National Academies Press: OpenBook
Suggested Citation:"NOTES AND REFERENCES." 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.
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Suggested Citation:"NOTES AND REFERENCES." 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.
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Suggested Citation:"NOTES AND REFERENCES." 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.
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Suggested Citation:"NOTES AND REFERENCES." 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.
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NOTES AND REFERENCES 25 ministries, including MITI. This is summed up in the familiar phrase "MITI proposes, and the MOF disposes."51 In the United States, any description of government policy is greatly complicated by differences in philosophy over the appropriate federal government role in national research and development activities, differences which have sharpened in recent years with the end of the Cold War and increased pressure to balance the federal budget. For example, in the aftermath of the November 1994 elections, federal programs supporting the development and diffusion of generic or precompetitive commercial technology have come under attack. A number of federal initiatives in this area were launched during the Reagan and Bush administrations, and funding support grew rapidly in the first few years of the Clinton administration. To some, this restraint or scaling back of federal civilian technology programs signalled a return to the traditional U.S. policy of caution in economic intervention and S&T policies that emphasize the support of basic science and mission-oriented technological developments in defense and public health.52 However, the 105th Congress has seen a substantial reduction in the conflict over industrial policy, as both Democrats and Republicans in the political center have accepted the concept of public-private partnerships in R&D with certain policy safeguards.53 One of the main differences between the currently emerging policy and that of the past is that there is no longer a consensus on the role of government in such areas as energy and space, and even in defense the long-term trend has been toward shrinking budgets despite recent relative increases. For some time, experts have noted a decline in commercial spin-offs from government mission-oriented R&D, particularly in defense.54 Consequently, there is no longer any theoretical or financial basis to expect much technological spin-off from the government to the private sector. Instead the policy has shifted to a concern for "spin-on," as defense agencies seek to use commercial products and technologies in military applications. In conclusion, it is clear that in responding to global developments, U.S. and Japanese companies are adopting and adapting each other's approaches. To that extent, it can be said that they are converging in their approaches. However, some movement toward convergence in approaches does not mean that the U.S. and Japanese environments for innovation are the same, and problem convergence itself is not premised on U.S. and Japanese top managements or policymakers sharing the same core beliefs. As long as differences remain in the basic relationships between manufacturers and suppliers in Japan and the United States, in their respective business networks abroad, and in the structure of their R&D systems, areas of convergence should be considered in balance with continuing differences in formulating innovation strategy. Therefore, the caution expressed in a 1990 National Research Council report is still valid today: It is highly unlikely, given vastly different historical backgrounds and the different industrial bases which Japan and the United States are building, that there will soon be a homogenization of the patterns of R&D within industrial firms in the two countries. But in an age of increasing competition both in technology development and market position, firms on both sides of the Pacific are finding it necessary to learn from each other's strengths.55 NOTES AND REFERENCES 1 Branscomb and Kodama, op. cit., p. 2.

NOTES AND REFERENCES 26 2 For a comprehensive discussion of Japan's technological capabilities see Thomas S. Arrison, et al., eds., Japan's Growing Technological Capability: Implications for the U.S. Economy (Washington, D.C.: National Academy Press, 1992). 3 The strong yen has helped this effect, but it is not solely responsible. 4 For fiscal 1996, 54.7 percent of U.S. federal R&D was defense-related, with the comparable figure for Japan being 6.2 percent. See National Science Board, Science and Engineering Indicators 1998 (Arlington, Va.: National Science Foundation, 1998). 5 John Cantwell, "The Globalisation of Technology: What Remains of the Product Cycle Model?", Cambridge Journal of Economics 1995, 155-174. 6 Use of the term technological parity to compare the United States and Japan raises questions as to what is meant by technology. Indeed, many would agree that the United States generally has the most advanced technology in most fields. Here the task force refers to technology as a means to commercial ends. Therefore, it includes both the technical knowledge and the tools, skills and management structure—plus imbedded knowledge—that permit innovations to be accomplished. The best evidence for technological standing is to look at the sophistication and competitiveness of products. They are not the technology, but rather the products of technology. 7 See Richard Florida and Martin Kenney, "The Breakthrough Illusion," and idem., "Venture Capital-Financed Innovation and Technological Change in the USA," Research Policy 17, (1988), pp. 119-137. 8 Discussions of cost of capital and cost of funds containing frequent comparisons of the United States and Japan can be found in National Research Council, Investing for Productivity and Prosperity (Washington, D.C.: National Academy Press, 1994); Thomas R. Howell et al., Creating Advantage: Semiconductors and Government Industrial Policy in the 1990s, (Semiconductor Industry Association, 1992), especially Chapter III C. "Capital," pp. 181-200; and National Academy of Engineering, Time Horizons and Technology Investments (Washington, D.C.: National Academy Press, 1992), especially Chapter 4 "Time Horizons and Cost of Capital," pp. 43-58, and Appendix A: Joseph Morone and Albert Paulson, "Cost of Capital—The Managerial Perspective," pp. 79-104. 9 See W. Carl Kester and Timothy A. Luehrman, "The Myth of Japan's Low-Cost Capital," Harvard Business Review, May-June 1992, pp. 130-138. 10 Richard Rosenbloom and William Spencer, Engines of Innovation: U.S. Industrial Research at the End of an Era (Boston, Mass.: Harvard Business School Press, 1996). 11 Roberts, op. cit., pp. 8-9. 12 Source: Marvin Garfinkel, "The GE R&D Center: Structure and Strategy," from presentation made at the meeting of the United States-Japan Joint Task Force on Corporate Innovation, Makuhari, Japan, September 11-13, 1994. 13 See C.K. Prahalad and Gary Hamel, "The Core Competence of the Corporation," Harvard Business Review, May-June 1990, pp. 79-91. 14 Ibid. Several of the examples cited here were discussed in the article, while others are drawn from task force discussions. 15 See also Peter F. Drucker, Post-Capitalist Society. (New York: Harper Business, 1994), and Ikujiro Nonaka and Hirotaka Takeuchi, The Knowledge-creating Company: How Japanese Companies Create the Dynamics of Innovation. (New York: Oxford University Press, 1995). 16 See Branscomb and Kodama, op. cit., pp. 38-53 for a discussion of the business models employed by a number of leading Japanese firms. 17 See Pari Patel and Keith Pavitt, "Large Finns in the Production of the World's Technology: An Important Case of Non-Globalization," International Business Studies 1, 1991. 18 National Science. Board, Science and Engineering Indicators 1998 (Washington, D.C.: U.S. Government Printing Office, 1998), and National Science Foundation statistics on U.S. industrial R&D for 1996. 19 The member countries of the Organization for Economic Cooperation and Development display a wide disparity in the proportion of R&D performed by foreign-based companies, with Japan by far the lowest of the group. The figure for the United States in 1995 was 11.3 percent, for the United Kingdom 19 percent,

NOTES AND REFERENCES 27 for Germany 1.9 percent (1996), for Italy 5.4 percent (1996), for France 11.2 percent (1994), for Canada 17 percent (1996) and for Japan 0.1 percent. Ibid. 20 Although a number of U.S. companies have long maintained R&D facilities in Japan. See Donald Dalton and Manuel Serapio, Globalizing Industrial Research and Development (Washington, D.C.: U.S. Department of Commerce, 1995). 21 "Overseas Shift of Production Key to Bullish Results," Journal of Japanese Trade and Industry No. 4, 1994, p. 6. 22 Tohru Hirose, "Hollowing out: Can new growth replace Japan's pruned industries?," Nikkei Weekly, January 16, 1995, p. 8. 23 MITI, Major Reforms in Japanese Research and Development, Research Institute of International Trade and Industry, 1996, p. 138. 24 Electronic Industries Association of Japan, data release April 1998. 25 "Unlike other principal activities of MNEs [multinational enterprises], research and technology development tends to be concentrated in the country of national origin," and "...the available evidence suggests that ...[Japanese and European corporations] conduct similar if not smaller percentages of their R&D overseas than do U.S. firms." U.S. Congress, Office of Technology Assessment, Multinationals and the U.S. Technology Base, OTA-ITE-612 (Washington, DC: U.S. Government Printing Office, September 1994), p. 2. See also Edward B. Roberts, op. cit., p. 55, Figure 13: Internal Sources are Still Primary for Both Research and Development [includes U.S. and Japanese companies]; and D. Hicks et al., op. cit. 26 See Richard Florida and Martin Kenney, "The Globalization of Japanese Innovation: The Economic Geography of Japanese R&D in the United States" Economic Geography (October 1994), 70,4: 344-69. See also Dalton and Serapio, op. cit. Japanese corporations spent $1.8 billion on U.S.-based R&D in 1993 up from $307 million in 1987. 27 Dalton and Serapio, op. cit. One committee member cautioned that surveys may tend to overcount the number of facilities. 28 For a discussion of these various viewpoints see Florida, ibid., pp. 8-9. 29 Dalton and Serapio, op. tit. 30 Loring Wirbal and Yoshiko Hara, "Hitachi, TI plan U.S. DRAM fab," Electronic Engineering Times, August 8, 1994, n809, p. 1. 31 Ken Phillips," Motorola to Join Alliance of IBM, Siemens and Toshiba to Develop Advanced Memory Chips," Motorola Press Release, October 25, 1995 32 IBM Press Release, "Toshiba and IBM to Set Up U.S. Manufacturing Joint Venture for Next-Generation Semiconductor Memory Products," August 8, 1995. 33 Yoshiko Hara, "Hitachi turns to IBM, eyes PowerPC," Electronic Engineering Times, May 2, 1994, n795, p. 14. 34 David Lammars, "Toshiba in chartered CMOS pact," Electronic Engineering Times, Nov. 7, 1994, n822, p. 1. 35 Terho Uimonen, "DRAM Demand to Match Supply First in 2001, Dataquest Says," InfoWorld Electric, April 24, 1998. 36 Mark Ferranti, "Hitachi, TI End DRAM Chip Venture," InfoWorld Electric, February 9, 1998. 37 Business Wire, "Micron Completes Acquisition of TI's Memory Business," October 1, 1998. 38 Rebecca Sykes, "Motorola Drops DRAM Business," IDG News Service, Boston Bureau, July 1, 1997. 39 Ron Wilson, "Toshiba Splits with Moto, Siemens On 1-Gigabit DRAM," EE Times, January 21, 1998. 40 For contrasting views of this issue, see Richard Florida, "Technology Policy for a Global Economy," Issues in Science and Technology. Spring 1995, pp. 49-56; and the reply by Alan Tonelson, "The Perils of Techno- Globalism," Issues in Science and Technology. Summer 1995, pp. 31-38. These issues are the central themes in Sylvia Ostry and Richard R. Nelson, Techno-Nationalism and Techno-Globalism Conflict and Cooperation. (Washington, D.C.: The Brookings Institution, 1995). 41 The terms techno-globalist and techno-nationalist are frequently used to describe these two positions and their adherents. While these terms are handy and have their usefulness in debate, they also tend to

NOTES AND REFERENCES 28 push complex issues and viewpoints into opposing ideological camps rendering subsequent discussion more polemical than enlightening. Therefore, the task force has chosen not to employ such terms. 42 Florida, ibid., p. 50. 43 Ibid. 44 Tonelson, op. cit. 45 Jean M. Johnson, The Science and Technology Resources of Japan: A Comparison with the United States (Arlington, Va.: National Science Foundation, 1997), p. 1. 46 Motivations and context for the Basic Law and Basic Plan are covered in "Constructing a New Global Partnership: Science and Technology as an Investment for the Future," address by Minister of State for Science and Technology Hidenao Nakagawa at the National Academy of Sciences, August 8, 1996. 47 Masahiro Hashimoto, "Desirable Form of Academia-Industry Cooperation," Journal of Japanese Trade and Industry, No. 2, 1998. 48 Michiyuki Uenohara has pointed out that although the Japanese government (MITI) protected the infant computer industry in the early stages, since the 1970s it has not provided a substantial amount of subsidies. From Michiyuki Uenohara, "Relevance of Government-Sponsored Corporate R&D Projects to Large Japanese Corporations," a presentation at the bilateral meeting of the U.S.-Japan Corporate Innovation Task Force, Makuhari, Japan, September 11-13, 1994. See also Branscomb and Kodama, op. cit., p. 4. On the other hand, the Japanese government has provided loans at very low rates to encourage new technologies and business alliances through such avenues as the Japan Key Technology Center which is funded through dividends derived from government-owned shares in Nippon Telegraph and Telephone Company (NTT) funneled through the Ministries of Posts and Telecommunications and International Trade and Industry. These funds, which are substantial, are not included in Japanese government budget figures. Also, the Japanese government has provided in-kind services to industry. For example, for years NTT designed the prototypes that later became the products of Hitachi, Fujitsu, and others. 49 See Nihon Keizai Shimbun (American Edition), "Kan-min Kyodo Kaihatsu e Shinkaisha," (New company for public-private joint development), January 14, 1995, p. 1. 50 The report paints a sobering picture of Japanese innovation. See Sangyo Kozo Shingikai Sogo Bukai Sangyo Gijutsu Shoiinkai (Industrial Structure Advisory Committee, Industrial Technology Subcommittee) and Sangyo Gijutsu Shingikai Sogo Bukai Kikaku Iinkai (Industrial Technology Advisory Committee, Planning Subcommittee), Kagaku Gijutsu Sozo Rikkoku e no Michi o Kirihiraku: Shiteki Shisan no Sozo, Katsuyo ni Mukete, (Clearing a Path Toward a Nation Based on Creative Science and Technology; Toward Creating and Utilizing Intellectual Assets), June 1995. 51 See Eamonn Fingleton, "Japan's Invisible Leviathan," Foreign Affairs , Volume 74, No. 2, March/April 1995, pp. 69-85. 52 The Clinton Administration's policy of encouraging greater government-industry cooperation and its intention to devote considerably more federal resources to pre-competitive projects of commercial relevance was first announced in William J. Clinton and Albert Gore, Technology for America's Economic Growth, A New Direction to Build Economic Strength, February 22, 1993. 53 Branscomb and Keller, op. cit. 54 John A. Alic, Lewis M. Branscomb, Harvey Brooks, Ashton B. Carter, and Gerald L. Epstein, Beyond Spinoff: Military and Commercial Technologies in a Changing World (Cambridge, Mass.: Harvard University Press, 1992). 55 National Research Council, Learning the R&D System: Industrial R&D in Japan and the United States, op. cit., p. 13.

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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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