The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&D9.3.2 Competitive PressureJapan is the largest world economy after the U.S. (see Figure 9-8).Figure 9-8 Japanese population and GDP (nominal) in comparison with E.U., Sweden, U.S.and China in year 2002.600 400 2005,000 10,000454 9,599E.U.288 10,979the U.S.9Sweden238128 4,240Japan1,304 1,410ChinaPopulation (2002), million personsSource: Asahi 2005.GDP (2002) million dollarsDespite its position as the second largest world economy, Japan has recently lost itsdominance in many cutting-edge industry areas due to increasing international competitivepressure (Nakagawa 2004). Some areas have been “taken over” by SouthKorea (e.g. Korean company Samsung is world-leader in the production of flat monitorsbased on the TFT LCD technology (Naito & Hausman 2005)). The Japanese economyhas gone through several stages since the end of the WWII. First there was a recoveryperiod during which Japan built its economy back up to the prewar level. Nextcame a high-growth period driven by chemical industry. Then, after the two oil crises,Japan saw a stable period driven by technology-intensive industries. In the 1990s therewas a prolonged recession triggered by the expansion and contraction of an economicbubble in the latter half of the previous decade. Japan’s economic downturn was arguablycaused by its 50-year-old postwar economic system, as well as an increasing inabilityto respond flexibly to internal and external changes.After coming into power in April 2001, the Koizumi Cabinet has implemented policiescovering regulatory reform, public company privatization (e.g. postal service privatization)and administrative reform. Economic revitalization is being promoted withpolicies to improve efficiency in areas like labor allocation, fund allocation and R&D.Major changes are also taking place in the corporate world as companies strive to increasecompetitiveness by moving away from traditional employment practices, such aslifetime employment and seniority-based wages (JETRO 2004a, Asahi 2005).218