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Suggested Citation:"CHANGES IN GOVERNMENT'S ROLE." National Research Council. 1999. New Strategies for New Challenges: Corporate Innovation in the United States and Japan. Washington, DC: The National Academies Press. doi: 10.17226/5823.
Page 24

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ARE THE U.S. AND JAPANESE INNOVATION SYSTEMS CONVERGING? EVIDENCE FOR AND AGAINST 24 manufacturing and technological investments from abroad. They point out that the total value of goods and services resulting from foreign investment had reached $6 trillion by 1995, whereas the same figure for trade is $4 trillion, with one-third of that taking place between affiliates of businesses located in different countries.42 Consequently, they view restrictive approaches as potentially dangerous ways of addressing these important changes in the global economy.43 On the other side are those who stress the possible risks faced by countries with relatively accessible systems of research and innovation in interacting with systems where capability is less accessible, and who point out that national and corporate interests may sometimes diverge. They believe that doctrines advocating free trade and open markets are neither practiced nor taken seriously in most of the world and that as long as different systems of capitalism exist, countries will need to pursue activist government policies.44 CHANGES IN GOVERNMENT'S ROLE Both in Japan and in the United States, the role of government in R&D and innovation has been much discussed in recent years. In Japan, the most significant recent policy changes have been aimed at expanding the government's role in funding long-term fundamental research, and enhancing the scale and quality of graduate science and engineering education. For some years, experts inside and outside Japan have pointed out that Japan has lagged in funding basic research in open settings.45 The Science and Technology Basic Law was passed in 1995, and the Science and Technology Basic Plan was adopted in 1996.46 At the same time, the Japanese government announced ambitious goals for increased funding, but it is unclear whether these goals will be met in light of Japan's continued economic difficulties. Other changes have been made to encourage venture business interactions with academia and wider agency support for academic research. For instance, MITI established the Office for Promotion of Academia-Industry Cooperation within the Ministry's Industrial Policy Bureau, and MITI and Monbusho have jointly drafted legislation that went into effect in August 1998 for the promotion of the transfer of research outcomes at universities to the private sector.47 A second aspect of Japanese policy discussion involves calls to ease regulations and otherwise reduce government's role in the overall economy. The Japanese government, in particular the Ministry of International Trade and Industry (MITI) has played an important role in Japan's technological and industrial development. Several members of the task force have pointed out that government's influence has declined significantly over the years.48 At the same time, the central government in Japan continues to play a different and more direct role with respect to industrial and technology policy than it does in the United States. MITI still performs a coordinating role with respect to industrial policy where market mechanisms alone appear insufficient. For example, with 70 percent financing from MITI, NEC, Matsushita, Sony, Ascii, Toshiba, Fujitsu, and Hitachi, through the Japan Key Technology Center, have agreed to jointly develop the system technologies central to multimedia, including standards needed for new products.49 MITI also established a committee to examine the current problems facing Japan in the development of science and technology and to report on how to improve government policies in that area.50 Furthermore, in addition to MITI, there are other government agencies which influence the actions of the private sector. In this regard, some observers have pointed out that the Ministry of Finance (MOF), referred to as "the Ministry of Ministries," deserves more study in that it ultimately controls the purse strings of all the other

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Innovation, "the process by which firms master and get into practice product designs and manufacturing processes that are new to them," is vital for companies wishing to remain competitive in today's rapidly changing high technology industries. American and Japanese firms are among the world's most technologically innovative and competitive. However, the changing dynamics of global competition are forcing them to rethink their technological innovation strategies. The choices they make will have great impact on their futures as companies as well as on the livelihoods of their employees and the communities in which they operate.

In order to understand the ways in which Japanese and American companies are changing their technological innovation strategies and practices, the Committee on Japan of the National Research Council and the Committee on Advanced Technology and the International Environment (Committee 149) of the Japan Society for the Promotion of Science (JSPS) organized a bilateral task force composed of leading representatives from industry and academia to assess developments in corporate innovation strategies and report on their findings. Through a workshop discussion of the issues and subsequent interaction, the task force explored the institutional division of innovation in both countries: the structure and performance of technology-based industries, the role of the government in the support of science and technology, and the role of universities in the science and technology system. The task force was particularly interested in exploring the points on which the two systems are converging,-i.e., becoming more similar in strategy and practice-and where they continue to be distinct and different.

Although a comprehensive study of these trends in U.S. and Japanese innovation was not easily feasible, the task force was able to develop several conclusions based on its workshop discussion and follow-up interactions that were substantial in time and content. This report identifies a set of issues whose further elucidation should be helpful in guiding public policy in both nations. These issues include the role of external sourcing of innovation, transnational activity and globalization, the organization and performance of R&D, and the role of consortia, joint ventures and other joint activities. A call for greater international efforts to collect and analyze data on these important trends is the central recommendation of the task force.

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