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Suggested Citation:"CORPORATE TECHNOLOGY STOCK MODEL." National Research Council. 1999. New Strategies for New Challenges: Corporate Innovation in the United States and Japan. Washington, DC: The National Academies Press. doi: 10.17226/5823.
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THEORY AND PRACTICE: DEVELOPING NEW FRAMEWORKS FOR ANALYZING SYSTEMS OF INNOVATION 41 organizations such as the United Nations and the Organization for Economic Cooperation and Development (OECD). Until better indicators are developed, the Joint Task Force believes that comparisons of R&D resources will be more useful if side-by-side reporting of MER and PPP figures becomes standard practice. Figure 5-1 U.S. vs. Japan R&D, purchasing power parity vs. market exchange rates. NOTE: Data are in current U.S. dollars. SOURCE: Organization for Economic Cooperation and Development, Main Science and Technology Indicators, 19 96. CORPORATE TECHNOLOGY STOCK MODEL One possible method of placing financial value on R&D activities is to treat R&D as an investment rather than an expense.8 One approach to this is the corporate technology stock model. It requires knowledge of depreciation times and quantified risk factors. If such a system could be developed and accepted by the accounting profession it might make business judgments about R&D investment more consistent with the economists' computation of private returns from R&D. However, it might also have a less desirable effect if taxation authorities used this method to require firms to capitalize R&D rather than expense it. At present, no companies in Japan or in the United States are known to be employing this method, except in the case of U.S. firms which, under special rules, are allowed to capitalize all or some of their software development efforts.

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Innovation, "the process by which firms master and get into practice product designs and manufacturing processes that are new to them," is vital for companies wishing to remain competitive in today's rapidly changing high technology industries. American and Japanese firms are among the world's most technologically innovative and competitive. However, the changing dynamics of global competition are forcing them to rethink their technological innovation strategies. The choices they make will have great impact on their futures as companies as well as on the livelihoods of their employees and the communities in which they operate.

In order to understand the ways in which Japanese and American companies are changing their technological innovation strategies and practices, the Committee on Japan of the National Research Council and the Committee on Advanced Technology and the International Environment (Committee 149) of the Japan Society for the Promotion of Science (JSPS) organized a bilateral task force composed of leading representatives from industry and academia to assess developments in corporate innovation strategies and report on their findings. Through a workshop discussion of the issues and subsequent interaction, the task force explored the institutional division of innovation in both countries: the structure and performance of technology-based industries, the role of the government in the support of science and technology, and the role of universities in the science and technology system. The task force was particularly interested in exploring the points on which the two systems are converging,-i.e., becoming more similar in strategy and practice-and where they continue to be distinct and different.

Although a comprehensive study of these trends in U.S. and Japanese innovation was not easily feasible, the task force was able to develop several conclusions based on its workshop discussion and follow-up interactions that were substantial in time and content. This report identifies a set of issues whose further elucidation should be helpful in guiding public policy in both nations. These issues include the role of external sourcing of innovation, transnational activity and globalization, the organization and performance of R&D, and the role of consortia, joint ventures and other joint activities. A call for greater international efforts to collect and analyze data on these important trends is the central recommendation of the task force.

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