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Japan's Growing Technological Capability: Implications for the U.S. Economy Accessing Japanese Technology: Experiences of a U.S.-Based Company JIM F. MARTIN INTRODUCTION Rockwell International's sales in Japan include semiconductors for modems and GPS (global positioning system) applications, newspaper printing presses, factory automation equipment, truck and automotive components, and other mostly commercial equipment. Annual sales there through our Japanese divisions are around $150 million; we have approximately $130 million more in direct exports to Japan from the United States and Europe. We employ more than 400 people in Japan, largely for sales and service; these numbers are growing slowly. Some of our industrial relationships there are brand new, and some (in aerospace) go back to the mid-1950s. The purpose of this paper is to briefly describe the experience of a U.S.-based company in accessing Japanese technology: who's doing good work, how to assess it, and how to get access to it. Most of the paper is based on my personal experience in Japan, from 1986 to 1991, directing an office to support technology assessment and access for Rockwell's divisions in Japan and in the United States. This office has a broad technology charter, assisting nearly all of Rockwell's businesses: electronics, aerospace, automotive components, factory automation, and printing presses. Most often, the office works from a list of technologies that have been identified as strategically valuable, and it reports data and results directly to the requester. In addition, these and other events in Japan's technology infrastructure are compiled in a monthly newsletter distributed internally. During this period, we found that engineering groups within our company
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Japan's Growing Technological Capability: Implications for the U.S. Economy were able to accurately evaluate technology and, when it became desirable, were able to gain access to Japanese technology with about the same proprietary and legal constraints as they would face in the United States. We encountered significant limitations and differences relative to the United States, arising from the language and culture (both personal and business), but with a significant investment in personnel in Japan, we found that these challenges can be managed and to some extent leveraged for a competitive business advantage. Judging from our discussions with other Western companies in Japan, our experience is not unique. OVERALL CHARACTERIZATION OF JAPANESE TECHNOLOGY In the popular comparisons of Japanese and U.S. technology, university and national laboratory research groups are seen to be significantly behind, and small high tech start-ups are said to be virtually nonexistent. By contrast, according to this popular image, large Japanese corporate technology labs are ahead in many technologies, and in general it is very difficult for a U.S. corporation to gain access to them or work with them in a meaningful way. This popular characterization is generally accurate, but there are many opportunities for collaboration with technical groups in industry, government, and academia. Most university and national laboratory research in Japan is indeed well behind that in the United States, primarily because of the huge disparity in government funding for such research. Despite this and other major constraints, a few leading professors and institute directors have managed to set up significant, highly creative laboratories, outstanding even by U.S. standards. These exceptional labs are easily discovered, and are relatively approachable and interested in making connections with U.S. companies. These connections can bear fruit in research collaborations and in assisting recruiting of excellent technical people, a critical factor in Japan's tight market for technical personnel. High tech start-ups, at least ones that are not dedicated to a large company, are far more rare in Japan because of the business environment, but they are increasing. Start-ups with relatively advanced technologies are hard to find, but when contacted are often very interested in working with U.S. companies. A good example is Nippon LSI Card, which we discovered in a JETRO (Japan External Trade Organization) tour of the United States in 1987: they make non-contact semiconductor memory, which we designed into our truck electronics product line. Gaining entry to medium and large corporations in Japan is difficult because of the fierce, competitive business climate. However, the more advanced labs publish in journals, their research engineers attend conferences
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Japan's Growing Technological Capability: Implications for the U.S. Economy in the United States, and their public relations departments are very active. Therefore, it is frequently a straightforward task to determine which companies are the leaders in a specific technical area. Furthermore, if a Japanese company is a supplier or customer, it is probably approachable concerning joint development in the product line in which a mutual interest exists. Because Japanese companies are so aggressive about market share, linking up with a U.S. company may represent a new way to get an edge in the market, especially if the company name is not known in the United States. The defense and aerospace sectors in Japan spend far less than the United States on R&D, relying for the most part on spin off from their commercial businesses. However, in certain technical areas, they have developed technology of genuine interest or have put laboratories in place that will help them gain significant markets in the future. Although cooperation between governments has been thrown into some confusion in recent years by the FSX fighter project, the U.S. space station, and other projects, there are many areas of potential cooperation between companies. Examples include composite materials, infrared imaging, microwaves, avionics, and automation. LOCATION AND EVALUATION Our first step in setting up the office for technology access in Tokyo was to recruit an experienced Japanese Ph.D. engineer to be my associate. Together with our customers in Rockwell's businesses, we developed the modus operandi, including three basic types of activity for the liaison office: tech window, obtaining requested data or samples, and supporting negotiations for exchange of information, licensing, or joint projects. We found several sources of information valuable, but the primary filter was frequently my associate or our colleagues in Rockwell's Japanese operations. As a result of their education and working experience in Japan, these employees already have a wealth of knowledge about companies, universities, and national labs that is invaluable. To supplement this knowledge base, we found the following sources of information in Japan useful: suppliers' and customers' labs and engineering groups; trade journals, company journals, and conference proceedings; international conferences and Japanese conferences and exhibits; patent literature; standards groups and professional societies; ACCJ, AEA, AAIJ, and other business organizations*; * (ACCJ: American Chamber of Commerce in Japan; AEA: American Electronics Association; AAIJ: American Aerospace Industry in Japan).
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Japan's Growing Technological Capability: Implications for the U.S. Economy American embassy; the Ministry of International Trade and Industry (MITI), including its international R&D collaborations; trading companies; and consultants and research companies In addition, certain sources of information in the United States on Japanese technology also proved to be quite helpful. Among the most valuable are MCC's (Microelectronics and Computer Technology Corporation) monthly report for its members, and ScanC2C's (a U.S. company) Japan Technology data base, now available on DIALOG (a well-known on-line data base). MCC has a small staff that monitors technology developments worldwide and reviews the most interesting work; the quality of their reporting is excellent. ScanC2C provides abstracts (by mail or on-line) of articles in Japanese company technical journals. The first on the above list, the laboratories and engineering groups of our business partners, are the most useful because they truly want to work with us. When genuine mutual interest is established, this type of access never fails to produce information or a project of value. Next, international conferences and Japanese conferences and exhibits are helpful because engineers and researchers from our company can quickly review a large number of companies (with some help from a technical interpreter). Furthermore, they often meet counterparts in Japanese companies or universities who are relatively frank about their work and the status of development of a technology. Properly followed up, these contacts can be maintained over several years and can serve as a crucial source of information. Two other sources of information on the list deserve mention because they are perhaps not so obvious. The American embassy in Tokyo—especially the Department of Commerce, the office of the National Science Foundation, the Department of Defense, and the Department of State—can be enormously helpful in educating about current trends, providing pointers to the right companies, and providing introductions. MITI can also be very influential in enabling a foreign company to get the attention of a potential customer or supplier, and can cut through much of the confusion of working in Japan. The activities in our liaison office included reviewing published articles in trade journals and elsewhere, discussions with companies or government agencies, and working with those in our own company to understand and answer their questions. At different times, we utilized several commercial data bases, including JICST, PATOLIS, COMLINE, ScanC2C, EGIS, DIG-IN, and others. Recently, it has become possible to get access to these and other Japanese technology data bases here in the United States through commercial gateways such as DIALOG.
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Japan's Growing Technological Capability: Implications for the U.S. Economy Initial evaluation is made by the technology liaison office, but the detailed evaluation is always carried out by a Rockwell engineering group. This evaluation frequently requires at least one technical visit by a Rockwell engineer. In really active cases, such as our investigation of flat panel displays, Rockwell engineers visited potential Japanese sources at least once every three months over a period of years. Technical areas in which we are particularly impressed with Japanese industry include (but are not limited to) composite materials, synthetic diamond, superconductivity (high temperature and low temperature), semiconductor fabrication, electronic packaging, compound semiconductor devices including semiconductor lasers, electro-optical devices, flat panel displays, fuzzy logic, neural nets, factory automation, and machine tools. To accurately describe the relative status of Japanese technology in any of these areas requires reviewing the work in universities, industrial labs, and products that are on the market. In many of these areas, Japanese scientific development lags the United States, but commercialization is significantly more advanced. It is common to find situations where U.S. university or industrial laboratories, or high tech start-ups, are ahead of any effort in Japan, but only Japanese companies are really capable of economically producing related products in any volume. Finally, there is the most serious issue of relative capability in manufacturing. A succinct description appears in the final report of the U.S. Department of Defense Technology Assessment Team on Japanese Manufacturing Technology: "...Japanese excellence in manufacturing as manifested in the rapid commercialization of new technologies, superior productivity and high quality is not due to access to better automation or manufacturing technology, but to a pervasive and deep belief in the strategic importance of manufacturing excellence, better exploitation of advanced process technologies, and to smarter management and organization."1 GETTING ACCESS The overriding factor in discussion of a technology alliance with Japanese companies is what potential partners have to offer, beyond dollars. There is a strong sense that there must be mutual benefit, in which the other company's technologies, manufacturing, and marketing capability provide more leverage than they could discover elsewhere. Pure "technology for dollars" deals are not interesting to the Japanese, because they always look several years down the road, to how the arrangement will be useful to them in the long run. So deals can be made, but dollars alone are not enough. 1 See U.S. Department of Defense, Findings of the U.S. Department of Defense Technology Assessment Team on Japanese Manufacturing Technology (Washington, D.C.: 1989).
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Japan's Growing Technological Capability: Implications for the U.S. Economy Consequently, the most promising way to gain access to Japanese technology is through genuine cooperation with a Japanese company. The best candidates will be a supplier or customer. Cooperation takes many forms, but the primary feature is dependence: the two companies involved agree to become dependent on each other. This is a necessary part of what the Japanese refer to as "trust"; this trust must be established at several levels of management in order to produce mutual benefit. In my opinion, this same feature, trust, exists in nearly all successful deals here in America. In fact, companies make headlines—the wrong kind—when it has been demonstrated that such trust has been violated. Forms of cooperation between U.S. and Japanese companies include cooperative design projects, joint ventures (when they are well planned), participation in government-sponsored or private R&D collaborations, long-term exchanges of personnel, and other activities. To cooperate effectively, each company must contribute experienced personnel who are outstanding performers. Anything less on either side is a telltale sign of lack of commitment and usually leads to misunderstandings, stalled initiatives, and failure. In addition, each company must sign on for the long run, because the formidable barriers of different business practices, culture, and language require time and persistence to overcome. In recent years, it has become easier to recruit experienced, high-quality Japanese technical people, through search firms, contacts at conferences, and relationships with universities. Senior people can frequently be recruited as they retire from MITI, from universities, or as they are pressured to retire from large Japanese companies while still in their fifties. These people bring with them the experience and contacts gained from their years in the Japanese industrial community, and can usually lead to others interested in working for an American company. The core group in one American company's research laboratory in Japan was recruited in just this manner. As a final note, a real R&D laboratory in Japan is vastly superior to a liaison office for locating, evaluating, and accessing technology. Japanese researchers and engineers maintain friendships with colleagues from their educational years, they have intimate knowledge of the infrastructure in their technical area, they can communicate effectively with potential or established partners, and they are loyal employees. A number of American companies, including IBM, Eastman Kodak, Hewlett-Packard, and Texas Instruments, are taking advantage of this approach. CONCERNS Every year, there is stronger emphasis in Japanese industry on R&D funding—it is increasing overall, the focus on basic research and originality is sharper, and the mechanisms for improving industrial productivity in all
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Japan's Growing Technological Capability: Implications for the U.S. Economy sectors of design and production are being rapidly enhanced and refined. Japanese companies, motivated by competition in Japan and elsewhere in the world, are aggressively searching for methods to decrease their concept-to-market "productization" time to even lower levels in the future. Japanese industry, supported by the Japanese financial community and the government, invests readily in new equipment and in foreign (e.g., American) high tech start-up companies. Although there is recent anecdotal evidence that some of these investments are not yielding high returns, over the long term Japanese investment in U.S. high technology can be expected to grow steadily. Despite the resulting increased technical strength in Japan, the technology flow between the United States and Japan continues to be very unbalanced, partly because of the great inequity between the two countries in easily available technical resources, and partly because Japanese companies are better (for financial and management reasons) at rapid commercialization of new ideas. Also, the vast majority of American firms believe that they cannot afford to make a similar level of investment because the way their financial performance is measured does not encourage long-term investments in capital or R&D. This is lending greater momentum to the closing of the technological gap between U.S. companies and their competitors in Japan and Europe. The erosion of any company's leadership in technology lessens its opportunities to establish partnerships with other companies. So, as the Japanese become stronger technically, their need for American companies has lessened, and they turn away from the negotiating table because no useful benefits can be offered in return. In addition, there are structural problems that inhibit the flow of technology from Japan to the United States. One of the most difficult to cope with is the strong tendency for Japanese companies to work only within their own keiretsu, or economic group. Within such groups, easy licensing terms are usually available, and special sacrifices are made to support other parts of the group. Foreign companies are usually not accepted into such groups unless they participate in a local joint venture, which often results in yielding control of their technology for that product line. The U.S. government has played an instrumental role in pressuring the Japanese government to encourage changes in Japanese business practice in order to help American companies penetrate the Japanese market. This pressure has been necessary, in my opinion, but I believe that each company has a responsibility to be the best that it can be and to make the appropriate investments in order to sell its products. It is irresponsible to ask the U.S. government for help in entering a market if management is not willing to change its product in order to make it attractive to the prospective customer. Compounding the technology flow problem, Americans' relative ability
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Japan's Growing Technological Capability: Implications for the U.S. Economy to commercialize new technology and manufacture high-quality products also appears to be deteriorating. Part of this change is natural, as other countries' industries become well-educated, well-financed, and experienced in developing high technology products. But the largest part of the cause lies with the complacency of American corporate and government management. Even those leaders who recognize that there is a problem are handicapped by organizations that are not yet convinced that there is a need for dramatic change. RECOMMENDATIONS The current situation in the United States is comprehensively described in Made in America, a book published by the MIT Press in 1989, by Michael Dertouzos, Richard Lester, and Robert Solow. They set forth five fundamental imperatives for the United States, which are well thought out and which are being studied by companies all over America. These imperatives do not represent a quick solution, but a way of life that U.S. businesses and government must practice if we are to arrest the current trend towards being second (or third) best in the world. Technology, manufacturing, and management practice are linked and cannot be separated without serious losses in quality and productivity. In another report, Emerging Technologies, released in 1990 by the Technology Administration of the Department of Commerce, there is an excellent characterization of the status of 12 new technologies in the United States relative to Japan and Europe. In most of these areas, the report advises that the United States is losing ground to Japan. This report lists several areas called ''opportunities for change'' and recommends specific actions for government leadership, for government-industry cooperation, and for industrial leadership facilitated by the government. In yet another 1990 report, "Scientific and Technological Relations Between the United States and Japan, Issues and Recommendations," by Dr. Frank Press and Dr. Martha Caldwell Harris, several excellent recommendations are made regarding investment in the United States and Japan and the need for cooperation in a number of areas.2 These include Japanese investment in U.S. high tech start-ups and universities, treatment of multinational companies, and a detailed discussion of asymmetries in science and technology. One important element of the context is that Japanese industrial 2 Frank Press, "Scientific and Technological Relations Between the United States and Japan: Issues and Recommendations," Commission on U.S.-Japan Relations for the Twenty-First Century, November 1990, with an attachment by Martha Harris, "Asymmetries and Potential Complementarities: Scientific and Technological Relations Between the United States and Japan."
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Japan's Growing Technological Capability: Implications for the U.S. Economy R&D is always undertaken with an eye on the market—even long-term basic research projects. In order to benefit from these and the dozens of other fine reports and books on these subjects that have appeared in recent years, both Americans and Japanese must carry out substantive and long-term changes in the operation of business and government. Neither country can any longer afford the luxury of looking at this problem as a simple "them versus us" competition: the two economies are so mutually interlocked that there is no turning back. The future economic strength of both countries is dependent upon developing methods of cooperation that improve industrial productivity and competitiveness in each country while making it possible to work together effectively. This discipline will not be easy, and the rewards will not appear in the short term, but by committing to making the needed changes, America will be able to remain technically competitive in the future, and Japanese industry will become a more welcome participant in the global economy.
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