JAPANESE FIRMS

Use Of Research & Development (R&D) In Japanese Firms And Business Groups To Improve Their Competitive Advantage In Global Markets





Use Of Research & Development (R&D) In Japanese Firms And Business Groups To Improve Their Competitive Advantage In Global Markets

Introduction

Japanese firms have a preference for short-term cost reduction rather than long-term development of technological competitiveness. They accomplished this feat early in their economic development by absorbing? then extending? foreign technologies; by developing a skilled labour force and advanced manufacturing techniques; by exploiting their robust domestic market; and by adopting export-oriented strategies. The developmental efforts of Japanese firms strongly emphasize rotation of personnel among departments in ways that lead to the exchange of useful information and the formation of common goals. In many cases? close communication among functionally separate specialists is strengthened by the awareness of a commonality of interest flowing from stable? long-term employment (and supplier) relationships (Rosenbloom and Abernathy? 1982). In addition? Japanese firms make more systematic use of engineering skills. This paper discusses how Japanese Firms and business groups used Research & Development (R&D) to change their product and production technologies improve their competitive advantage in global markets.

Discussion

In the internal organization of their firms? the Japanese commonly provide for much closer interaction between product designer and production engineers? they devote considerable attention to the refinement of the appropriate process technologies? and they also assign a prominent role to the engineering department. In considerable measure? then? their skill in imitation can be attributed to their skill in? and concern with? development activities (Mansfield? 1988a).

The post-war Japanese government encouraged the development of the more advanced sectors of the economy. Foreign firms were prevented from establishing subsidiaries in Japan and selling products? and were only allowed to license and to establish joint ventures with Japanese companies. Licences were allocated by MITI (the Japanese Ministry of International Trade and Industry) to “suitable” companies. These Japanese companies made use of their protected status first to master and then to improve on the technology which they had acquired. Japanese companies prefer to do it themselves rather than contract it. In 1981? only about 4 per cent of the Japanese R&D spent was paid to universities or independent institutes for contract work or in support grants (Clark? 1984).

The intensity of competition in Japanese industry is another reason for innovation. Japanese markets are typically more competitive than elsewhere throughout the world? dozens of similar products seek to attract the customers' favour? and technical innovation assumes enormous importance for both manufacturers and consumers in differentiating products. In their annual reports? most Japanese firms discuss their R&D efforts in detail? provide information not only about research in general but also about individual patent and royalty agreements.

Japanese companies favour trial and error over the systematic step-wise techniques more widely used by US companies. This means many of the development phases overlap with planning and action taking place simultaneously. The end result is a high adaptability to make mid-course adjustments to compensate for new information? a drive ...