Japan's Growing Capabilities in Industrial Technology: Implications for U.S. Managers and Policymakers

See Freeman C. , Technology Policy and Economic Performance: Lessons from Japan (London: Frances Pinter, 1987); Nelson R.R. , ed., National Innovation Systems: A Comparative Study (New York, NY: Oxford University Press, forthcoming).

Uekusa M. , “Industrial Organization,” in Yamamura K. Yasuba Y. , eds., The Political Economy of Japan, Vol. 1, The Domestic Transformation (Stanford, CA: Stanford University Press, 1987).

See Japan Economic Institute, “Research and Development in Japan: 1991 Update,” JEI Report, 36A, 9/27/91. Okimoto and Saxonhouse report a similar trend. Okimoto D.I. Saxonhouse G. R. , “Technology and the Future of the Economy,” in Yamamura K. Yasuba Y. , eds., The Political Economy of Japan, Vol. 1, The Domestic Transformation (Stanford, CA: Stanford University Press, 1987), pp. 384–95.

The data suggests negative balance of trade in new technology agreements for 1987 and 1988, which is sharply reversed in fiscal 1989. Japan Economic Institute, op. cit.

Pavitt K. Patel P. , “The International Distribution and Determinants of Technological Activities,” Oxford Review of Economic Policy, 4 (1988): 35–55.

National Science Foundation, The Science and Technology Resources of Japan: A Comparison with the United States, NSF report 88–318 (Washington, D.C.: National Science Foundation, 1988), p. 33.

“Given their total representation in the U.S. patent system, Japanese patents account for 45 percent more of the top 1 percent most highly cited U.S. patents than expected. The highest citation rates for Japanese patents are in the automotive, semiconductor electronics, photocopying and photography, and pharmaceuticals patent classes.” Ibid., p. xii. The relatively high quality of Japanese firms' U.S. patents, however, may reflect some tendency for these firms to seek U.S. patents only for their most important technological advances. Taylor and Yamamura argue that Japanese firms are far more likely to seek domestic patent protection for minor technical advances than are U.S. firms. Taylor S. Yamamura K. , “Japan's Technological Capabilities and Its Future: Overview and Assessments,” in Heiduk G. Yamamura K. , eds., Technological Competition and Interdependence: The Search for Policy in the United States, West Germany, and Japan (Seattle. WA: University of Washington Press. 1990). It is also possible, although there is no direct evidence to support such a speculation, that a Japanese firm is more likely to cite other patents received by itself than are U.S. or European firms.

Flamm K. , “The Changing Pattern of Industrial Robot Use,” in Cyert R. M. Mowery D. C. , eds., The Impact of Technological Change on Employment and Economic Growth (Cambridge. MA: Ballinger, 1988); Mansfield E. , “The Diffusion of Industrial Robots in Japan and the United States,” Research Policy, 18 (1989): 183–192; Edquist C. Jacobsson S. , Flexible Automation: The Global Diffusion of New Technology in the Engineering Industry (New York, NY: Blackwell. 1988).

Clark K. B. Chew W. B. Fujimoto T. , “Product Development in the World Automobile Industry.” Brookings Papers on Economic Activity (1987), pp. 729–771.

Clark K.B. Fujimoto T , Product Development Performance: Strategy, Organization, and Management in the World Auto Industry (Boston. MA: Harvard Business School Press, 1991).

Mansfield E. , “Industrial Innovation in Japan and the United States,” Science (1988).

Mansfield E. , “Industrial R and D in Japan and the United States: A Comparative Study,” American Economic Review Papers and Proceedings (1988).

Okimoto D. , “The Japanese Challenge in High Technology,” in Landau R. Rosenberg N. , eds., The Positive Sum Strategy (Washington. D.C.: National Academy Press, 1986), p. 551; Taylor Yamamura , op. cit. p. 32.

Odagiri H. Goto A. , “The Japanese System of Innovation: Past, Present and Future,” in Nelson R. , ed., National Innovation Systems: A Comparative Study (New York, NY: Oxford University Press, forthcoming).

R&D expenditures constituted roughly 1.70 percent of Japanese GNP in the years 1975–1978. This ratio rose to 1.80 percent in 1979 and to 2.77 percent in 1985, exceeding the U.S. GNP share of 2.4 percent in that year.

See Cohen Teece Tyson Zysman for an early statement on this issue. Cohen S. Teece D. Tyson L. Zysman J. , “Competitiveness,” Global Competition: The New Reality, Vol. Ill (Washington, D.C.: President's Commission on Industrial Competitiveness, 1985).

Stenberg, for example, notes that Japanese university research has played an important role in the development of molecular beam epitaxy (MBE), a semiconductor component manufacturing process: “While universities played a minor role in MBE-research in the early 1980s in Japan, they are ten years later contributing very actively, especially in research related to quantum materials and quantum-effect devices. The pattern is similar in other countries and partly a consequence of changes in MBE technology and related research topics. The development of MBE technology has, for example, become increasingly dependent on an understanding of the basic mechanisms of the MBE growth process and as the sophistication of MBE technology has grown it has become possible to grow materials and structures which can be used to study scientifically increasingly more interesting physical effects, changes which both have served to attract academic scientists to MBE-research. Although Japanese universities have responded vigorously to the new challenges opening up, their response has been weaker, in quantitative terms, than that of the American universities but comparable to that of European universities.” Stenberg L. , “Molecular Beam Epitaxy—A Mesoview of Japanese Research Organization,” unpublished manuscript. Research Policy Institute, University of Lund, Sweden, 1990, p. 56.

We are indebted to Dr. Takebi Otsubo of the Nomura School of Advanced Management for his assistance in obtaining these data.

Kagaku gijutsu-cho [Science and Technology Agency], ed., Kagaku gijutsu hakusho heisei 3 nendo: Kagaku gijutsu katsudo no guroobarizeeshion no shinten to wagakuni no kadai [1989 White Paper on R&D: Developments towards the Globalization of R&D and Japan's Tasks] (Tokyo: Kkurasho Insatsukyoku, 1989).

The data in Table 2 suggest that only 13.5 percent of the patent applications in Japan were from foreign sources, far below the 86.3 percent of all patent applications in the United Kingdom filed by foreign entities. Interpreting these differences is difficult without much more information, but they reflect differences in domestic intellectual property systems (e.g., the Japanese system imposes a low novelty requirement for receipt of a patent, encouraging large numbers of applications for minor patents), as well as underlying differences in foreign corporations propensity to patent in these economies.

Patent applications in Japan primarily reflect technology developed outside of Japan.

For purposes of the survey, “foreign-owned R&D” establishments are defined as those operated by foreign firms or joint ventures in which non-Japanese firms control more than 51 percent of the equity.

Cantwell J. , “Global R&D and U.K. Competitiveness,” in Casson M. , ed., Global Research Strategy and International Competitiveness (Oxford: Blackwell, 1991).

National Science Foundation, Survey of Direct U.S. Private Capital Investment in Research and Development Facilities in Japan, contractor report for Science and Engineering Indicators program prepared by Global Competitiveness Corporation and Technology International, Inc. (Washington, D.C.: National Science Foundation, 1991).

“A major recent trend is the divestiture of established R&D operations in Japan by U.S. firms as a result of merger and acquisition (M&A) activity. Within the past four years, at least eleven U.S. firms with R&D facilities in Japan were either acquired by foreign companies or they sold off their R&D facilities … The divestiture of Japanese R&D facilities has been offset by a new wave. The latest group establishing R&D facilities has consisted primarily of software firms (CADEM, Lotus, MicroSoft, Nova Graphics) and medium-sized firms involved in electronics. In addition, a number of semiconductor and pharmaceutical firms are currently building R&D facilities or have indicated they will establish such facilities within the next two years… . However, the number of U.S. companies with R&D facilities in Japan is substantially less than that believed at the onset of this study.” Ibid., p. 3.

“17 of the 30 responses (57%) show primary R&D activity in the related fields of chemicals, plastics, petroleum refining, and drugs. We had anticipated that electronics and related fields would prove to represent the majority interest.” Ibid. p. 8.

Ibid., p. 43.

“Despite the recent publicity surrounding the potential technology transfer benefits from stationing U.S. R&D employees in Japan, this practice is very limited. Several respondents indicated that double taxation and fringe benefits make employment of U.S. expatriates very expensive compared to hiring Japanese nationals … the major activity of the Japanese R&D staff was product development, followed in importance by applied research.” Ibid. p. 6.

The “market access” motive for offshore R&D has long been prominent in U.S. firms' foreign R&D investments. Mansfield found that “In our sample, practically all of the firms doing R and D overseas say that the principal reason is to respond to special design needs of overseas markets. In their view, there are great advantages in doing R and D of this sort in close contact with the relevant overseas markets and manufacturing units of the firms.” Mansfield E. Teece D. Romeo A. , “Overseas Research and Development by U.S.-Based Firms.” Economics, 46 (1979): 188. Cantwell's analysis of trends in multinational firms' R&D investment behavior, however, emphasizes the recent growth in these enterprises' use of global R&D networks to support the growth of firm-specific technological capabilities drawn from a number of international and domestic sources. Cantwell J. , Technological Innovation and Multinational Corporations (Oxford: Basil Blackwell, 1987).

Peters L. , “Technology Strategies of Japanese Subsidiaries and Joint Ventures in the U.S.,” Center for Science and Technology Policy, School of Management, Rensselaer Polytechnic Institute. 1991.

Ibid.

Some evidence [ Mansfield , op. cit., [1988a] suggests that Japanese firms are considerably more effective than U.S. firms in developing innovations based on sources of knowledge outside of the firms. If these differences are present as well in their management of foreign R&D. Japanese firms may be able to derive returns from their offshore R&D investments that exceed those of U.S. firms.

Genther P.A. Dalton D. , “Japanese Affiliated Electronics Companies and U.S. Technological Development: 1990 Assessment.” Office of Business Analysis. Economics and Statistics Administration. U.S. Department of Commerce, August 1991.

Mowery D.C. , “Public Policy Influences on the Formation of International Joint Ventures,” International Trade Journal, 6 (1991): 29–62.

Teece D.J. , “Transactions Cost Economics and the Multinational Enterprise: An Assessment.” Journal of Economic Behavior and Organization, 7 (1986): 21–45.

Like many tabulations of trends in international joint venture activity, the MIT1 data in Tables 5–7 contain no information on terminated joint ventures. Since these undertakings are renowned for their high “mortality” rate, the MITI data may overstate somewhat the rate of growth in sustained collaborative activity. Any overstatement, however, almost certainly is more than offset by the effects of the MITI study's narrow definition of joint ventures.

E.g., Mowery D.C. , “Collaborative Ventures Between U.S. and Foreign Manufacturing Firms,” Research Policy, 18(1989): 19–32.

Unfortunately, the lack of data on the size of the ventures in Table 8 means that the only basis for comparison of the “importance” of different types of collaborative activity is their number. Adjusting these data for the size of individual collaborative undertakings might yield different conclusions regarding the relative importance of various types of ventures.

Reich R. Mankin E. , “Joint Ventures with Japan Give Away Our Future,” Harvard Business Review (March/April 1986).

For a recent example, see Business Week. “The Partners.” February 10, 1992, pp. 102–107.

Teece D.J. , “Foreign Investment and Technological Development in Silicon Valley,” in McFetridge D. , ed., Foreign Investment, Technology and Economic Growth (Calgary: University of Calgary Press, 1991), pp. 215–235.

Mowery (1991), op. cit. Chesnais has noted the complementary relationship between relatively closed domestic research programs in the EC and the U.S., such as JESSI and Sematech, and international product development and technology exchange agreements in microelectronics: “one finds a combination between domestic alliances in pre-competitive R&D (with all of the provisos attached to this notion), and a wide range of technology exchange and cross-licensing agreements among oligopolist rivals at the international level.” [p. 95; emphasis in original]. Such international collaboration brings important benefits to the United States and other corporate participants, but it may undermine domestic political support for public financing of domestic R&D consortia that prohibit or restrict foreign participation. Chesnais F. , “Technical Cooperation Agreements Between Firms,” 577 Review, 4 (1988): 51–119.

Heaton G.R. , International R&D Cooperation: Lessons from the Intelligent Manufacturing Systems Proposal, Manufacturing Forum Discussion Paper #2 (Washington, D.C.: National Academy of Engineering. 1991).

Mowery D.C. , “Balancing Benefits and Obligations within the Global R&D System: The Changing Position of Japan.” presented at the Georgetown University-Japan Economic Institute conference on “Japan's Future Global Role.” Washington, D.C., March 11–14. 1992.

As Yoder's 1989 article pointed out, some Japanese firms already are aggressively pursuing infringement actions against South Korean firms. Yoder S.K. , “Hitachi Reaches Patent Accord with Samsung,” Wall Street Journal, April 5, 1989, p. B3.