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CONCLUSIONS AND RECOMMENDATIONS 47 The Joint Task Force has two specific recommendations for focused future work. First, in the U.S.-Japan context, the issue of diversification through acquisition and new firm creation, predominant in the United States, vs. diversification through internal R&D and investment, prevalent in Japan, deserves further study. The extent to which nation-specific factors are at work as opposed to the characteristics of specific industries and their growth rates should be further explored. For instance, a growing industry will be better suited for diversification as new business units are created, while acquisitions are suited for mature industries to reduce the number of firms. Second, in view of the insights gained through investigation of possible U.S.-Japan convergence, it would be highly useful to continue and expand the exploration of this issue by looking at companies based in Europe or Asia. Need to Address Major Emerging Policy Questions and Issues The Joint Task Force has identified a number of major issues related to changes in corporate innovation and their policy implications. While it was not possible to develop specific recommendations to address these complex issues, and this is certainly not an exhaustive list of future challenges, the committee believes that the governments of Japan and the United States, as well as various multilateral bodies, should step up efforts to understand and address the following: Possible Shortage of Industrial Basic Research If firms increasingly outsource innovation to suppliers, universities and partnership arrangements, will reduced levels of effort in traditional corporate central research activities lead to an overall slower pace of innovation worldwide? Or will R&D efforts become more efficient as corporate strategies become more tightly linked to global market needs, with partnerships picking up the slack in areas of precompetitive technology development? Does this trend imply the need to supplement historic linkages between central corporate laboratories with closer support of small and medium enterprises by university research and training? Possible New Division of Labor in Funding Fundamental Research While future public funding of R&D in the United States and Europe appears to be constrained, Japan and several Asian nations have announced plans to significantly expand public funding. Will the emerging strengthened research base of Japan and Asia contribute to global public welfare to the same extent that the U.S. research base has over the past fifty years? De Facto Standards In view of the growing influence of consortia to establish de facto proprietary standards for interfaces and protocols, described in Chapter 4, how should individual countries and multilateral regimes deal with possible anticompetitive concerns? Does the relationship between market driven standards and the formal consensus process raise concerns?
