as well as political and trade questions, will have to be addressed. Work is at the beginning stages, but Japan and the United States are exploring collaboration in optical computing. Much is made of Japanese industrial representatives visiting U.S. campuses. What is not said is that this enhances the ability of U.S. faculty to have access to Japanese companies. A number of the JTEC panelists from universities have established strong ties with Japanese researchers, many of whom have studied here in the United States. Those former students are extremely helpful, not only in the JTEC visits, but also for other information exchange purposes. To be sure, company secrets are preserved, but precompetitive work is generally made fully available. The enthusiasm of the visits is such that, to my surprise, even some competitive work is discussed. On several occasions, however, the panel received letters after the visit asking that certain technology not be included in the report due to its proprietary nature. The chairman of the JTEC study on Computer-Integrated Manufacturing and Computer-Aided Design in the Semiconductor Industry, William Holton of the Semiconductor Research Corporation, told me after his trip to Japan that he was surprised by the openness of the Japanese industrial labs, which in some cases were more forthcoming than the American companies he works for. One of the strong common threads in the JTEC reports is the belief that if current trends continue, Japan will dominate more and more high technology markets. This is not to say that it will dominate all high technology industry, but we can be sure that if there is a large market, the Japanese will be in it and will be trying to perform state-of-the-art work to ensure that their products are the best. High quality and state-of-the-art work are Japanese trademarks. Unlike the United States, Japan has an economic strategy tied to end-use products involving long-term investments in R&D. Not all investments pay off, but enough do to make it a very attractive industrial policy. The Japanese do not ''dabble'' in research in the hope that something will come out that has a commercial payoff. Their research is tied to specific problems that are related to products, and those products are leveraged in markets that they control or intend to control. Luckily for the United States, not all Japanese investments have met with success. One example that JTEC teams have tracked for seven years is software. In spite of large investments by the Japanese in this area, including the creation of "software factories," they still trail the United States. To be sure, they have not given up, but recently have acknowledged the difficulty in the next step of advanced computing.
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Japan's Growing Technological Capability: Implications for the U.S. Economy In the West, particularly in the United States, being associated with a technological failure is usually detrimental to one's career. In Japan, decisions are made by consensus, and risks are taken by all concerned. If a program fails to meet its technological objective, most of the people associated with the undertaking share the disappointment, but seldom is an individual's career path threatened, since it was a group decision. Moreover, the Japanese try to learn from the failures and document the findings, as if the results were positive. As a result, there is much less duplication of effort in Japan than in the United States. Even though basic research is weak in Japan, in many technologies it is improving steadily. In some areas, for example, superconductivity and electronic materials, Japanese basic research is on par with the United States. Many other examples can be found in the JTEC reports. Closely associated with the improvement in basic research is the strengthening of university research in Japan and the coupling of such research to industry. Japanese university research has traditionally played a secondary role in the country's research enterprise. Initial JTEC teams were so disappointed with what they observed that for a long while, few teams even wanted to visit universities, other than to pay social calls. Today that is changing. Recent JTEC teams have noted that not only has university research steadily improved, but even more significantly, Japanese industry is paying more attention to what is going on at universities. The Japanese government has recognized the existence of barriers between university and industrial research, and has not only started to remove them, but has instituted a number of programs to encourage cooperative research. Really unfettered research is seldom seen in Japan. Much of the basic research ultimately is tied to some need and, if successful, has an immediate pipeline to a commercial process or product. Except for the ERATO projects, most basic research is directed by a well-thought-out roadmap to possible applications. In addition to ERATO, it appears that the Japanese have chosen superconductivity as the flagship of their basic research efforts and are competing successfully on a worldwide basis. Their focus is on high-temperature superconductor materials. Manufacturing products is the single most important element of Japanese strength. In contrast to the Japanese approach to managing basic research efforts, one finds that U.S. research is often oriented to solving ever more difficult problems, whereas the Japanese concentrate on solving incremental problems closely tied to product development. The United States tries for the "giant leaps," while Japan consistently notches ahead. As I mentioned earlier, in some critical areas, such as artificial intelligence, software, and a few others, the Japanese have decided to fund basic research in the United States. Some of the work is being done at prestigious U.S. universities, while some is being done at Japanese-owned R&D
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Japan's Growing Technological Capability: Implications for the U.S. Economy centers at major U.S. locations. The work there is first class, and most of the results are published in U.S. journals. However, the Japanese carefully look at the results for possible applications to their product lines. When JTEC was started, one of the preconceptions was that it would be extremely difficult to get useful information from the Japanese since "they are secretive" and because the language barrier provided them with an easy excuse for not telling visiting Americans about the important things going on. We found that the opposite is true. Like most researchers, the Japanese are eager to share their work and in most cases go far beyond what would be expected from comparable visits to U.S. companies. To be sure, good advance work is necessary to ensure visits to the right places. One has to prepare himself/herself to ask the right questions, but rarely has a JTEC team not been given access. The hardest visits to arrange were to U.S. subsidiaries in Japan. They operated more like U.S. companies in America. Language is really not a problem; since we had at least one Japanese-speaking member of the JTEC technical team, more information was exchanged and it enhanced the results. JTEC is viewed very positively in Japan since the Japanese have been engaged in programs similar to JTEC on a much larger scale. They believe in the importance of gathering information and are very good at it. As we saw earlier in Table 1, the trade balance with the United States in information gathering is roughly three to one; that is, Japan buys three times more information from the United States than the United States buys from Japan. In terms of people exchange, the numbers are even more skewed. For every ten Japanese scientists or engineers visiting the United States for an extended time, only one American goes to Japan. It is so badly out of balance that the Japanese government even funds Americans to spend time in Japanese laboratories. Although written by over 120 scientists and engineers from all walks of life, the JTEC studies convey an overall impression of Japanese research and development that is scarcely subject to misinterpretation: Japan is currently engaged in a systematic effort to achieve parity with, or superiority over, the United States in virtually every technology that is of current or potential economic significance. It is not unlike that of U.S. determination in the 1950s and 1960s to be best in defense. In order to achieve this goal, the U.S. government supported such technologies as computers, microelectronics, radar, and space. The mechanisms by which Japan has pursued its strategy, and the extent to which it is succeeding, should be of great interest to policymakers in the United States and in the rest of the world. The Japanese make no secret of their objectives or methods. Quite to the contrary, they offer the rest of the world a possible blueprint for the pursuit of economic prosperity through thoughtful, long-range investment in science and technology.
Representative terms from entire chapter: