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Abstract:
The low economic growth rate due to recession pushed down the per-capita GDP of Japan for six consecutive years from the world's third in 2000 to eighteenth in 2006. Still, Japan continues to lead the world in research and development, investing around 3.39% of it’s GDP in Research and Development compared with 2.6% of U.S.A. and 2 % in the European Union. Japan is witnessing new wave of innovation and Entrepreneurship despite the fact that there is massive loss experienced by Japanese companies due to recent financial crisis. (Ref: A World Bank Report on Unchanging Innovation and Changing Economic Performance in Japan by Adam Posen)
Government is promoting new consortia of knowledge excellence centres and industries to result in decentralized network of research and development across the Japanese islands. Also, I wish to focus on Japanese Government’s efforts on investing more and more in Human Resource Development of Science Technology sector and their conscious efforts to form the consortium of experts and clusters of service companies. This approach is helping different elements of industry to respond positively to government’s initiative in exploring, innovating and communicating the means and methods of successful policy making by motivating the healthy competition. This path of wealth creation and national development eventually contributes to the nation’s ability to commit itself to the larger objectives of International Development by promising more humanitarian aid and technical assistance.
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The prevalent and recently regenerated surge to reorient the strength of Science, Technology and Innovation (STI) capabilities to solve the challenge of Sustainable Development are based on firstly understanding STI capacity building processes going on in different countries. This realization then goes through process of exchanging transnational lessons of experience in building STI capacity. Therefore, the government’s capacity for STI policy making to enhance donor capacity so as to design successful STI capacity building projects must be understood in the context of how donor organizations could work together under the supervision and guidance of the Paris Declaration on Aid Effectiveness and other similar international initiatives to improve their professional capacity building partnerships with developing countries. [1]
Japanese success in innovation can be traced back to first white paper published by Govt of Japan in late forties. The white paper starts by identifying the weaknesses of Japanese industry:
1) The reluctance of Japanese firms in investing for costly R&D activities leading towards lack of domestic self-reliance in technology;
2) Difficulty in transforming the university research output into industrial products, due to the lack of applied research and development.
3) Predominance of know how, tacit knowledge, embodied skills, tricks and craftsmanship in the production process. This is truer about firms within small and medium enterprises (SME). This benefits by causing low productivity of labor and long training periods, and preventing a large-scale diffusion of technology.
4) The vertical hierarchical structure of academic disciplines obstructs the development of technology which strongly requires an interdisciplinary approach;
The inspiration behind the quest of technological capability in Japan aroused by urgent need to address the development impediments in the decade of 1960s, 70s. The choice behind these massive efforts was driven by technological avenues pursued during the 1960's and 1970's. This journey was dictated by social needs, such as finding solutions to pollution, traffic jams, and water shortages. But the main force was the need to fill the technology gap between Japan and the United States. During this entire period, Japan had established a model of a technological path, participating companies to consolidate their technological base to reach success in catching up with American companies in appropriate fields. [2]
The reasons for this progress are articulated in one of the Reports of National Industrial Technology Development (NITSDC) set by Japanese Govt.
In recent years, Japanese firms have achieved, maintained and increased competitiveness by introducing basic industrial technologies from western nations. This was done consciously to achieve ‘process innovation’ (i.e. technically enhancing different manufacturing process) which tremendously improved productivity and product quality. The inherent criteria for this success was uniform standards of technical education, high quality morale, visionary investment in human resources and teamwork reflecting efficient organizational behavior between manufacturing employees and management. In short, Japan made full use of strengths of Japanese society and Japanese business management systems.
While recognizing all these, introspection in the policy making institutions is reflected in one of the reports of Ministry of International Trade and Industry in Year 2000. This can be summarized as: “Japan has to think seriously to compulsorily abandon it’s piecemeal, vertically oriented approach. This also include, moving ahead of university-led basic research so as to empower the nation to provide the foundation for long term and continuous technical innovation.
While assessing the economic performance in parallel successful journey in innovation we will try to understand the framework of the actors and linkages in the innovation system. [3] (http://www.naturaledgeproject.net/NAON1Chapter11.7.aspx)
Few roots of the successful coping strategies and insulating strength which is helping Japan to tackle two decade old economic recession lie in Japanese government initiative in adopting the "Science and Technology Basic Law" in 1995 and implemented policy measures to adapt the way the Science and Technology (S&T) was organized and managed. The reflections from Law which are incorporated in policy building by making the state responsible for formulating and implementing comprehensive policies with regard to the promotion of S&T." Thus the state is expected to take the necessary measures, especially allocating and ensuring utilization of budgetary provision in this regard.
This law emphasizes concern about the cooperation between national research laboratories, universities and the private sector. The ideal balance between basic research, applied research and development has to be supported by timely training of researchers. Significant fact is that particular attention is paid to preserving the autonomy of researchers and specifying more focused research activities within the university sector. This clause has motivated the universities to derive new means of bypassing those applications that were unacceptable to them. The Law envisages the establishment of a basic plan to promote S&T, which will contain operational policies. The Council for Science and Technology has to be consulted prior to formulation of the basic plan.”
Being aware of the above presented ‘Innovation Model’ and other mentioned facts about Japan’s response to post war and current financial crisis in the context of increasing international competition, let us see what latest White Paper on ‘White Paper on Science and Technology 2008’ says:
1) Promotion of R&D in New Fields:
Japan has to invest in meeting the challenges of environmental problems. It is the world’s unprecedented aging society with a shrinking population. The Japanese government is very proactive to play a leading role in international cooperation and collaboration toward solutions to these social problems which require scientific solutions. This is essential for the benefit of society and so that Japan can maintain and improve its competitiveness. Simultaneously, it is also mandatory that Japan increase investments in all the strategic areas of sciences. Each expected to become an important arena of future research capable of contribution to international competition. This should be continuously improving its international competitiveness toward sustainable economic growth. Apart from these, needed initiatives have to include Promotion of service science; promotion of S&T related science-based industry and responses to newly emerging and interdisciplinary fields.
2) Development and Recruitment of Internationally Competitive Human Resources should be done by Foundation of Establishment of systems to attract outstanding foreign researchers. Creating major research-priority Environment to enhance the research support available to result in emphasizing the role of higher education throughout. This, report explains goes on: “The guarantee of Japan wining out in global competition in research, it is imperative to produce internationally active human resources from Japanese universities. The resources available in universities must be embedded in developing research environments suitable for international students and foreign researchers. In the situation where foreign countries promote R&D mainly from research human resources at the level of doctorate holders, for sustainably creating innovations, Japan has to make doctoral courses more attractive and foster research human resource. All over the world number of students working on their Ph.D. is improving abilities under the environment of global competition. Industries also are involved in foresight analysis so as to know the real strength of the human resources through, on the other hand, need to capitalize on acquiring human resources with doctoral degrees as research potential is very much crucial to an enterprise’s own innovations.”
Behavior of Japanese companies:
Japanese companies engage in continuous innovation by exchanging in even minuscule information which can be of minor improvements in their work of scientific experiments. Also, firms are continuously involved in anticipating changes in market, technology, competition, product, and consumer behavior, trends of scientific and technological rapid up-gradation. The sustaining interaction by firms with their suppliers, customers, distributors, government agencies and competitors for new insights is very categorical. Tacit or Personal Knowledge which is come out of the experience gets accumulated from the outside the company and outside the country, These inputs shared widely within the organization, becomes part of the company's repository of knowledge, and is utilized to develop new technologies and products. A conversion from outside to inside and then outside again takes place in the creation of new products, services or systems. Process of continuous improvement is Kaizen and the place of dense clusters is called Keiretsus. There is need to study how Japanese companies are carrying out User Oriented Product Research which helps to know what are the consumer’s changing need patterns by establishing real time communication with them. I wish to discuss about Kaizen and Kiretsus in my next paper.
Philosophy of Japanese Innovation:
Any innovation is context, culture and society specific. There is always a perceived knowledge and actually uncodified knowledge. Tacit knowledge has technical and cognitive dimensions. The technical component consists of informal skills or crafts, expressed as "know-how", accumulated through years of experience, and difficult to articulate precisely. The cognitive dimension consists of mental models, beliefs, and perceptions that are deeply ingrained and often taken for granted, including visions about what could and what ought to be in the future. Explicit knowledge can be taught through education and training. This knowledge is untransmittable in codified due to some reasons. The most people attribute this aspect of innovation to feelings which are inherent to the certain innovative practices. The most powerful learning comes from direct experience and through trial and error. Learning takes place with the body as well as the mind. The oneness of body and mind is an outgrowth of Zen Buddhism in Japanese thinking. [4]
What has come to realization about Post-war Japanese innovation system is that degree to which domestic competition among firms in high-tech sectors occurred and even was encouraged, despite the status-quo biases of the system. Government deliberately introduced controlled competition in electronics and telecommunication industry. [5]
Individual entrepreneurship continues to be significant factor in Japanese technological development. Govt. of Japan has already introduced “Mentor Introduction Service for Women Entrepreneurship”. This was followed by Amendment in Act on Securing, Etc. of Equal Opportunity and Treatment between Men and Women in Employment i.e. Equal Opportunity Act in 2006. There are some contemporary reasons which facilitated the rise of New Women in today’s time. Here the concept of loyalty and lifetime employment is slowly loosing it’s charm. Also, seniority based payment structure is paving way for quality and competitive compensation mechanisms
Looking at the shrinking workforce population in Japan the new business leadership is evidently being transferred to highly educated woman who is simultaneously taking care of family, office and new challenges of learning the changing technology and management practices. This is possible here because of lowest cost of connectivity and easily available technological assets in the cluster of people which are easily accessible. For example, internet penetration in Japan has gone up from 37% of total population in 2000 to more than 74 % in 2007. Also this country is cheapest ISP (0.09 $ for 100 Kbps) in whole world not to forget fastest connectivity (26. Mbps).
Starts up are providing safe environment for women to work hard. These start-ups provide anonymity so as to remove prejudice in the minds of male counterparts. As all these new emerging companies are knowledge- ICT bases they are providing flexibility for women to set working hours as per their convenience. This helps them to minimize traditional barriers. More and more new woman could assert themselves and lead start ups in the market place of fierce race. But still some significant problems of society cannot be ignored. Few of the companies which are making their mark as new symbol of rising women entrepreneurship in Japan are: Digimom, Coolgiris, Palias, eSampo, SOHO, Women, Photonet, DeNA, New Year Group and many others.
Foundation or parent firms tend to concentrate in specific local areas according to their specialization. Firms work closely together at each stage of production and across industry tiers, making possible the production of even the smallest lots and the implementation of any process. This fact and culture is directed towards Kiretsus. By pooling their know-how and working together, these small companies are able to undertake portions of large industrial projects quite beyond what any one could handle on its own (Kaizen). In combination they have outstanding development capabilities and provide the infrastructure for creating new products. [6]
In Japan, small and medium enterprises (SMEs) are truly a engine of economic growth by removing the ill effects prevalent in the demand lacking and not so friendly pro-employment market society./ SMEs can be regarded as “weak” low-tech firms and hence as the targets of protective policies, have recently been attracting considerable attention as promoters of innovation (Small and Medium Enterprise Agency, 2002, 2004). Special attention is being paid to start-up firms including new ventures that enter the markets with new products and services based on new technologies and ideas or exploit new markets. [7] It is observed that there has not been significant increase in penetration of culture of Venture Capital risk taking initiatives. (Ref: Seminar on Innovation and Entrepreneurship, jointly organized by Stanford University Project on Japan and The University of Tokyo, 28 May 2009)
New Initiatives:
Considering all the issues discussed uptill now, let us take a look at agenda for 21st Century Japanese Govt. has prepared based on this belief:[8]
“It is significant to proceed with the scientific discoveries and technological inventions. These achievements must be realized by collaboration of upstream basic research and downstream applied research by placing out priorities beyond the confines of just daily needs by starting to address wider challenges arised due to uncertainty. This research reflected in scientific papers must be able to produce social and economic values and feed back the benefits to society and people. Therefore, it is necessary to manage purpose-specific basic research and applied research programs appropriately in order to prevent them from becoming mere tools for satisfying researchers' own intellectual curiosity. In this situation, Japan Science and Technology Agency(JST) promotes basic research related to strategic prioritized S&T items as part of its Basic Research Programs. These operations are being under an officer given with the responsibility and discretion which will maintain database concerning the management of research progress in order to achieve the strategic sector set by the government for the purpose of creating innovations. In addition, JST implements the Collaborative Development of Innovative Seeds and Project to develop "innovative seeds" as applied research programs intended to feed back the research achievements to society.”
If all these Japanese policies are looked in the framework of emerging consensus that STI capacity building is an essential tool for sustainable development and poverty reduction then we would be better able to understand the centrality of current discourse about science and technology being at the forefront of development policies characterized by economic and trade polices. But what precisely is meant by STI capacity building? What capacities must be built? How countries can built these capacities? How should policy makers allocate scarce resources to different capacity building objectives and what specific capacities are the highest priorities for any given country at a given stage of development? While trying to figure out answers to these questions awareness about minimum requirements about STI capacity building involves strengthening two types of capacity will help us to move in this direction:
a) To acquire and use existing scientific and technological knowledge
b) To produce and use new knowledge which will be sustainable and major contribution to
Knowledge System
c) It also involves building capacity at four distinct levels
i.Government policy making
ii.Labor force skills and training
iii.Enterprise innovation
iv.Education and training institutions and research institutes
Features of Policy Interventions:
Chalmers Johnson (1982) defines industrial policy as "a explicit feeling of concern for the welfare-ness with the structure of domestic industry. The emerging structure of STI enhances the nation's international competitiveness." Japan's approach to industrial policy, which encompasses competition policy, was relatively interventionist. Regulatory regime started to implement feasible policy prospects and targeting particular industries for development and involving extensive government guidance to industry. Key elements in this approach were: [9]
a) Many industries are being given concession from antitrust rules, including (but not
restricted to) small- and medium-sized companies and depressed industries in need of
restructuring.
b) Cartels were legalized in a variety of circumstances, including recessions; Industry-wide
cost reduction or quality enhancement were deemed necessary and in operation of
achievement. Small and medium-sized companies, are successful in collective bargaining
power was seen as desirable; and exporting, when it was necessary to discourage
"dumping" of Japan's exports in other countries at low prices by smaller companies.
c) The Japanese Fair Trade Commission (FTC) was weak, enforcement of antitrust policy
was lax (Takigawa, 1996) and criminal and civil sanctions in Japan were light
d) The Ministry of International Trade and Industry (MITI) sometimes intervened in
business conduct in ways to maintain limited competition.
e) Fifth, a provision of Japanese Anti-monopoly Law limited private suits unless the
Japanese FTC took formal action, at least in the form of a preliminary finding of a violation
and recommendation of remedial action.
Challenges Ahead:
The types of competition that are common in Japan may help explain why some Japanese firms can be innovative and highly successful in world export markets in certain products and yet earn consistently low rates of profitability. In the late 70s and mid 80s Japanese manufacturing companies were threatened by USA for not generating any significant profit beyond the 8 percent mark. The different types of competition also help explain why Japanese firms would be vulnerable to the catch-up of firms from other countries, because firms from other countries can adopt practices such as Total Quality Control and Lean Production Techniques, but then will not practice the excessive diversification and me-too entry or accept the low profits characteristic of Japanese firms.
Few scholars have warned that once Japanese firms are equaled in efficiency, they may not have much else to offer because they have lacked distinctive company strategies. The successful and innovative Japanese firms are also vulnerable because they are dragged down by the inefficiencies of other parts of the Japanese economy because of little competition and heavy government intervention. Many successful Japanese firms have diverted most investment abroad to avoid the high costs of the local market. [10]
While competition has long been vigorous in many Japanese industries and has been noticeably opened in the last decade, serious distortions and impediments to competition remain. Until Japan addresses these issues more frontally, the period of Japanese economic stagnation will be unnecessarily protracted. Almost all discussions of the cause of current Japanese stagnation concentrate on macro economic issues: a lack of aggregate demand, deflation and nonperforming loans held by banks. Many Economists and Planners agree that macroeconomic issues are important, but macroeconomic adjustment alone will not restore economic vitality. Japan's problem is rooted in microeconomics, in how companies compete and distortions to competition. These microeconomic structures reduce productivity, lower the return on new investment, drive companies offshore and artificially elevate local prices. A more flexible economy in which competition is truly open will increase productivity and create new business opportunities. A stimulus to aggregate demand will not be effective unless attractive goods and services are available at attractive prices. Disposing of nonperforming loans must be accompanied by policies that encourage new investment and the formation of new companies to which capital and labor can shift.
Searching ways for International Relationships for direction towards Development through the means of Science-Technology-Innovation cooperation:
Thus, after studying Japan’s various initiatives in the direction of establishing, strengthening and preserving the innovation potential I wish to refer to some of the founding principles which developing countries should reorient sufficient time and expertise for creating possibilities of self-reliant and novel alternatives development to in the future: [11]
a) Training and education in Science and Engineering in Centres of Excellence
b) Use of Foreign Assistance and Technical Assistance driven by strong bilateral agreements
c) Overseas Plant Visits for getting some technical know how and exposure to problem
solving in real time situation
d) For safe financial planning, consultation with foreign capital goods and high technology
suppliers
e) Inward substantial FDI in production R n D facility from more advanced countries
f) Mergers and Acquisitions in national and globalised world
g) Joint R and D Projects which will lead way to future greater cooperation between two
science technology agencies.
h) Flexibility in immigration of Scientists, Engineers and Skilled Labor
i) Establishing R and D facility in high tech countries
j) Attendance to International Exposition, Conference and Lectures
k) Flexible Technology Licensing
l) Imports of capital goods and high technology products at lower prices.
The implications of this new mode of technological progress for development are significant on endogenous innovation processes in developing country situations. In the old industrial S&T model, the focus was on technology transfer and imitation. In the new model, innovation is anything but imitation. Every innovation appears now unique with respect to its application. [12]
Conclusion:
Majority of the development discourse is suffering from ignorance towards potential of collaborative approaches of International Community in fostering relationships on the pillars of science, technology and innovation. The strong bilateral relations and courage of individual countries to initiate experiments based on indigenous needs and capabilities must be the way forward. While realizing the ‘criticism of Aid for Development and Aid for Trade’ is frequently circulating in the discussions, we must take foresighted initiatives to strengthen regional and multilateral relationships which will enhance the possibilities of domestic innovation. But in a true sense the success of these entire international efforts to foster domestic innovation entirely depends more on architecture of Physical and Human Science-Technology-Innovation Infrastructure based on justified financial support and less on foreign help. Japan has shown us direction in this regard.
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References:
[1] Alfred Watkins and Michael Ehst, Ed. Science, Technology, and Innovation, Capacity Building for Sustainable Growth and Poverty Reduction, The International Bank for Reconstruction and Development / The World Bank, 2008 Alfred Watkins and Michael Ehst, Editors
[2] Yuko Harayama, JAPANESE TECHNOLOGY POLICY: HISTORY AND A NEW PERSPECTIVE, RIETI Discussion Paper Series 01-E-001, Research Institute of Economy, Trade and Industry, August 2001
[3] OECD 1999
[4] Kuniko Fujita and Richard Child Hill, Innovative Tokyo, World Bank Policy Research Working Paper 3507, February 2005
[5] Fransman, Martin, Visions of Innovation: The Firm and Japan, Oxford University Press, New York, 1999
[6] Hill, Richard C. and Fujita, K. 1995. "Osaka's Tokyo Problem." International Journal of Urban & Regional Research, 19-2: 181-193
[7] Hiroyuki Okamuro Jian Xiong Zhang, Ownership Structure and R&D Investment of Japanese Start-up Firms"Center for Economic Institutions Working Paper Series, CEI Working Paper Series, No. 2006-1
[8] MEXT, White Paper on Science and Technology 2008
[9] Johnson, Chalmers. 1982. MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975. Stanford, Calif.: Stanford University Press.
[10] Michael E. Porter and Mariko Sakakibara, Competition in Japan, The Journal of Economic Perspectives, Vol. 18, No. 1 (2004), pp. 27-50, American Economic Association
[11] Mark Taylor, The Political Economy of Technological Innovation: A Change in the Debate,
Massachusetts Inst. Of Technology, 2006
[12] Luc Soete, Science, Technology and Development: Emerging Concepts and Visions, SLPTMD Working Paper Series No. 017, Department of International Development, University of Oxford
