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PAST PERCEPTIONS OF U.S. AND JAPANESE INNOVATION SYSTEMS 10 2 Past Perceptions of U.S. and Japanese Innovation Systems Many observers have compared the U.S. and Japanese corporate innovation systems in order to better understand their inherent strengths and weaknesses and to ascertain which elements might be borrowed or adapted as a means of improving competitive performance. Some experts have focused on particular aspects such as R&D; others have focused on distinctive institutional and organizational features; while yet others have produced broad overviews encompassing historical as well as current developments.1 A summary of past perceptions of the U.S. and Japanese corporate innovation systems will be useful in evaluating ongoing changes. In general, observers have concluded that in the spectrum of attributes and capabilities comprising innovation, the United States is strongest in inventiveness, and Japan is strongest in manufacturing and customer feedback to enhance product quality. More specifically, as described by Lynn and others, the strengths and weaknesses of the Japanese system, in contrast to the U.S. system, are as follows: (1) an alleged unique ability to exploit technical knowledge developed in other countries; (2) speed in commercializing technology; (3) strength at incremental innovation in processes and products; (4) weakness at making breakthroughs and generally in basic research; and (5) emphasis on manufacturing process and customer feedback. 2 NATIONAL LEVEL DIFFERENCES Underlying the strategies toward innovation in each country are fundamental national level differences that influence corporate innovation choices. These fundamental differences include: ⢠a higher share of GNP for nondefense R&D in Japan (2.74 percent) than in the United States (2.05 percent)3 ⢠the higher percentage of total national R&D funded by industry in Japan than in the United States (72 percent in Japan [1995] vs. 60 percent in the United States [1995])4 ⢠venture capital and strong equity markets as driving forces for innovation and competitiveness in the United States ⢠the prominent role of U.S. universities as performers of research, especially basic research (most of which is funded from federal sources), and strong linkages between university research and private industry 5 ⢠the prominent role of the Japanese government in establishing industrial and technology policies, disseminating information about technological needs and opportunities, assisting technology adoption, and otherwise working with Japanese corporations through trade associations, trading companies, and other intermediaries that distribute technological information6 ⢠the increasing focus of U.S. firms on partnering
