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Suggested Citation:"De Facto Standards." 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 47

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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?

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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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