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4
Consulting Organizations
Consulting organizations have grown in both the United States and Japan in
recent years. These organizations are private entities that perform R&D for or
provide technical advice to clients and are reimbursed for their services. They
may or may not operate for profit. Their clients include universities, private
firms, and government agencies. Although this broad definition covers many
U.S. and Japanese organizations, the differences between U.S. and Japanese
consulting organizations in terms of historical evolution, roles, organization,
and resources are more striking than the similarities.
The most difficult aspect of such a comparison arises because an important
type of U.S. consulting organization-private, not for profit research institutions
with their own physical research laboratories-does not exist in Japan. There are
no Japanese equivalents to institutions like Southwest Research Institute or Bat-
telle, the major focus of discussion here. The closest Japanese approximations,
Mitsubishi Research Institute (MRI) and Nomura Research Institute, are really
quite different.
HISTORICAL EVOLUTION
Private, not for profit research institutions have a comparatively long history in
the United States. Battelle Memorial Institute was established in 1925 and
became involved in significant R&D activities in xerography during the mid-
1940s. During the period shortly after World War II, seven other private, not for
profit organizations-Stanford Research Institute (now SRI International), Illi-
nois Institute of Technology, Midwest Research Institute, Southern Research
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Institute, Triangle Research Institute, Southwest Research Institute, and Franklin
Institute-also became major players in U.S. R&D. Of these eight U.S. consult-
ing organizations, seven are still in operation mday.40
The "small band of pioneers" who founded the eight U.S. private, not for profit
consulting institutions did so in response to He U.S. government's decision after
World War II to revert to its prewar policies of not supporting private sector
R&D. The organizations established were not meant to benefit any particular
industry, but to support industry in general. Although some were originally based
in particular regions of the United States (Midwest, Southern, Triangle, and
Southwest Research Institutes), their founders saw their role in the overall post-
war industrialization process.4i
In contrast to the long history of private, not for profit U.S. consulting organi-
zations, Japanese "think tanks" were created in the 1970s. Also in contrast to the
not for profit U.S. consulting organizations, Japanese think tanks were established
largely to help the government respond to problems created by industrialization-
pollution, urbanization, and transportation problems. With strong connections to
national or local governments, the Japanese think tanks were established to work
on national issues being ignored by private industry, as well as to provide
specialized support. Government-commissioned projects account for a large
proportion of Japanese think tank activity. The fact that the Japanese government
played a more significant role in the nation's industrialization may explain why
private consulting organizations with their own facilities for conducting industrial
R&D did not sprout in Japan as they did in the United States.
ROLES
The seven major private, not for profit U.S. consulting organizations all have
physical research facilities and conduct a great deal of applied and experimental
research. Their applied engineering work spans areas as diverse as the auto
industry, nuclear and fossil fuel plants, nondestructive testing, space science,
medical electronics, software, chemical engineering, materials engineering, and
optoelectronics. Their products include technical analysis, technology innova-
tion, and technology transfer, all of which depend on internal technical expertise.
Southwest Research Institute's work for the auto industry, for example, involves
developing technology to meet new environmental pollution standards.
Japanese think tanks like Nomura Research Institute and MRI, on the other
hand, perform no physical research and have no laboratory facilities, although
they do have computer systems. These organizations conduct research in areas
such as macroeconomic analysis, techno-economic studies, corporate behavior
and management, environment and energy, urban and regional issues, social
systems planning, information technology, engineering analysis, and computer
software development. Some of these organizations are also involved in informa-
tion and data processing services, but none directly conduct physical scientific
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research. Typical examples of the products of Japanese think tanks are MRI's
design of a national transport system for the twenty-first century and identifica-
tion (not development) of technologies needed to implement the concept of
underground living space in crowded Japan.
An important aspect of the role of private, not for profit U.S. consulting
organizations as contract researchers for industry is their ability to maintain
confidentiality and independence. The fact that the seven major private, not for
profit U.S. consulting organizations have been in business for so many years
without violating the confidentiality of proprietary information is testimony to the
effectiveness of their systems. Great care is taken to see that conflicts of interest
are avoided between ongoing projects.42
Japan's major think tanks are all affiliated with a large business group. MRI,
for example, is a part of the Mitsubishi group. Some believe that Japanese
companies outside the Mitsubishi group may be reluctant to turn to MRI to
conduct sensitive, proprietary research because of a potential conflict of interest.
Although it has been argued that large Japanese companies, which have their own
considerable R&D capability, have no need to contract research outside, the fact
that some large Japanese firms are contracting research from U.S. consulting
institutions indicates the existence of a Japanese market for high-quality, inde-
pendent research that is not being adequately served domestically.
There are Japanese consultants who work with proprietary information from
many different companies. The principal "consultant" is usually an individual-
often a university professor or a researcher in a governmental or semi-govern-
mental laboratory. These individuals work for companies as individuals and not
as representatives of the organizations by whom they are employed; they may not
even be paid directly by the companies. Enjoying the trust of Japanese corpora-
tions similar to that enjoyed by private, not for profit consulting organizations in
the United States, they are sometimes identified by industry through their partici-
pation in professional associations.
Consulting organizations can be called "bridges" for a variety of reasons, but
differences between the capabilities of U.S. and Japanese consulting organiza-
tions dictate different types of bridging roles. Consulting organizations can be
bridges by offering technical advice or conducting R&D of a type not available
within their clients' facilities, by acting as intermediaries between their clients
and others as a consequence of their specialized knowledge, or by absorbing,
"adding value" to, and disseminating information to and from a variety of organi-
zations.
Japanese think tanks are less capable than U.S. consulting organizations of in-
house technology development but they are particularly well-suited to disseminat-
ing information and in some cases helping to build consensus among organiza-
tions within the science and technology community. An example of a U.S.
consulting organization's activities in the collection and dissemination of infor-
mation is Battelle's multiclient program on "Advances and Opportunities in
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Nonlinear Optical Materials," which permits subscriber companies access to
research literature analyses and forecasts.
Photonic Integration Research Inc. (PIRI), a joint venture company located on
the Battelle campus in Columbus, Ohio, is an example of a bridge between
research and developmental applications as well as an international bridge. Through
PIRI, Battelle is working in partnership with Mitsubishi Corporation and NTT to
commercialize an advanced fiber optic component technology developed by
NTr.
Consulting organizations bridge international boundaries, but some in the
United States perceive consulting organizations to be primarily a one-way bridge
from the United States to Japan. Japanese companies are increasingly contracting
research from private U.S. consulting institutions. Battelle, for example, reports
rising numbers of programs involving Japanese clients, most of which are coor-
dinated through Battelle's relationship with Mitsubishi. Southwest Research In-
stitute has a similar arrangement with the Mitsui Technical Development Center.
Japanese companies also appear more eager to take advantage of the services
offered by U.S. consulting organizations than are U.S. companies. The Battelle
program on nonlinear optics, for example, has attracted 27 Japanese and three
European companies, but only one U.S. subscriber company.43 Battelle's efforts
to commercialize an Ną-developed technology, mentioned above, is an example
of technology flow in the other direction from Japan to the United States.
Reflecting their broader scope, the private, not for profit U.S. consulting
organizations are large employers. Battelle, for example, employs 7,500 people
and Southwest Research Institute has 2,400 employees. MRI employs only 700.
The backgrounds of these employees are also different. Private, not for profit
U.S. consulting organizations employ many scientists and engineers. In contrast,
the professional staffs of Japanese think tanks may have expertise in fields like
economics and computer science, but they have limited internal staff with techni-
cal or engineering expertise. They go outside the company when contracts
require technical expertise.
Although the major U.S. private, not for profit consulting organizations under
consideration here count the government among their clients,44 they pride them-
selves on the fact that they do not receive government subsidies. They may
depend on U.S. government contracts for a significant portion of their research
activities, but they do not receive any "base" or "guaranteed" government fund-
ing.
Representative terms from entire chapter:
southwest research
