Global Economy, Global Technology, Global Corporations

Reports of a Joint Task Force of the National Research Council and the Japan Society for the Promotion of Science on The Rights and Responsibilities of Multinational Corporations in an Age of Technological Interdependence

Committee on Japan

Office of Japan Affairs

Office of International Affairs

National Research Council

Washington, D.C. 1998



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Global Economy, Global Technology, Global Corporations Global Economy, Global Technology, Global Corporations Reports of a Joint Task Force of the National Research Council and the Japan Society for the Promotion of Science on The Rights and Responsibilities of Multinational Corporations in an Age of Technological Interdependence Committee on Japan Office of Japan Affairs Office of International Affairs National Research Council Washington, D.C. 1998

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Global Economy, Global Technology, Global Corporations 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 by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. 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. This project was made possible with funding support from the United States-Japan Foundation and the National Research Council. 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. International Standard Book Number0-309-05847-3 Additional copies of this report are available from National Academy Press , 2101 Constitution Avenue, N.W. , Lockbox 285, Washington, D.C.20055; (800) 624-6242or (202) 334-3313(in the Washington area);Internet, http://www.nap.edu . Copyright © 1998 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

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Global Economy, Global Technology, Global Corporations 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 Respresentatives 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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Global Economy, Global Technology, Global Corporations NATIONAL RESEARCH COUNCIL TASK FORCE ON MULTINATIONAL CORPORATIONS Chairman Donald N. Frey Northwestern University Members G. Frank Joklik Kennecott Corp. (retired) Barry MacLean MacLean-Fogg Co. Hugh Patrick Columbia University Donald E. Petersen Ford Motor Co. (retired) Hubert J.P. Schoemaker Centocor, Inc. Edson W. Spencer Spencer Associates E. Joseph Zemke Amdahl Corp.

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Global Economy, Global Technology, Global Corporations JAPAN SOCIETY FOR THE PROMOTION OF SCIENCE COMMITTEE 149 MULTINATIONAL CORPORATIONS WORKING GROUP Leader Michiyuki Uenohara Executive Advisor, NEC Co-Leader Tsuneo Nakahara Vice Chairman, Sumitomo Electric Vice Leaders Junichi Baba Advisor, Mitsubishi Electric Hiroshi Sakurai Executive Director, Engineering Academy of Japan Advisors Ryoichi Nakagawa Advisor, Nissan Motor Sogo Okamura President, Tokyo Denki University Hiroshi Inose Director General, National Center for Science Information Systems Yoshikazu Ito Chairman, Toray Members Yumi Akimoto President, Mitsubishi Materials Chikara Hayashi Chairman, ULVAC Shigeo Hosoki Advisor, Nippon Steel Tsutomu Kanai President, Hitachi Fumio Kodama Professor, University of Tokyo Eiichi Kumabe Senior Managing Director, Toyota Motor Noboru Makino Chairman, Mitsubishi Research Institute Noboru Miura Senior Managing Director, Nissan Motor Masahiko Morizono Counselor & Executive Advisor, Sony Teruhisa Noguchi Senior Executive Vice President, Yamanouchi Pharmaceutical Co. Yoichi Ogawa Auditor, Fuji-Xerox Morio Onoe Senior Executive Vice President, Ricoh Co. Sakae Shimizu Executive Advisor, Toshiba Corp. Hideo Sugiura Auditor, Yamatane Industry( former Senior Executive Vice President, Honda Motor) Takuya Urakawa Executive Director, Business Research Institute( former Vice President, Bridgestone) Takuma Yamamoto Chairman, Fujitsu Keizo Yamazi Vice Chairman, Canon Naoya Yoda Executive Advisor, Toray Corporate Business Research Secretaries Katsuhiko Masuda National Institute of Research Advancement Jiro Shibata Research Institute for Science and Technology Policy Seiichi Takeuchi General Manager, Sumitomo Electric Takashi Uchida Mitsui & Co.

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Global Economy, Global Technology, Global Corporations OFFICE OF JAPAN AFFAIRS Since 1985 the National Academy of Sciences and the National Academy of Engineering have engaged in a series of high-level discussions on advanced technology and the international environment with a counterpart group of Japanese scientists, engineers, and industrialists. One outcome of these discussions was a deepened understanding of the importance of promoting a more balanced two-way flow of people and information between the research and development systems in the two countries. Another result was a broader recognition of the need to address the science and technology policy issues increasingly central to a changing U.S.-Japan relationship. In 1987 the National Research Council, the operating arm of both the National Academy of Sciences and the National Academy of Engineering, authorized first-year funding for a new Office of Japan Affairs (OJA). This newest program element of the Office of International Affairs was formally established in the spring of 1988. The primary objectives of OJA are to provide a resource to the Academy complex and the broader U.S. science and engineering communities for information on Japanese science and technology, to promote better working relationships between the technical communities in the two countries by developing a process of deepened dialogue on issues of mutual concern, and to address policy issues surrounding a changing U.S.-Japan science and technology relationship. Staff Thomas Arrison, Staff Officer Maki Fife, Program Associate

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Global Economy, Global Technology, Global Corporations Contents     INTRODUCTION        OVERVIEW OF THE PROJECT   3     REPORT OF THE U.S. WORKING GROUP       1  CONCLUSIONS, RECOMMENDATIONS, AND EXECUTIVE SUMMARY   11      Benefits of Foreign Direct Investment,   11      Equal Access and New Rules of the Road,   12      Best Practices,   13      Understanding and Managing our Differences,   14     2  MULTINATIONAL CORPORATIONS AND THE CHANGING GLOBAL ENVIRONMENT   16      Opportunities,   17      Challenges,   21      The Importance of Effective U.S.-Japan Leadership for the World Economy,   22     3  FOREIGN DIRECT INVESTMENT AND THE U.S.-JAPAN ECONOMIC AND TECHNOLOGICAL RELATIONSHIP   24      The Pre World War II Period,   24      U.S. MNCs in Japan,   25      Japanese MNCs in the United States,   29     4  U.S. AND JAPANESE MNCs AND THE SHAPE OF GLOBAL COMPETITION   40      A Global Economy: Who's Turning Toward Asia?,   40      Global Technology: Accessing and Utilizing Technological Capabilities Worldwide,   47      Global Corporations: Management Vision and Emerging Opportunities,   53     5  DEFINING RIGHTS AND RESPONSIBILITIES   59      MNC Rights: Perspectives on Policies,   60      MNC Responsibilities: Defining and Implementing Best Practices,   63      Tasks for the Future,   65     REPORT OF THE JAPANESE WORKING GROUP       1  SUMMARY   71      Conclusions and Recommendations,   71

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Global Economy, Global Technology, Global Corporations      Basic Difference in Objectives,   71      Summary Case Studies,   72      Conceptual Differences on National Security,   73     2  MNC CASE STUDIES   74      Statistics on Foreign-based MNCs in Japan,   74      Reasons for Success of U.S.-Based MNCs in Japan,   81      Reasons for Success of Japan-Based MNCs in the United States,   83      Some U.S.-Based MNCs in Japan Still Have Room for Management Efforts,   85      Difficulties of Japanese Companies in Doing Business in the United States,   87      New Trends for MNCs,   89     3  EMERGING ROLES OF MNCs   94      Increasing International Company Alliances,   94      Emerging Roles of MNCs,   95      Comprehensive National Security,   96     4  CONCLUSIONS AND RECOMMENDATIONS   98