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Japanese Investment and Technology Transfer: An Exploration of its Impact: Report of a Workshop
and probably desirable for the first two or three postwar decades, continuation of the pattern is a matter of growing concern. The National Research Council's Committee on Japan has identified the acquisition of technological know-how from Japan as a national priority for the United States.2 In light of the recognized role of foreign direct investment (FDI) in transferring technology from the “home country” of the investing firm to the “host country” in which the investment takes place, Japanese FDI might be expected to play a role in balancing the bilateral technology flow.3 The purpose of the workshop organized by the Committee on Japan was to assess the evidence in order to determine what can be said about linkages between Japanese investment and technology transfer to the United States.
The question is complex. Some commentators believe that foreign multinational corporations (MNCs), including Japanese firms, that perform high value-added manufacturing and R&D in the United States can make a greater contribution to the American economy than U.S.-owned companies that transfer manufacturing and R&D overseas.4 For example, technology transfer to the United States might be accomplished if the American manufacturing facilities of Japanese firms utilize management practices associated with high productivity and the rapid assimilation of new technology in their Japanese operations. The manufacture of critical components and the performance of R&D in the United States could spur technology development in general, raise the skills of the manufacturing work force and have a positive impact on technical labor markets. In the best-case scenario, the benefits of this technology transfer would not be limited to the Japanese-owned facilities themselves but would also diffuse to American firms in the same industry or geographical area.
Others assert that Japanese FDI does not generally result in technology transfer to the United States and in many cases serves as an efficient mechanism for Japanese companies to transfer more know-how back to Japan. According to this formulation, Japanese industry is on a “shopping spree” for U.S. high technology, and is conducting a raid on America's innovative capacity by buying small, high technology companies. 5 Capital-starved U.S. firms that cannot attract funding from banks or other
Committee on Japan, Science, Technology and the Future of the U.S.-Japan Relationship (Washington, D.C.: National Academy Press, 1990), p. 11.
See Raymond Vernon (ed.), The Technology Factor in International Trade (New York: Columbia University Press, 1986).
Robert Reich, “Who is Us?” Harvard Business Review, January-February 1990, pp. 53-64, and “Who is Them?” Harvard Business Review, March-April 1991, pp. 77-88.
Marjorie Sun, “Investors' Yen for U.S. Technology,” Science, December 8, 1989, p. 1238.