The Positive Sum Strategy Harnessing Technology for Economic Growth (1986) / Chapter Skim
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The Japanese Challenge in High Technology
The Japanese Challenge in High Technology
Pages 541-568
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From page 541... ...
As comparative advantage shifts to the newly industrializing states, Japan will have to compete head to head with the United States in what has been the traditional U.S. stronghold, high technology.
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Against the background of this experience In the "smokestack" sectors, the question arises: Is America's current leadership in high technology safe from the Japanese challenge? The Ministry of International Trade and Industry (MITI)
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From page 543... ...
According to one estimate, Japan's `'economic miracle" can be ascribed largely to the contributions made by technology, much of which was imported from We United States and adapted or incrementally improved (see Figure 1~. Importing the most advanced foreign technology had the effect of setting in motion a virtuous cycle, fostering heavy investments in new plant facilities (which embodied new production technology)
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deficiencies in university-based research) , and institutional factors (e.g., the lack of a venture capital market)
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It is trying to upgrade the quality of research at leading Japanese universities. The embryo of a venture capital market seems to be taking shape.
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What used to be a 1:47 ratio has become a 2:3 ratio; in 1980, exports of Japanese technology amounted to $638 million and imports of foreign technology came to $958 million (Ministry of International Trade and Industry, 1982:1731. Areas in which Japanese technology is so advanced that it can be sold overseas include agricultural chemicals, construction equipment, transportation machinery, electrical machinery, iron and steel, and ceramics areas in which Japan also happens to be successful at exporting finished goods.
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From page 547... ...
Successful Industries Consumer Electronics Despite the fact that transistors and integrated circuits were invented in the United States and despite Amenca's pioneenug work in solid-state physics, Japan was He first country to succeed in commercializing transistor technology for radios and televisions; miniaturization revolutionized the entire consumer electronics industry. Japan's commercial successes, especially in the early stages, can be attributed largely to several factors: the availability of basic patents from the United States, the ability of Japanese companies to modify imported technology and bring it to very high levels of refinement, sustained and growing levels of capital investments in R&D, low production costs, aggressive pncing, and mass marketing at home and abroad.
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From page 548... ...
Part of Japan's mar~ufacturing prowess can be attributed to the quality of its labor force, techniques of quality control, and extensive subcontracting networks; but part of the explanation can also be traced back to the high priority placed on investing in world-class process and production technology, which are thought in Japan to constitute the keys to commercial success. The emphasis placed on process and production technology is accentuated by such distinctive characteristics of Japanese industrial organization as the practice of permanent employment.
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From page 549... ...
Semiconductors Most of the factors cited as an explanation of Japan's success in consumer electronics the importation of basic foreign patents, high and sustained investments in R&D and state-of-the-art manufacturing facilities, superior process and production technology, economies of scale (achieved in part through aggressive export efforts) , severe price competition, and so on also account for its progress in semiconductors.
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From page 550... ...
National research projects, like He VLST, helped to mobilize resources and to close the technological gap with the United States, but in all likelihood, Japanese companies would have narrowed the gap anyway, albeit at a slower pace. The amount of government funding for R&D in high technology (not just electronics)
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Of all possible government actions having an impact on We growth of high technology industries, the most ~mponant has not been industrial policy targeting; rather, it has been effective macroeconomic management. MonTABLE 2 Government Funding and Research Intensity, 1981 (percentages)
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From page 552... ...
The powerful pull of overseas demand has helped Japanese companies move down the learning curve and advance technologically. What Is not as well known, however, is that Japan has also done well in some industries Mat are not dependent on exports for a significant share of production, like pharmaceuticals (e.g., Interleukin-lI)
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· Emphasis on process and production technologies (ion-beam etching) · Steep learning curves · Concentration on applied research and development · Importation and modification of foreign know-how Industrial Organization · Dominance of large corporations · Fierce interfirrn competition · Close, cooperative relations with networks of small subcontractors · Lifetime employment: relatively limited labor mobility between fins · Reduction and diffusion of risk though organizational mechanisms Commercial Factors · High and sustained R&D investments · Large and growing domestic demand · Usually, a powerful export thrust · Difficulties of penetration by foreign competitors · Success even in sectors not ''targeted'' by government (consumer electronics)
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· Exceedingly high bamers to new entry (aircraft, space) · Lack of a venture capital market · Labor and capital market constraints on the exploitation of new technological on pornlIiities by independent, small-scale companies · Inhibitions on the diffusion of technology by limited labor mobility Commercial Factors · Exceedingly high costs of R&D and manufacturing (aircraft, space)
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From page 555... ...
They prefer problems with known parameters and for which solutions can be found using extant theones. Such training suggests strengths at solving discrete problems but weaknesses at research tasks that call for creative conceptualization, like the design of advanced systems software and large jet aircraft.
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Japan laser industry has failed to keep pace with its U.S. counterpart largely because university-based research in applied physics has lagged.
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with no assurances of government demand for new products, Japanese companies have followed a fairly consecrative approach to R&D, emphasizing reasonably high prospects of commercial feasibility—this may be one reason Me Japanese have not been noted for creating whole new industries or major new product designs; and (6) Japanese engineers and scientists have not been diverted from commercially oriented
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, Japan was able to draw on more domestically developed technology; over 60 percent of the components installed were manufactured, assembled, and tested in Japan (Ministry of International Trade and Industry, 1982:6~77~. While Japan is making headway, it is still a long way from complete selfsuff~ciency in aerospace technology, and an even longer distance behind He United States.
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Indeed, if ever Here was an illustration of fallibility in Japanese industrial policy targeting, He commercial jet aircraft industry would be He clear-cut example. Regardless of He criticisms that can be leveled at America's so-called m~litary-indus~ial com -- c7 r~
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There is already some concern being expressed in the U.S. laser industry that the "Star Wars" space defense concept could divert such large resources from commercially promising endeavors Mat Japanese companies could slip past the United States unnoticed, concentrating solely on commercial applications and benefiting from MrrI's organization of national research projects in industrial lasers (Conversation with Professor Robert Lo.
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project did advance the state of Japanese semiconductor knowledge, especially In the area of production technology (e.g., silicon crystal growth and processing) , Japanese companies probably would have made such advances eventually anyway.
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Japan's system of industrial targeting may have been appropriate for the needs of an earlier era of latecomer catch-up, but is it as effective, now that Japan has reached the frontiers of technology? Lack of a Venture Capital Market A swing difference in Japanese and American patterns of capital allocation for high technology is the lack of a venture capital market in Japan.
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There appears to be more than enough money for the creation of a large venture capital market; Hambrecht and Quist, for example, recently created a venture fund In Japan with Sanwa Bank and Oriental Leasing. But the problem is Mat lapan's stock market is not designed to handle small startup companies.
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S=n~s B=ic mse~b B=^ughs ad invendoDs Milan ~plic~ons New-~cl design Syrups i -- on Sat Less percale Recedes New ~nchon~ides New Ibis posits Cusm~on ad act ~ Be misaim notion be conveyed ~~ obese technological ch~dsUcs eve out of idle noons Abuts, it should be pointed out ~m Me Was of coffee sand ~ condnu~ly evolving, as high ecology Asks ~~ ~oc_s_. ~= ~ ~ _ss~ Was as sag, while America seems ~ be paint ma abandon ~ process and pnoducdoD technology.
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the creation of small subsidiaries designed to serve as the functional equivalent of small venture start-ups; (3) the appearance of the rudiments of a venture capital market; (4)
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From page 566... ...
Nevertheless, even under an open international regime, Japanese companies would have to have Weir own technology in order to cross-~cense foreign know-how. In ~nterna~aonal technology transfers, more bartering seems to be taking place, a manifestation perhaps of Me mounting costs and value of innovation.
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From page 567... ...
Unpublished paper, prepared for Japanese Political Economy Research Conference, Honolulu, Hawaii. Semiconductor Industry Association.
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