Management of Technology and Innovation in Japan

324 A. Gerybadze
Where is the
Geographical
Center / Lead
Location?
Most advanced
location for the
the Innovation
process in
FOREIGN
COUNTRY
Most advanced
location for the
the Innovation
process at
HOME BASE
Where is the Engine in the Innovation Process?
Research-based
Innovation
Engineering
Innovation
Fig. 6. Source of knowledge and knowledge flows in Japanese MNCs
Lead-market
Innovation
Recommended
area of
improvement
for Japanese
MNCs
Innovation systems and the patterns of knowledge flows are still quite diverse
in different European countries and need to be studied on a country-by-country
and industry-by-industry basis. We will concentrate on the pattern of innovation
observed in large German and Swiss MNCs. There is still a tendency to build on
technology-pull, and to generate new products based on R&D in the home country,
in combination with strong engineering capabilities. This is still the predominant
pattern of innovation in mechanical engineering, automobiles and chemicals.
German and Swiss firms have also set up R&D labs abroad and have invested in
advanced manufacturing facilities. Competitive strengths can be explained by a
functioning virtuous circle combining home-base augmenting and home-base exploiting
R&D and advanced manufacturing, as is illustrated in Figure 6. Lead
marketing capabilities are much less emphasized than in Japanese firms, and there
are much fewer “success cases” where breakthrough products were triggered
through home-based lead markets.
Innovation efforts outside this functioning circle, particularly in high-tech industries
like information technology, computers, biotechnology etc. have often led
to failures. European MNCs have invested considerable amounts of money for
new products for which national or European markets turned out to be less advanced
or over-regulated. Furthermore, German high-tech firms showed limited
success rates, whenever the source of knowledge was concentrated in more advanced
locations (like in the U.S.), and when they were lacking absorptive capabilities
in R&D and manufacturing in the home country. Developing lead market
innovation capabilities would be a recommended area for improvement for European
MNCs. Learning from Japanese firms in managing home-based lead markets,
as well as learning from successful examples of Scandinavian firms in leveraging