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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
