Click for next page ( 7


The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 6
The Organization of Industrial R&D in Japan and the United States: Contrasts and Commonalities U.S. and Japanese industrial firms built their R&D organizations in very different social and historical contexts, which is reflected in the fact that there are more contrasts than similarities between the two systems. Major U.S. firms such as General Electric and DuPont began establishing R&D laborato- ries around the turn of the century during a period of industrialization in the United States. In Japan, however, although major companies established R&D laboratories before World War II, significant research results were not obtained until the first decade after the war. The Japanese drew heavily on U.S. models of industrial research, but they adapted them to Japanese corpo- rate structures, technical labor markets, and institutional contexts. Thus, both Japanese and Americans today are more conscious of the differences between the two countries in industrial R&D than of their similarities. The formal structure of research in the industrial corporation differs very little in the two countries: the organization charts of R&D in large U.S. and Japanese firms in the same industry are remarkably similar. In manufacturing companies, basic research or advanced product development is centered in a corporate laboratory; medium- or shorter-term product development is locat- ed in divisional laboratories that are tied more closely to the separate businesses of the multidivisional firm. Japanese firms have tended to locate their divisional laboratories within or beside a production facility and main- tain more of their technology development at the plant level, particularly incremental process or product improvements.9 In the United States the loca- tion and relative emphasis of R&D vary greatly from firm to firm. 6

OCR for page 6
7 To American eyes, Japanese corporate research today seems to be more persistent and to take a longer-tenn perspective in speculative areas. R&D organizations in Japanese corporations now are allocating percentages of their budgets to "seed" research that is intended to encourage individual researchers to look into potentially promising areas that may or may not be tied to the company's short- and medium-term strategic plans.~ Americans usually tend to explain Japanese approaches by such factors as lower costs of capital and the absence of short-term performance pressures from the stock market. But many Japanese feel that Americans underestimate the extent to which Japanese research agendas are driven from the beginning by a search for products and business development. Differences in the degree of integration between research and business divisions in Japanese and U.S. corporations influence the role that R&D orga- nizations take in carrying out fundamental business plans. For example, over the last two decades, while some of the leading U.S. industrial corporations have looked to acquisitions to diversify their businesses and technologies, Japanese firms increasingly have made their R&D organizations the centers of diversification efforts. Firms in such mature industries as shipbuilding, steel, and textiles have exhibited an especially strong drive for technological diversification to provide opportunities for the growth their core businesses can afford no longer. For example, concurrent with the sharp appreciation of the yen in 1985, Nippon Steel Corporation undertook diversification into new businesses, with the objective of making steel account for less than 50 percent of its total sales. Other materials (including steel), new materials, and chemicals are planned to account for 60 percent of sales in 1995, electronics and informa- tion systems 20 percent, engineering 10 percent, and urban development and infrastructure projects 10 percent. Nippon Steel also has begun research in biotechnology and employs 1,000 people in its R&D, while another 7,000 are engaged in development of steel materials and production technologies. To achieve diversification, the company established a new "CREDIT" (Characterization of Research and Development for Innovative Technology) system; its objectives are giving greater authority to the Central R&D Bureau, providing rewards and incentives for innovative research, and integrating research plans and budgets over the medium and long term. R&D activity is defined according to whether it is in the research or development phase and corporate-wide or division-wide laboratories. The Central R&D Bureau has the lead in launching corporate-wide research projects, and senior executive management exerts leadership over corporate-wide development projects. In terms of manpower allocation, more than 60 percent of the company's R&D activity takes place in the corporate-wide projects, and a good portion is

OCR for page 6
designed to develop "seeds" of new technologies within the framework of a clearly defined plan with target objectives and milestones (see Figure 41. At Toshiba, R&D is carried out in a three-tiered hierarchy, with four cor- porate laboratories conducting longer-term work that may be applied to prod- ucts in 5 to 10 years (see Figure 51. The R&D Center, one of the four central laboratories, allocates 10 percent of its budget to "basic" research. The overwhelming majority (90 percent) of the 15,000 scientists and engineers employed by Toshiba are working in the engineering laboratories and depart- ments that are part of business groups where short- and medium-term research is carried out.~3 Toshiba's corporate R&D strategy is formed by the Corporate Technology Committee, which includes central laboratory direc- tors and representatives from each business group. Each of these business group representatives has the title of Group Executive for Technology, and each is assigned as a partner to the top manager of the business group. There is great pressure in short- and medium-term research to develop new product lines and businesses. Many of the more obvious differences between Japanese and U.S. corpo- rate R&D organization cluster around human resource development and the careers of researchers. This begins with the significant difference in the tech- nical labor markets of the two countries. Japanese universities produce far fewer PhDs than U.S. universities, in part because companies are not particu Seed Exploring Research Agenda 1 a' 0 can o ns E ~ 0 . 0 ~ E G ~ a: o Ct)' ~ ~ Corporate-Wids / \ Research Project i' N~ 20% 1 1 1/ b I l l 20% \ I i\ a 40% ~ C;orporate-W'de /1 \Development Project/ _y _l_ il i, _ ~ d 20% ~ Divisional Development \< Agenda J _ ~ R & D Resources ~ FIGURE 4 R&D resources and organization at Nippon Steel. Central Research Laboratory Total jig On-site Research Laboratory R & D Resources ~

OCR for page 6
l Boa rd at Ol r.~t~r. 9 r ; CORPORATE TECHNOLOGY COMMITTEE) 1 ~ CORPORATE TECHNOLOGY STAFF - Technical Planning & Coordination Division _- Intellectual Property Division - Design Center President Ch let Esecutl ve Otticer ,' CORPORATE LARORATORIES - Research & Development Center - Advanced Research Lab - ULSI Research Center _ _ Systems ~ Software Engineering Lab _ _ Manufacturing Engineering Lab 1 FIGURE 5 Toshiba's R&D organza ion. BUSI NESS GROU P (DIVISION) Information Processing & Control Systems Group Information & Communications Group- -Electronics & Telecommunication Group - Medical Systems Div. - Electron Tube & Device Group - Semiconductor Group - Consumer Products Group - Energy Systems Group - Industrial Equipment Group Material & Components Groun DEVELOPMENT LABORATORI ES _ _ Information & Communication Systems Lab - Medical Engineering Lab (E.L.) -Electron Device E.L. -Semiconductor Device E.L. -Consumer Products E.L. Nuclear E.L. ~ Heavy Apparatus E.L. -New Material E.L. larly eager to hire them. Instead, large Japanese firms, such as Toshiba Corporation, staff their research organizations primarily with graduates of masters programs. As of mid-1989, Toshiba employed 15,800 university and college graduate engineers and scientists-23 percent of its employees. Of this number, 4,700 held a master's degree, but only 500 were PhDs.14 Japanese managers sometimes explain their reluctance to hire university-bred PhDs as a function of over-specialization and lack of commitment to the company's business goals.15 American managers have come to share this feeling to a certain extent in that PhDs, initially at least, are said to be less company oriented and may have less interest in following ideas through to marketable products. However, American managers have been willing to trade off these drawbacks for the PhD's greater capacity to do independent and creative research.16 Since the talented researcher in the U.S. corporation is rewarded for indi- vidual creativity and performance within the research organization, he or she is much less likely than the Japanese counterpart to move outside the compa

OCR for page 6
10 ny's technical realm to corporate management. Some U.S. companies have instituted "dual ladder systems," which are designed to allow R&D personnel to obtain increases in salary and status equivalent to those of business man- agers of comparable seniority. In most cases, however, the intent has been to induce the talented researcher to stay in R&D.17 Although the situation may be changing in recent years, U.S. firms have maintained a stronger distinction between technical and business management than has been the case in Japanese firms during the postwar period. Many Japanese corporations encourage flow and flexibility between the technical and business management functions. Typically, a researcher will move from an R&D function into business management. Companies such as Toshiba maintain dual ladder career systems similar to those found in the United States, but in Japan the equalized salaries and positions across techni- cal and management lines are seen to promote mobility between R&D and business [unciions.19 The differences in the labor markets for midcareer researchers also strong- ly affect human resource management in the two countries. In Japan researchers rarely move from one large company to another. Movement among major competitors is especially rare, although firms in mature indus- tries such as steel and shipbuilding have in recent years recruited midcareer researchers aggressively from other companies as part of their efforts to move into new businesses in electronics and new materials. Japanese researchers move within the firms in an industrial group, but these shifts are initiated by the companies rather than the individuals. In a pattern more similar to the United States, top ranking industrial researchers often will move into academ- ic positions in private or local universities after retirement at about age 55 to Sometimes even earlier. In the United States the threat of losing key researchers means that R&D management is challenged constantly to retain the most qualified people who are, in effect, the carriers of much of the firm's intellectual property. Partly as a result of these differences in the labor markets, career develop- ment in U.S. industrial R&D is much less structured than that in Japan. Japanese researchers exercise far less individual choice during their careers, from their initial recruitment (in which graduates with master's degrees from the leading universities are funnelled into the leading corporations by their professors) to their assignments to projects and training courses. Senior Japanese R&D managers spend considerable time developing appropriate assignments for their subordinates. This highly structured career development system contrasts sharply with the "self-development" ideal prevalent in U.S. industrial research, where it is the individual and not the company who assumes the primary responsibility

OCR for page 6
11 for seeking career opportunities and interesting assignments as well as acquir- ing new skills. This ideal is pursued to the point in some U.S. corporations where new R&D positions and project openings are posted openly within the research organization to enable all interested individuals to take the initiative in applying for more challenging roles. This tendency to regard personnel more as vessels of specific skills and expertise as opposed to integral mem- bers of the corporate team leads many U.S. firms to hire new people as a way to enter new technological fields or add specialized expertise.20 The contrast between structured and nonstructured career environments shows up in approaches to off-thejob education. In the United States, where the research university serves as an important resource for the industrial research organization, some leading companies have adopted the concept of the research sabbatical, which allows outstanding researchers to take up to a year off from their regular work to take the initiative to pursue new ideas either within their own R&D organization or at an outside university. By contrast, Japanese companies prefer to use "training assignments" whereby outstanding researchers are sent to a university or an outside R&D laboratory to develop a clearly targeted set of new skills or research goals. The highly defined career structure in Japan also affects methods of tech- nology transfer within the firm. Many Japanese R&D organizations move R&D personnel into the production organization to oversee the movement of a product rapidly and effectively through production and into the market. Often, these researchers will stay with the business divisions and eventually move into management roles there. In the United States, however, firms have drawn sharper lines among personnel in R&D, production, and manufactur- ing, permitting less crossover among these functional areas. The result may be to hamper intrafirm technology transfer. This pattern has been engendered by both managers and researchers in U.S. organizations. Management often reinforces R&D personnel's tenden- cies not to see invention through to product by rewarding researchers on the basis of originality of their ideas and dramatic technical departures rather than on success in the marketplace, which often is based on incremental improve- ments in design and process. As a result, U.S. researchers are less likely to be closely involved with the products they have helped develop once the research is handed off to production, although several leading U.S. companies are taking steps to change this. Some of the recent steps taken in Japanese industrial R&D to foster indi- vidual creativity bear striking resemblances to patterns in the great U.S. industrial laboratories of past decades. Some Japanese corporations have established new basic research centers, separated from their long-established central R&D laboratories, where individual researchers are encouraged to

OCR for page 6
12 pursue advanced technologies with a long time horizon. The trend by leading Japanese corporations such as Toshiba and Nippon Steel Corporation is to build slack into their R&D budgets to support individual initiatives and "bootlegging." Toshiba, for example, allocates 10 percent of its corporate R&D center's budget for "under-the-table" projects those undertaken with- out official approval and budgeting. Nippon Steel guidelines for allocating research resources set aside 20 percent to "seed exploring research."22 Top R&D management is increasingly vocal in its encouragement of younger researchers. In some corporations (e.g., Toshiba) top management urges researchers with a challenging idea for a project to bypass their immediate superiors, who may be reluctant to see their most promising subordinates dis- tracted from the assignments at hand, and seek higher-level approval. In the United States, on the other hand, intensified competition with Japan and other advanced countries has put pressure on corporate R&D organiza- tions to demonstrate greater relevance to the firm's major businesses. With this pressure has come an array of efforts to compress the time required for product development and improve design quality through the use of cross- functional development teams. Whereas a decade ago one of the main con- trasts between U.S. and Japanese R&D organizations was U.S. emphasis on the individual versus Japanese emphasis on the team (a difference still sus- tained in many industries), today Japanese firms increasingly are focusing on fostering individual creativity while U.S. firms are trying to improve the organization and processes of research teams. Nippon Steel, for example, has instituted both a "President's Prize" to reward outstanding inventions in steel technology and a "Create Number 1 Prize" to reward outstanding achieve- ment in basic research.23 Many in the United States have noted the paradox inherent in Japanese firms' ability to bring a product to the marketplace more quickly than their American counterparts despite their time-consuming emphasis on the team approach and consensus. American firms may make decisions quickly, but they have fallen behind in product introduction, perhaps because the rapidity of the decision-making process itself does not allow time to adapt to unfore- seen changes in direction, such as in marketing or manufacturing specifica- tions. One top R&D manager from a major U.S. firm believes that faulty specifications are the largest cause of project failure for American compa- nies a problem that is exacerbated by what he describes as a "command and control" environrnent.24 The growing importance of crossfunctional teams in U.S. industrial firms as a means of minimizing these shortcomings also is generating pressures for management to foster cooperation and consensus, to ensure commitment by those involved in a decision before a decision is formally taken, and to com

OCR for page 6
13 municate intensively with all those involved over the life cycle of a product. This is eroding the traditional contrast in management styles between the two countries, with the U.S. moving toward patterns that have long been consid- ered the hallmark of consensus-oriented "Japanese management." A final casualty of the changing technological environment is the contrast between the importance that U.S. industrial R&D organizations have assigned to invention versus the higher Japanese reliance on acquiring and enhancing externally generated technology. Traditionally, U.S. R&D organizations have resisted a mission of acquiring and then making incremental improvements to technology generated by another firm. Opportunities to acquire technology from external sources often were bypassed in favor of internal corporate development efforts. On those rare occasions when technology was licensed in, it all too frequently became an orphan, unrelated to R&D activities tied in with the firm's day-to-day mission and lacking commitment for furler devel- opment from anyone within the R&D organization. Japanese firms, on the other hand, are well known for their ability to con- duct global technology scanning and acquisition and for their success in har- nessing the efforts of their researchers to incremental development and appli- cation. Japanese firms have begun to put internal development of technology at the top of their lists of strategic priorities. U.S. firms, on the other hand, recognize the impossibility of maintaining technological autonomy in all fields of technology important to their businesses. They are moving to build systems for identifying and acquiring technology on a global scale.25 It is highly unlikely, given vastly different historical backgrounds and the different industrial bases which Japan and the United States are building, that there will soon be a homogenization of the patterns of R&D within industrial firms in the two countries. But in an age of increasing competition both in technology development and market position, firms on both sides of the Pacific are finding it necessary to learn from each other's strengths. In this environment growing interdependence is inevitable. Defining formal collabo- ration, however, is the result of complex business decisions critical to success in the marketplace. The next sections explore examples of technological col- laboration involving firms from the United States and Japan.