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New Strategies for New Challenges: Corporate Innovation in the United States and Japan (1999)

Chapter: CONSORTIA FOR INFORMAL STANDARDIZATION AND RELATED TECHNOLOGY DEVELOPMENT

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Suggested Citation:"CONSORTIA FOR INFORMAL STANDARDIZATION AND RELATED TECHNOLOGY DEVELOPMENT." 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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Page 36

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EXTERNAL RELATIONSHIPS IN CORPORATE TECHNOLOGY POLICY AND INNOVATION STRATEGY 36 effective?14 One expert on Japanese consortia concluded that their real value was not in developing precompetitive R&D nor in the pursuit of significant technological advances but rather in fostering competitiveness.15 The inability of U.S. and Japanese semiconductor companies to unite in a common effort to develop new manufacturing technologies to process 12-inch silicon wafers illustrates that international cooperation is difficult to structure, even where the technological rationale is strong.16 However, some joint ventures such as the IBM-Toshiba production of flat panel displays seem very successful. CONSORTIA FOR INFORMAL STANDARDIZATION AND RELATED TECHNOLOGY DEVELOPMENT A final example of increased reliance on external sources of innovation are alliances and consortia formed to develop or diffuse de facto standards. These consortia are increasingly prevalent in information technology-related businesses. Products and services are becoming more intertwined, with customers expecting more complete systems solutions to their needs. With strong competition, few firms can for long dominate all the elements in a service/product system so that many are now embracing open systems that enable competition at the subsystem level. Access to complementary assets is an increasingly important competitive factor. This has given rise to large numbers of industrial consortia, created to negotiate standard interfaces and protocols in the quest for de facto standardization. The computer and communications industries are a particular focus. With outsourcing of components and subsystems rising, standards processes are unlikely to remain domestic for very long. The rise in de facto standardization is due to the fact that the formal standards process is too slow and too open to meet all the needs of firms, especially in information industries, to find a path to open systems that is consistent with their business objectives. The formal system is intended to ensure fairness through broad participation of manufacturers and users and through consensus decision-making. It is most often used to harmonize mature technologies, while the de facto standardization addresses anticipatory standards for systems not yet widely available in the market. The rapid rise of business consortia for the purpose of negotiating consensus in the industry on standard interfaces is leading to more open product systems, itself a welcome trend that will encourage trade. De facto standardization also raises international policy challenges in areas such as antitrust and competition policies, which up to now have been set and enforced in a national context. Where the de facto standard is the proprietary product of a particular company or group of companies, such as MS-DOS, antitrust questions that were previously domestic in nature may assume international significance. At the same time, national governments and groups of companies may seek to develop their own standards to compete with emerging market-driven standards, and use these as trade barriers. Some consortia that fall into this category are from a single country, and many are transnational. Antitrust exposures may be latent in their operations. So far informal standards consortia in the United States, and presumably in Japan, appear to have worked relatively well, in the sense that competing standards have not significantly delayed the introduction of new technologies. To date, the potential abuse of market power by standards developers appears to have been held in check by U.S. competition policies, enabled by the fact that the United States constitutes the largest market for advanced information technology products. This may not necessarily be the case in the future.

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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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