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Comparing the Non-Academic, Non-Industrial Research Organizations In the United States and Japan: Overview and Categorization In both the United States and Japan there are a host of organizations not easily categorized as "academic" or "industrial" that perform important roles in R&D (see Table 2-1~. Categorizing these organizations in either national context is not an easy task, since they take many forms and perform a wide array of functions. Comparing and contrasting the organizations in the two countries is even more challenging, because organizations called by similar names may perform quite different functions and are in many cases funded and organized in strikingly different ways. There are a number of reasons why comparing and contrasting these organiza- tions is nevertheless worthwhile. According to the National Science Foundation (NSF), in 1985 government and not for profit organizations together performed significant shares of the total R&D effort in both countries 13 percent in Japan and 15 percent in the United States.~ There are more than 1,000 "research institutes" in Japan that spend as much as Japan's colleges and universities on R&D.2 In Japan, this category of research institutes includes government labora- tories and other organizations that are not expected to be self-supporting, as well as special corporations that are. Nippon Telegraph and Telephone (NTT), which from a U.S. perspective might be called a joint stock company by virtue of the fact that stock ownership is shared by the government and the private sector, falls into this category although it is called a private company in Japan.3 Expenditure per researcher in these organizations, moreover, was three times that in universities and even exceeded the per researcher expenditure in Japanese companies in recent years.4 Another reason for making the effort to learn more about these organizations 3

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4 TABLE 2-1 Non-Academic, Non-Indusmal Research and Development (R&D) Organizations in the United States and Japan Ownership, Funding Government Government-Owned Government-Operated National Laboratories Government-Owned Contractor-Operated National Laboratories *Special Corporations (staffed by civil servants or private employees Japan only) Functions ~ United States Japan Basic Fermi High Energy Laboratory National Institute for Radiological Research Naval Research Laboratory Sciences (Stanford Linear Accelerator Center) (National Laboratory for High Energy Physics) Applied Sandia National Laboratories Technical Research and Development Research Lawrence Livermore Laboratory Institute Environmental Research National Aerospace Laboratory Laboratories *Japan Atomic Energy Research Institute *National Space Development Agency of Japan *Power Reactor and Nuclear Fuel Development Corporation Regulations, National Institute of Standards and National Research Laboratory of Standards Technology Metrology Support for National Institute of Standards and Agency of Industrial Science and R&D Technology Technology Useful to Research Development Corporation of Industry Japan Services Argonne National Laboratory *Japan Atomic Energy Research Institute *Power Reactor and Nuclear Fuel Rev el opm ent Co Iporati on Policy National Institute for Science and Analysis Technology Pony Note: Representative examples are included. Some organizations perform many different functions. Those in parentheses were covered in previous meeting.

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s TABLE 2-1 Continued Ownership, Funding Private, Non-Prof~t "Hybrids" Government-Sponsored Consortia Joint Stock Canpanies Public Stock Companies United States Japan Un _ _ _ NHK `_ Battelle Professional Sematech Key Technology Center Projects Southwest Research Associations Very Large Scale Integrated Institute Circuit project Optoelectronics Joint Research Laboratory Govemment-sponsored Consortia Professional Professional As somat~ons As soc~at~ons National Academy of Think Tanks Sciences National Academy of Engineering National Research Council

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6 is that some of them play significant roles in R&D useful to industry. In contrast to the situation in the United States where debates continue over whether it is appropriate and feasible to add a technology transfer mission to the roles of the national laboratories, a number of Japanese national laboratories were established specifically to carry out R&D useful to industry. In 1987, almost 85 percent of the R&D carried out by non-academic, non-industrial research institutions in Japan was reported to be applied or developmental.S In the context of increasing interest in the United States in establishing R&D consortia and other organizations that involve government as well as private sector participation in research useful to industry, an examination of some of the "hybrid" organizations established in Japan is timely. However there should be no assumption made that it would necessarily be possible or appropriate to imitate these forms in the U.S. setting. By virtue of the fact that these organizations are in most cases supported by the government in one way or another, they also offer special possibilities for ex- panded foreign participation under the terms of the U.S.-Japan Agreement for Cooperation in Science and Technology signed in 1988. Questions about the quality and working environment for research in these organizations, however, cannot be fully resolved here. This report covers national laboratories, professional associations, consulting organizations, and examples of "hybrid" organizations that involve both govern- ment and private sector participation. Based on the discussions of a two-day meeting, the report is in no sense an exhaustive account of the myriad organiza- tions in the two countries that are neither purely academic nor purely private. Senior scientists, engineers, and research managers who attended the meeting emphasized the value of developing a classification that highlights the striking variety of functions and organizational forms apparent in both countries. The "government-owned" research organizations6 are perhaps the most famil- iar of the research organizations under consideration here. In most Organization for Economic Cooperation and Development (OECD) countries, the research effort in the government sector is generally on a par with the higher education sector, but relatively little is known about it and there has been questioning of its role during the past ten years.7 As will be explored in more detail below, the questioning concerns the contribution that these organizations can and should make to innovation and technology development. In this sense, the U.S.-Japan contrast drawn here should be understood in light of broader trends apparent in the OECD countries. In both countnes, the national laboratories perform a wide range of R&D to meet national goals. Individual laboratories also carry out R&D in a variety of areas. Many U.S. federal laboratories set out to perform basic research; in some cases the research results in useful industrial applications. Although Japanese national laboratories are more oriented toward applications, the National Institute for Radiological Sciences is an example of one that conducts basic physics and chemistry research.8

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7 National labs also conduct applied R&D in areas considered to be the respon- sibility of the government such as energy, the environment, and defense. Ex- amples in the United States include the Department of Energy's (DOE,) civilian energy labs, Environmental Protection Agency labs, and defense-related research organizations such as Lawrence Livermore and Sandia National Laboratories. In Japan, the Technical Research and Development Institute (TRDI) is the only gov- emment-owned research organization with an explicitly defense-related mission. In contrast to other ministries that operate national labs in Japan, the Japan Defense Agency aDA), which operates TRDI, has enjoyed significant funding increases during the past five years.9 Laboratories such as those at the Arnold Test Center in the United States and the National Aerospace Laboratory in Japan carry out applied R&D in the national interest that in some instances is also of interest to industry. In the United States the National Institute of Standards and Technology (NISI has played a role in standards development through its industrial research and participation in standards committees. Similar functions are earned out in Japan by Agency for Industrial Science and Technology (AIST) labs, such as the National Research Laboratory of Metrology, under the Ministry of International Trade and Industry (MITI). A significant contrast can be found in the fact that the AIST labs were established to carry out R&D useful to industry. These labs and the AIST headquarters together had a budget of less than one billion dollars in 1988 and employed 2,500 researchers.~ While these labs make up a comparatively small percentage of the total budget or staff of Japanese national labs, they represent a distinct contrast to the situation in the United States where there is only one national laboratory (NIST) with an explicit mission of assisting in research useful to industry. For purposes of comparison, NIST operates with an estimated budget of $278 million in 1990 and has 2,900 permanent positions. It is interesting to note that Japanese national laboratories include the National Institute for Science and Technology Policy MISTER), an institute established separately under the Science and Technology Agency (STA). NISTEP does not conduct physical research, but is tasked with science policy development. A1- though similar types of science policy studies are conducted within the NSF, there is no parallel to NISTEP among the U.S. federal laboratories. A noteworthy aspect of Japan's research organizations involved in applied R&D is the prominence of public corporations, or tokushu hojin, which are legal entities according to government legislation and are largely financed by the government. As noted above, many of these public corporations are not expected to be self supporting, as is the case with the National Space Development Agency, the Power Reactor and Nuclear Fuel Development Corporation, and the Japan Atomic Energy Research Institute. NTI (which is formally privatized but where significant government stock ownership continues) is a self-supporting organiza- tion with a market value of more than $160 billion that has no parallel in the

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8 United States. With an operating budget of $43 billion dollars, N11 carries out and commissions a great deal of R&D useful to industry and is included among the special corporations for the purposes of the annual survey of R&D in Japan. It should be noted that public corporations in Japan make up a larger share of R&D expenditure than national laboratories and their budgets have increased significantly in recent years. When we consider the R&D organizations that are not predominantly govern- ment-owned or govemment-funded and not "purely" private, the private, non- profit professional associations play important but different roles in the two countries. Non-profit professional associations (such as the National Academy of Engineering, NAE) in the United States help to set national priorities for R&D useful to industry and serve as channels for exchanging views among industry, government, and university sectors. The Japan Engineering Academy, recently established, represents a private sector initiative to develop an organization out- side the government that performs some of these functions. In Japan, most professional associations are authorized by government agencies. The JSPS, which supports international scientific and technical exchanges, is a semigovern- mental organization which has no members but a number of industry-university cooperative committees and other programs. Professional associations and socie- ties in Japan, unlike those in the United States, organize research committees that actively carry out projects in applied areas such as the development of computer- aided design and manufacturing (CAD/CAlvI) systems. There are no counterparts in Japan to the private, not for profit consulting organizations, such as Battelle and Southwest Research Institute, that perform R&D for government as well as industry. Consulting organizations per se are a comparatively new phenomenon in Japan and the best known are private organi- zations that apparently still perform some work for their parent organizations. Mitsubishi Research Institute (MRI), for example, has no laboratories and does not carry out physical R&D in the sense that Battelle does. In Japan, however, there are many engineering research associations that are organized as non-profit legal entities to carry out specific research projects and are administered by government agencies. Engineering research associations administered by MITI are particularly prominent. By virtue of the fact that funding is shared by the government and private industry, these organizations can best be viewed as "hybrids." Organized to carry out specific projects, they are dissolved or modified once the task has been completed. A distinctive feature of Japan's R&D system is the proliferation of research associations and other "hybrids" that enjoy some government funding but encour- age considerable initiative on the part of private companies involved. The Japan Key Technology Center, with 70 percent of its funding from government, is a good example of how MINI can act as a venture capitalist to encourage R&D carried out by companies in their own laboratories. Other examples, discussed more fully below, include government-sponsored consortia of private sector

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9 companies involved in generic research useful to industry in fields like optoelec- tronics. Adaptation and organizational experimentation with hybrid forms is under way in both countries, but Japan has by far the larger number of such "hybrid" R&D organizations and the longer track record. In the United States, Sematech represents an effort to build indigenous U.S. capabilities in semicon- ductor technology research and manufacturing. It is, however, a comparatively new experiment. In contrast, Japan's engineering research association system was established in 1961, inspired by a British system of cooperative research. This complex mosaic of organizations that are neither purely academic nor purely private corporations play important and highly varied roles in the R&D systems of Japan and the United States. In both countries significant change is under way as many of these organizations are challenged to adapt to rising R&D costs and requirements for new expertise. In the sections that follow, these trends will be outlined in more detail and organizational differences will be explored with reference to specific organizations that are chosen for their importance in the respective system rather than because they are "representative" of all such organi- zations.