New Strategies for New Challenges: Corporate Innovation in the United States and Japan (1999)
Chapter: Greater Reliance on External Sources of Innovation.
Supplier Networks
U.S. supplier networks are comparatively more accessible to newcomers than Japanese supplier networks, which are characterized by long-term business ties, often reinforced by ownership linkages. Japan's vertical keiretsu are adapting to new challenges, as described below, with indications that they will become more open, particularly as Japanese firms continue to globalize. Still, U.S.-Japan differences are likely to continue, especially with regard to innovation and production networks inside Japan.
Component Sourcing
Japanese subsidiaries abroad continue to be more dependent on imports from the home country than do American subsidiaries abroad.
Financial Environment for Innovation
In Japan, cross share-holding and traditional horizontal business groups (horizontal keiretsu) composed of major banks and manufacturers help ensure long-term financial stability. In the United States, venture capital is a driving force for innovation and competitiveness.
Emerging Trends
Greater Reliance on External Sources of Innovation.
In the view of the task force, external sourcing of technology and innovation—that is, the acquisition of technology and innovation from sources outside one's own firm—is the most important development in global technology management.
External sourcing is taking place through what is traditionally referred to as the process of outsourcing—the practice by which OEMs solicit increasingly sophisticated technological components from suppliers—and through newly emerging forms of technological partnerships and alliances with other firms. American firms are becoming more like Japanese firms which have long sourced technology and innovation from outside. At the same time, the traditionally strong vertical alliances between Japanese OEMs and suppliers are gradually changing as suppliers develop diagonal relationships with firms outside the group. The burgeoning integration of U.S. and Japanese corporations is a major factor in innovation sourcing. As corporations adapt to the imperatives of global financial markets, the complexities of high technology products and processes, and the high costs of innovation, they are entering into many forms of alliances, consortia, and joint ventures in which technology sharing, based on complementary assets, is a major factor. Some recent U.S.-Japan alliances would have been unthinkable a few years ago. For example, in the semiconductor industry U.S. and Japanese companies have concluded agreements to engage in joint production in the United States.
