Symbiotic Competition: Emerging Roles of Multinational Corporations

MICHIYUKI UENOHARA

The world is facing a host of crucial problems whose solutions will require the advancement of science and technology. No longer can we concentrate our efforts solely on national interests. We must collaborate globally. Indeed, as noted in Technical Networks Between U.S. and Japanese Industry (Peters, 1987), this appears to be happening already:

Although current discussion about U.S.-Japanese relations has focused on trade difficulties, this study documents a growing relationship between the two nations through an extensive network of technical alliances. Economic strength in both the United States and Japan has been attributed to each nation’s success in technology-based industries. Concurrent with the growth of these industries has been the expansion of U.S.-Japanese private-sector technical alliances and a growing technological and economic interdependency.

A recent, as yet unpublished, study on multinational corporations (MNCs) conducted over the past 3 years by the Committee 149 of the Japan Society for the Promotion of Science (JSPS) reached the same conclusion. To address new economic, political, and social realities, many MNCs have been forming business and technical alliances. A number of those alliances have adopted a new mode of operation that I call “symbiotic competition.”

SYMBIOTIC COMPETITION

The term symbiotic competition may be unfamiliar to most people. I used it first in a talk I gave in 1972 (Uenohara, 1973). At that time, I stated:



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THE GLOBAL AGENDA FOR AMERICAN ENGINEERING: Proceedings of a Symposium Symbiotic Competition: Emerging Roles of Multinational Corporations MICHIYUKI UENOHARA The world is facing a host of crucial problems whose solutions will require the advancement of science and technology. No longer can we concentrate our efforts solely on national interests. We must collaborate globally. Indeed, as noted in Technical Networks Between U.S. and Japanese Industry (Peters, 1987), this appears to be happening already: Although current discussion about U.S.-Japanese relations has focused on trade difficulties, this study documents a growing relationship between the two nations through an extensive network of technical alliances. Economic strength in both the United States and Japan has been attributed to each nation’s success in technology-based industries. Concurrent with the growth of these industries has been the expansion of U.S.-Japanese private-sector technical alliances and a growing technological and economic interdependency. A recent, as yet unpublished, study on multinational corporations (MNCs) conducted over the past 3 years by the Committee 149 of the Japan Society for the Promotion of Science (JSPS) reached the same conclusion. To address new economic, political, and social realities, many MNCs have been forming business and technical alliances. A number of those alliances have adopted a new mode of operation that I call “symbiotic competition.” SYMBIOTIC COMPETITION The term symbiotic competition may be unfamiliar to most people. I used it first in a talk I gave in 1972 (Uenohara, 1973). At that time, I stated:

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THE GLOBAL AGENDA FOR AMERICAN ENGINEERING: Proceedings of a Symposium As we recognize our own capability, we realize the need very clearly to develop our own specialties, while relying on others to support our weaknesses. However, a major question arises: How should broad research and development be covered? And what should be relied upon from the outside? In addition, we have pollution problems, and technological assessment is now loudly discussed. With such a range of problems, it is extremely difficult, if not impossible, to carry out the necessary research and development activity in large research organizations or countries. It may also be inefficient to carry out all research in one country. Symbiotic competition is, I believe, the future trend of the open know-how market. This is the only way we can maintain healthy growth and a peaceful society. What does symbiotic competition mean? It is mutual support and reliance for survival and growth within the basic rule of free competition. Let me give you an example of what I mean. In Japan, beginning in 1966, we have carried out many national research and development projects by organizing industrial consortia. In the early days, the projects were of the catch-up type. Their goal was to develop the most advanced product model as quickly as possible. Since the members of the consortia were strong competitors in the market, it was almost impossible to make them collaborate. They were strongly opposed to organizing joint research laboratories and carried out their research separately. The first joint research laboratory was organized in 1976 by the VLSI Technology Research Consortium. The consortium received a 50-percent subsidy from the Ministry of International Trade and Industry for the term of the project. Companies approached about the consortium idea were initially opposed to it. But because of financial difficulties caused by the first oil embargo, they reluctantly organized the laboratory. It took almost a year before the facility started functioning. Consortium activities were limited to research on precompetitive technologies; research directly related to products was conducted by each member company independently. It was a very painful process at first but fruitful in the end. Since VLSI, we have organized numerous joint laboratories to create new generic technologies. The research outcomes have been competitively applied to new product development by member companies and other firms as well. Through the mid-1980s, all collaborations were among Japanese companies, hence the term “domestic symbiotic competition.” Since the mid-1980s, Japan has promoted “kyosei,” or cooperation and competition in the global community. Many consortia have added “international” to their names as part of an effort to encourage partnerships with non-Japanese firms. Foreign companies were at first skeptical about Japanese intentions. However, of the roughly 50 Japanese research consortia, about 10 now have international members.

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THE GLOBAL AGENDA FOR AMERICAN ENGINEERING: Proceedings of a Symposium INCREASING INTERNATIONAL ALLIANCES Most globally minded companies are expanding their businesses across national borders in order to maintain their competitiveness. The number of MNCs operating in major international markets is increasing rapidly. There are several reasons for this. From the point of view of industrial operation, it is best if enduser products are manufactured as close as possible to the customer base. This minimizes the energy used to transport the goods, reduces air pollution, and provides jobs in the community. In addition, the development of certain products, such as application software for information technologies, is very much dependent on local culture. Thus, the involvement of same-culture engineering talent is vital to meeting the needs of the marketplace. This trend is not unique to information technologies. Indeed, any firm hoping to develop a successful international business must globalize its research and development capability. The paradigm of modern technological innovation is changing rapidly. Innovation is increasingly market driven rather than technology driven. It is more interdisciplinary, interdepartmental, interindustrial, and international in nature. Innovation is no longer explainable by a simple linear model; a complex network model enjoys popularity among Japanese industrialists. In order to cope with this changing paradigm, many companies are forming strategic alliances across national borders. These networks are so complex and tightly woven that even nationalistic political pressure can no longer break them. GLOBAL SYMBIOTIC COMPETITION Strategic alliances are an important first step toward improving international collaboration. However, the challenge of environmentally sustainable economic growth and the increasing cost of technology development demand more extreme steps, I believe. Indeed, it seems unlikely that most environmental problems—such as ozone depletion, desertification, groundwater contamination, and industrial air pollution —can be addressed adequately without collaborative efforts on a global scale. We must develop new industries that can both boost the world economy and allow environmentally sustainable development to take place. One such industry is what I term the “vein” industry, which recycles wastes into useful products. If a single company or nation cannot invest sufficient resources in the science and technology needed to achieve these goals, we must collaborate globally to create and develop precompetitive generic technologies. Individual companies will then compete with each other to apply those generic technologies in ways that benefit both society and the bottom line. This is what I mean when I refer to global symbiotic competition, an approach many Japanese firms are planning to pursue. Given this view of the world, the increasing number of strategic alliances being formed by MNCs is a very encouraging trend.

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THE GLOBAL AGENDA FOR AMERICAN ENGINEERING: Proceedings of a Symposium MNCs IN INTERNATIONAL ENGINEERING AND SCIENCE JSPS has examined the reasons for the successful operation of MNCs in host countries. This 1992 effort produced case studies from 11 companies—6 U.S.-based MNCs in Japan and 5 Japan-based MNCs in the United States and England. We also asked the Research Institute of Management Information of Tama University in Tokyo to survey the research literature on MNCs. The study identified seven attributes of successful MNCs, regardless of where the corporation was based. These are not new concepts; many have been taught in basic management courses. However, many companies have failed to incorporate them in their own operations: Reliable management based on a long-range strategy; Mutual trust among top management of joint parent companies; Core competencies in unique technologies and products; Market research studies and products that respond to market needs; Localization of management and establishment of goodwill with customers and local communities; Integration of the management styles and corporate cultures of the home and host countries; and “Glocalization” strategy, or localization based on a global perspective. Many U.S.-owned MNCs established their presence in Japan prior to or during the 1960s, when Japanese markets were tightly closed. These firms had a very difficult time for at least a decade or so. But by enduring various difficulties, they established solid footing on Japanese soil. They now enjoy far better profit margins than most Japanese companies, have very good reputations, employ highly qualified Japanese workers, and will serve as bases for expanding business into Asian countries. Recently, a number of foreign-owned MNCs in Japan have expanded their research and development activities. Most MNCs used to operate exclusively through engineering centers, which transferred product technology from and manufacturing technology to the parent company. Now, many of these firms are increasing their contacts with major universities, and some are even becoming members of Japanese research consortia. They are participating in Japanese academic activities and contributing not only to the development of corporate technology, but also to the advancement of science and technology. Compared to U.S. multinationals, the history of Japanese MNCs is relatively short. Most Japanese-based companies with facilities in other countries are having difficulty hiring top local managers who have adequate Japanese language skills. (U.S.-based MNCs in Japan, on the other hand, seem to easily attract talented local managers who can speak English.) Many Japanese MNCs are also having difficulty hiring capable engineers, since these firms have not yet established themselves as good corporate citizens in their host countries. Hence, they

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THE GLOBAL AGENDA FOR AMERICAN ENGINEERING: Proceedings of a Symposium have contributed little to the advancement of science and technology in the host nation, although they have often successfully transferred advanced manufacturing technology. THE NEC RESEARCH INSTITUTE NEC had problems hiring capable engineers in the United States for decades. Even though NEC was well known in the professional community, the company was not seen as a corporate citizen. I thought that the easiest way to establish corporate citizenship in the professional community would be to establish a basic research laboratory. In 1989, after many years of preparation, we established the NEC Research Institute (NECI) in Princeton, New Jersey. The laboratory conducts primarily basic research and is open to the academic community. Its main objective is to create new concepts and basic technologies that contribute to the advancement of our highly information-oriented society. The institute’s main areas of research are the physical and computer sciences. Since NECI is an American company, the institute’s top management and tenured research members must at least be permanent U.S. residents. NECI’s budget comes entirely from NEC. NECI now collaborates with the U.S. academic and industrial communities. Many of the results of this joint research are published in academic journals. We feel that the activities of NECI are contributing to the advancement of science and technology as well as improving the environment for international scientific collaboration. In addition to NECI, NEC has established two applied research laboratories: C&C Research Laboratory, NEC U.S.A., also in Princeton; and C&C Research Laboratory, NEC Europe, in Bonn, Germany. These two facilities, also, are collaborating closely with universities and national laboratories on projects in applied research. In addition, we support many development laboratories and engineering centers, which are collaborating with major customers and allied companies. All of these efforts will contribute to the advancement of international engineering activities. CONCLUSION The scientific community has long enjoyed a favorable climate for international communication and collaboration. Unfortunately, the engineering community has faced numerous obstacles to such openness, including those related to national economic and security concerns. These constraints will not be removed in the foreseeable future. Without managing better our international engineering and science relationships with the goal of improving R&D productivity, we will not be able to work toward world peace or ensure the survival of the human race.

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THE GLOBAL AGENDA FOR AMERICAN ENGINEERING: Proceedings of a Symposium REFERENCES Peters, L. S. 1987. Technical Networks Between U.S. and Japanese Industry. Center for Science and Technology Policy, School of Management, Rensselaer Polytechnic Institute, Troy, N.Y. Uenohara, M. 1973. Symbiotic competition: Future trends of the open know-how market. R&D Management 3(2):91-95.