New Strategies for New Challenges: Corporate Innovation in the United States and Japan

Report of a Joint Task Force of the National Research Council and the Japan Society for the Promotion of Science

Committee on Japan

Office of Japan Affairs

Office of International Affairs

National Research Council

Washington, D.C.



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New Strategies for New Challenges: Corporate Innovation in the United States and Japan Report of a Joint Task Force of the National Research Council and the Japan Society for the Promotion of Science Committee on Japan Office of Japan Affairs Office of International Affairs National Research Council Washington, D.C.

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NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the NRC's Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making the published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. While the individual reviewers provided constructive comments and suggestions, responsibility for the final content of this report rests solely with the authoring committee and the institution. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations that provided support for the project. This project was made possible with funding support from the United States-Japan Foundation, National Research Council, and Committee 149 of the Japan Society for the Promotion of Science. The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievement of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce Alberts and Dr. Wm. A. Wulf are chairman and vice-chairman, respectively, of the National Research Council. International Standard Book Number 0-309-05848-1 Additional copies of this report are available from National Academy Press , 2101 Constitution Avenue, N.W., Lockbox 285, Washington, D.C. 20055; 800-624-6242 or 202-334-3313 (in the Washington area); Internet, http://www.nap.edu. Copyright © 1999 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

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TASK FORCE ON CORPORATE INNOVATION IN THE UNITED STATES AND JAPAN U.S. MEMBERS Lewis M. Branscomb, Co-Chairman Harvard University Michael G. Borrus University of California, Berkeley Lewis S. Edelheit General Electric Company Richard Florida Carnegie Mellon University Russell D. Jamison University Illinois, Urbana-Champaign Edward B. Roberts Massachusetts Institute of Technology Robert J. Spinrad Xerox Corp. Principal Project Staff Thomas Arrison Senior Program Officer Maki Fife Program Officer JAPANESE MEMBERS Fumio Kodama, Co-Chairman University of Tokyo Jun-ichi Baba Mitsubishi Electric Corp. Tsuneo Mitsui Tokyo Electric Power Co. Tsuneo Nakahara Sumitomo Electric Industries Sogo Okamura Tokyo Denki University Hiroshi Sakurai Engineering Academy of Japan Sei-ichi Takayanagi Toshiba Corp. Michiyuki Uenohara NEC Toshiyuki Yamada Sony Corp. Research Associate Kenneth Pechter University of Tokyo

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COMMITTEE ON JAPAN Erich Bloch, Chairman Council on Competitiveness Richard J. Samuels, Vice-Chairman Massachusetts Institute of Technology Sherwood L. Boehlert U.S. House of Representatives Lewis M. Branscomb Harvard University G. Steven Burrill Burrill & Company Lawrence W. Clarkson The Boeing Co. Mildred S. Dresselhaus Massachusetts Institute of Technology David A. Duke Corning, Inc. (retired) Daniel J. Fink D.J. Fink Associates, Inc. John O. Haley University of Washington Jim F. Martin Rockwell Science Center Joseph A. Massey Dartmouth College Mike M. Mochizuki The Brookings Institution Hugh T. Patrick Columbia University John D. Rockefeller IV United States Senate Robert A. Scalapino University of California, Berkeley Susan C. Schwab University of Maryland Ex Officio Members: Harold K. Forsen, Foreign Secretary, National Academy of Engineering F. Sherwood Rowland, Foreign Secretary, National Academy of Sciences

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Acknowledgments The Joint Task Force wishes to thank the following individuals for their participation in the review of this report: Marie C. Anchordoguy, University of Washington; Laszlo A. Belady, Mitsubishi Electric Research Labs, Inc.; Arden L. Bement, Jr., Purdue University (review coordinator); Kazuhiko Kawamura, Vanderbilt University; Hisashi Kobayashi, Princeton University; Richard S. Rosenbloom, Harvard Business School; Robert J. Saldich, Raychem Corp. The project co-chairs would also like to express their appreciation and thanks to Kenneth Pechter, University of Tokyo for his contribution to the report and assistance to the Joint Task Force.

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Contents     Executive Summary   1 1   Introduction   8 2   Past Perceptions of U.S. and Japanese Innovation Systems   10     National Level Differences   10     Firm Level Differences   11 3   Are the U.S. and Japanese Innovation Systems Converging? Evidence for and Against   14     Changes in Industry   17     Changes in Government's Role   24 4   External Relationships in Corporate Technology Policy and Innovation Strategy   29     External Sourcing of Technology and Innovation   29     Consortia for Informal Standardization and Related Technology Development   36 5   Theory and Practice: Developing New Frameworks for Analyzing Systems of Innovation   39     Demand Articulation   39     Indicators of Japanese and U.S. Technology Resources and Assets   40     Corporate Technology Stock Model   41     Innovation-mediated Production and the Role of Knowledge   42 6   Conclusions and Recommendations   44     Conclusions   44     Recommendations   45