There are a number of possible approaches to the analysis of “technology transfer.” Technology is “applied science” or the application of knowledge to the production of goods and services. The most common image of “industrial technology” is proprietary knowledge subject to intellectual property protection through patents or trade secrets. Technology trade statistics measure the flow of licensing fees to the owners of proprietary knowledge from those wishing to use it.

But technology is embodied first and foremost in people — scientists, engineers and technicians employed by companies, universities and research institutes. The timely application of new (or improved) technology to a more efficient production of goods and services requires superior management and marketing practices. Weighing the significance of the organizational context for technology transfer is especially relevant to this discussion. It is widely held that Japan's competitive advantage in manufacturing is primarily due to innovations in organizing and managing the manufacturing process. Attitudes, ideologies and even “culture” affect the receptivity of individuals and organizations to such practices as quality control circles, just-in-time manufacturing and concurrent engineering. Organizational assets outside the R& D lab have a major impact on how effectively companies are able to improve their competitiveness through the utilization of technology.

“Technology transfer” is the process by which organizations learn how to develop and manufacture new products or improve manufacturing processes. In the case of proprietary knowledge, technology transfer may be accomplished through an exchange of documents, equipment, personnel, or some combination. Transfers of “hard technology” between organizations are often accompanied by a financial transaction, but within organizations such as MNCs this is not always the case. “Soft technology” transfer within a single organization is mainly accomplished by training or personnel rotation. Between organizations, transfer of management practices can occur as a result of business relationships, labor mobility or competitive pressure.

In the case of Japanese FDI in the U.S., there are several potential “technology transfer routes” that need to be considered. One route is the transfer of technology from a Japanese parent to an American subsidiary. The second is the flow of technology in the opposite direction, from the U.S. subsidiary to the Japanese parent, including transfers in which the subsidiary is a conduit or intermediary for technology developed by other organizations. The third is technology transfer from the American subsidiary of a Japanese firm to U.S.-owned firms. A fourth route is the transfer of knowledge between U.S. subsidiaries of Japanese companies. This report deals primarily with a review of the evidence concerning the first route and, to a lesser extent, the third route. The second route — technol-

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