Changing Paradigms for Japanese Technology Policy: SMEs, Universities, and Biotechnology

Abstract

In the 1980s and early 1990s, major US government studies and popular press reports argued that Japanese firms were about to take the lead in the biotechnology industry, following a pattern established in the semiconductor and other industries where large Japanese firms had led the way in commercializing radically new technologies such as the transistor. The Japanese model included coordination by the Ministry of International Trade and Industry (MITI) or, occasionally, other ministries. New technology was often developed by government-subsidized research cooperatives made up of leading firms. Large firms commercialized the new technology, supported by financing from keiretsu banks and the development of complementary technologies by partner firms. If start-up firms in the US or elsewhere developed relevant technologies, the Japanese bought them. It soon became clear, however, that the US model, linking universities, venture capital-backed start-ups, and large firms, was outperforming the Japanese model in biotechnology. The Japanese undertook reforms to make their system more like that of the US. This paper describes these changes and makes a preliminary assessment of their success.