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 (1998)

The Japanese Multinational Corporations (MNC) working group has concluded based on its case studies that U.S.-based MNCs in Japan and Japan-based MNCs in the United States have been contributing as much as they could to the welfare of local communities by forming a variety of strategic alliances. Those MNCs who have been contributing to the local communities have been successful in their businesses. They have followed exactly the basic principles of effective corporate management.

As the globalization of corporate business operations progresses so strikingly and becomes more complex both among developed countries as well as developing countries of vastly different cultural and political climates, it is better to rely on the initiative of the private sector rather than government intervention or pressuring MNCs to make valuable social contributions. The government should set the basic long-range policy in harmony with existing various world organizations for promoting the world economy and peace.

The Japanese members recommend that no special guidelines are necessary to establish the rights and responsibilities of MNCs at this moment.

At the high level meeting between the U.S. Academies and JSPS Committee 149 in Washington, D.C. in 1991, the American members proposed a study on a “Code of Conduct for MNCs”. Since the subject was beyond the scope of Committee 149, which is to promote mutual understandings and to make constructive suggestions to key leaders in government and industry in order to reduce high technology conflicts between the two countries, the Japanese members objected to the proposal. One Japanese member had a bitter past experience of abolishing a similar OECD recommendation for MNCs resulting from a negative vote by the U.S. delegation.

The management of MNCs is not as simple as science and technology and not as simple as academicians think. Hence the Japanese members proposed to study successful cases of manufacturing MNCs in Japan and the United States in order to learn about common basic technological management, which could help MNCs to improve the probability of success. Their successes could improve the economies of both countries, and thereby reduce high technology conflicts between them.

During the course of the joint study, we have tried to narrow the gap between the two different objectives without success. For most Japanese working group members, it appeared as if the U.S. task force was working for the U.S. Department of Commerce, compiling data to pry open Japanese markets. Interim study reports by the U.S. task force blamed closed Japanese markets and numerous barriers resulting from traditional customs that have been restricting the activity of U.S.-based MNCs in Japan and creating the trade imbalance between the two

countries. A measure of equal access was also proposed by the task force in order to accelerate Japanese market opening.

Existing conditions in many local communities throughout the world are not as simple as many politicians think. These communities are struggling to adapt themselves to socioeconomic and sociopolitical changes within cultural and customary constraints which evolved for hundreds and thousands of years. It is very difficult, if not impossible, to change culture and custom overnight as the U.S. government demands. The Japanese working group strongly believes that culture and customs should not be unified for the sake of economic reasons; rather, its diversity should be encouraged to enrich civilization.

Many U.S.-based MNCs were established in Japan during the 1960's, when the market was tightly closed, and are earning much higher profits than most Japanese companies. None of the successful ones have retreated from Japan since their establishment. They have been contributing to the advancement of national economies as well as science and technology in the home and host countries. This fact has been known for many years; however, the claims by failed companies, who aimed at overnight success, have overshadowed the successful cases and resulted in misconceptions toward the Japanese market as a conspicuously tightly closed market.

We recognize that many outdated government regulations should be removed as soon as possible in order to promote emerging businesses. However, those industries, domestic or foreign, who are losing international competitiveness or those trying to protect vested interest, are still in favor of the current regulations. It will take painstaking efforts and step by step deregulation.

Japanese companies carry the heavy burden of regulations as much as foreign-based MNCs. It is a domestic problem and not discrimination against foreign companies. They used to say “when in Rome, do as Romans do.” The proverb is still valid today as the case studies prove.

Summarizing the results of the case studies, we have learned the following basic management practices, which are true regardless of the MNC's origins or the markets where they practice:

1. Consistent management based on long-range strategy.

2. Core competencies such as distinguished technology and products.

3. Careful market study and customer oriented product development.

4. Mutual trust between the top managements of joint ventures.

5. Localization of the MNC's management and establishment of trust with customers and local communities.

6. Fusion of corporate managements and cultures at MNC.

7. A long-range vision for globalization and “glocalization” (a fusion of globalization and localization.)

Since the 1970's Japan has rapidly relaxed market entry regulations, especially those in high technology industry. Of course there still exist informal barriers resulting from differences in culture and customs. No country exists in the world that completely opens its markets. As every river has to be properly managed locally in order to avoid flooding and to improve irrigation, the minimum level of necessary regulation may not be identical from country to country. Many

Americans insist that their market is open. However, there are numerous local codes that have to be carefully studied in order to succeed in business. Many Japanese companies have faced various problems in the United States due to different business customs, national security restrictions, and legal difficulties. There is no easy way to do business on foreign soil. All successful MNCs have overcome informal barriers.

Most Japanese believe that the concept of national security should be changed as the global social climate has changed. Military power alone no longer can secure world peace or national security. We think that a new concept of comprehensive national security should be promoted and all efforts be devoted to the ultimate goal of world peace.

The concept of comprehensive national security is nothing special. Most countries have been pursuing what we call comprehensive national security for their national interests; however, we advocate a better balance between economic and technological power, on the one hand, and military power compared with conventional formulations of national security based on military power.

We never underestimate the great benefits that Japan has received from the U.S.-Japan Mutual Security Treaty. Many Japanese companies have been trying to reciprocate favors they had received after the Second World War by donating to universities and establishing manufacturing plants in the United States during the crisis of U.S. manufacturing industry cavitation, which was greatly debated. Unfortunately, our efforts have been largely ignored or misunderstood in the United States as a Japanese strategy of buying out university research and devastating U.S. manufacturing industries. Our concept of global interdependence is similarly misunderstood.

The causes of many skirmishes in many areas after the end of the Cold War go back to poverty. We have to help those under-developed countries to develop their own industries to raise their living standards above critical levels. In order to reduce trade in military weapons, we have to help these countries to manufacture tradable consumer products. The world is becoming a borderless society whether we like it or not. The national security of one nation is heavily influenced by other nations' security. There is no longer a one-sided winner. We have to be mutually interdependent.