FONG.CHP:Corel VENTURA

Follower at the Frontier:International Competition and Japanese

Industrial Policy

GLENN R. FONG

American Graduate School of International Management

A dominant orthodoxy in political-economic analyses of internationalcompetition is to highlight how national industrial performance and thecompetitive balance between nations are determined by domestic featuresof national political economies. In contrast, this article reverses thesecausal arrows by highlighting how the international competitive environ-ment itself can shape and reshape domestic and state structures. Japan’shigh-profile, large-scale national research and development programs incomputer and semiconductor technologies serve as instructive testinggrounds for this argument. Illustrating how shifts in international com-petitiveness can induce changes in domestic structures, Japan’s R&Dprojects display a secular decline in the government’s interventionistcapabilities as the country’s computer and semiconductor industry dra-matically moves from industry follower to technological pioneer.

A dominant orthodoxy in political-economic analyses of international competitionis to highlight how national industrial performance and the competitive balancebetween nations are determined by domestic features of national political econo-mies (Hart, 1992; Katzenstein, 1978b: Zysman, 1983; Zysman and Tyson, 1983). Asencapsulated by one observer, “[T]he primary object of study concerns the extentto which variation in competitive outcomes traces to different domestic structuresand differences in national government policy” (Stowsky, 1987:1). Such domesticstructural analyses spotlight how certain nations can be bequeathed relative advan-tages over others in international competition. Along these lines, Japan’s economicperformance—whether its postwar “miracle” or more recent problems—is tied todistinctive conducive or debilitating features of its government institutions andbroader political economy.

In contradistinction, this article reverses these causal arrows by highlighting howthe international competitive environment itself can shape and reshape domesticand state structures. It should not be surprising to find that competitors areinfluenced by the nature of the competition in which they find themselves. Thisarticle highlights the shaping influence played by international competition.

International Studies Quarterly (1998) 42, 339–366

©1998 International Studies Association.Published by Blackwell Publishers, 350 Main Street, Malden, MA 02148, USA, and 108 Cowley Road, Oxford OX4 1JF, UK.

Author’s note: This research was supported by a grant for Advanced International Research in Japanese Studies fromthe Social Science Research Council and the American Council of Learned Societies. I am grateful to Rich Friman, PeterHall, Peter Katzenstein, Frank Langdon, T. J. Pempel, colleagues in the American Graduate School of InternationalManagement Department of International Studies, and reviewers and editors of ISQ for helpful comments on earlierdrafts of this article.

In particular, a “relative competitiveness” framework is developed highlightinghow differences and changes in the competitive positions of nations—for instance,early versus late industrializers, successful followers or challenged pioneers—en-compass distinctive imperatives and requirements for government institutions andstate-industry relations. Particularly with respect to a nation that moves from aposition of a “pursuer after the pioneer”1 to a “follower at the frontier,” institutionaland organizational arrangements created during a nation’s catch-up phase areanticipated to be transformed as it attains world-class competitive status.

This argument is explored with regard to Japan, and to its computer andsemiconductor industry in particular, for two reasons. First, the rapid and dramatictransformation from industry follower to technological pioneer for the nation atlarge and its computer and microelectronics industry in particular provides anexcellent opportunity to explore the domestic effects of international competition.Domestic responses to changes in competitiveness should be showcased.

Second, the Japanese computer and semiconductor industry offers a series of casestudies that provide revealing insight into Japan’s political economy and domesticstructures. More specifically, nine Japanese national research and developmentprojects partnering government and industry for ambitious technological break-throughs in computing and microelectronics serve as telling case studies:

• FONTAC Project (1962–64)• High-Speed Computer Project (1966–72)• New Series Project (1972–76)• Very Large Scale Integration Project (1976–80)• Supercomputer Project (1981–90)• Future Electron Device Program (1980–2000)• Fifth Generation Computer Systems Project (1982–93)• SIGMA Project (1985–89)• Real World Computing Program (1992–2001)

Each case is a multiyear, multimillion-dollar effort, sponsored by Japan’s Minis-try of International Trade and Industry (MITI). As the preeminent governmentagency responsible for Japanese industrial and technology policy, MITI has fosteredthe development of industrial technology via large-scale national R&D projects overthe past forty years. The nine case studies represent the ministry’s core sequence oftechnology initiatives in computers and semiconductors, beginning with theirinaugural effort in the early 1960s through the onset of the twenty-first century. Asdisplayed in Table 1, the nine case studies represent some of MITI’s most significantnational research projects.

These cases serve as penetrating windows on important dimensions of Japanesedomestic structures. As elaborated below, the nine MITI research projects revealthree major faces of government intervention in industrial affairs and government-industry relations in Japan: programmatic initiative, technology targeting, andindustry targeting.

In preview, the experiences of the nine MITI research programs support theoutlook of the relative competitiveness framework. The earlier of the pro-grams—FONTAC, High-Speed Computers, and New Series—reflect the impera-tives of a “pioneer after the pursuer.” Prior to the mid-1970s, MITI’s researchprograms displayed classic traits of an industry follower in a catch-up mode—traitsthat included heavy-handed government intervention.

1 This particular terminology is derived from Okimoto, 1983.

340 Follower at the Frontier

The mid-1970s emerge, however, as a watershed. This is precisely the period inwhich Japanese computer and semiconductor manufacturers begin to rapidly closeon and then pull even with their U.S. counterparts, the previously unchallengedglobal leaders. And as anticipated by the analysis of relative competitiveness, Japan’sR&D projects begin to evidence changes in Japanese domestic structures—includ-ing diminished MITI autonomy and interventionist capabilities. Such changesreflect the imperatives of a “follower at the frontier” and are increasingly displayedby our six latter case studies—VLSI, Supercomputers, Future Electron Devices, FifthGeneration Computers, SIGMA, and Real World Computing.

Such findings may appear rather unsurprising and common sensical. But asdeveloped below, they run counter to much of the comparativist analysis of domesticstructures as well as to major schools of thought in Japanese studies.

Relative Competitiveness

The relative competitiveness framework underscores how international competitionshapes and reshapes domestic political economies. The kernel of this frameworkcan be found in the work of Alexander Gerschenkron (1962). The classic work onnineteenth-century European industrialization links the organization of political-economic institutions to the extent of a country’s “economic backwardness” andtiming of industrialization:

[T]he more backward a country, the more likely its industrializationwas to proceed under some organized direction; depending on the

TABLE 1. MITI Research Projects in Computers, Semiconductors, and Software

MITI FundingRank Project (billion ¥)a

**1 Real World Computing 1992–2001 70.0b

**2 New Series [computer] 1972–76 57.0**3 Fifth Generation Computer Systems 1982–93 54.0**4 Very Large Scale Integration [semiconductor] 1975–80 29.0

5 Pattern Information Processing System [software] 1971–80 22.0**6 Future Electron Device 1981–2000 17.6c

**7 Supercomputer 1981–90 17.58 Optoelectronics 1979–85 15.7

**9 SIGMA [software] 1985–89 12.5**10 High-Speed Computer 1966–71 10.0

11 Interoperable Database Systems 1985–92 7.612 FRIEND21 [computer] 1988–94 6.813 Software Production Technology Development 1976–81 6.514 Japan Software Company 1967–72 3.015 Software Module 1973–75 3.016 Software Maintenance Engineering Facility 1981–85 3.017 New Models for Software Architecture 1991–98 2.0d

18 Formal Approach Software Environment Technology 1985–89 2.0**19 FONTAC [computer] 1962–64 0.4

Source: Ministry of International Trade and Industry.acurrent yen; bprojected; c1981–1996 only; d1991–1996 only; **case studies

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degree of backwardness, the seat of such direction could be foundin investment banks, in investment banks acting under the aegis ofthe state, or in bureaucratic controls (Gerschenkron, 1962:44).

Gerschenkron is quick to add that “one cannot understand the industrial develop-ment of any country as long as it be considered in isolation. Backwardness, of course,is a relative term. It presupposes the existence of more advanced countries” (1962:42;emphasis added).

Fundamentally, then, Gerschenkron pointed to the shaping influence of acountry’s relative level of industrial and technological development, or, moresimply, its relative competitiveness. The more backward and less internationallycompetitive the country, the greater the imperative to concentrate political-eco-nomic power to industrialize. Hence, Britain could industrialize early in the nine-teenth century without the assistance of centralized political authority because asEurope’s first industrializer it faced no external competitive challenge. Because ofBritain’s industrial head-start and accompanying competitive advantage later in-dustrializers would have to catch up by combining industrial and banking enter-prises (Germany) and turning to a strong centralized state as the agent of economictransformation (Russia).

But what are the implications of an industrial “follower” successfully catching upwith a previously dominant “leader”? As noted by one reviewer, this natural questionappears to have been overlooked by most analysts: “The catch-up hypothesis in itssimple form does not anticipate changes in leadership nor, indeed, any changes inthe ranks of countries in their relative levels of productivity” (Abramovitz,1986:396). While the existing literature provides analysis of the initial gap betweenleader and follower, much of it does not take the next logical step of consideringthe prospect of the competitive gap closing.

Gerschenkron, in fact, provides the basis for expectations of structural andpolitical adjustments on the part of a successful industry follower.2 He points tostructural changes in Germany, one of his classic industry followers, as the countryreached industrial maturity at the end of the nineteenth century. In particular,paternalistic relations between German banks and industry, engendered during themid-century catch-up period, began to erode: “As the former industrial infants hadgrown to strong manhood, the original undisputed ascendancy of the banks overindustrial enterprises could no longer be maintained. The process of liberation ofindustry from the decades of tutelage expressed itself in a variety of ways” (Ger-schenkron, 1962:22).

The imperatives of a “follower at the frontier” also impacted the role of the statein Russian industrialization between the 1905 and 1917 revolutions. While heavy-handed government intervention spurred Russian industrialization in the latenineteenth century, “the character of the industrialization process . . . changedgreatly” after 1907:

Railroad construction by the government continued but on a muchsmaller scale both absolutely and even more so relatively to theincreased industrial output. . . . The conclusion is inescapable that,in that last period of industrialization under a prerevolution-ary government, the significance of the state was very greatly

2 This article focuses on the implications of competitive shifts for the industry follower, a perspective relevant forthe Japanese case. While there are innumerable sources of domestic structural change in Japan—including demographicgenerational change and foreign political pressure—this article concentrates on domestic changes that flow frominternational competition. Work in progress addresses the implications of the closing competitive gap for an industryleader, specifically the U.S.


reduced. . . . Russian industry had reached a stage where it couldthrow away the crutches of government support and begin to walkindependently. (Gerschenkron, 1962:22)

In short, some of the institutional and organizational arrangements created duringthe catch-up phase of industrialization “disappear after they have fulfilled theirmission” (Gerschenkron, 1962:139).

In sum, if the competitive gap between an industrial leader and a follower helpsgenerate structural differentiation in their political economies, then the closing ofthat gap can also be expected to have domestic structural consequences. For thesuccessful follower, institutional arrangements for catch-up become less effectiveand even dysfunctional. In particular, in order to promote the innovation andentrepreneurship necessary for pioneering technology, heavy-handed governmentintervention is rolled back.

Our case studies of Japan’s national R&D projects and the political economy ofJapan’s computer and semiconductor industry at large should manifest thesedomestic imperatives of changes in relative competitiveness. Over the past fourdecades the Japanese industry has made the dramatic transition from a “pursuerafter the pioneer” to a “follower at the frontier.” In the 1950s U.S. companies, thepreeminent international leaders, enjoyed four- to five-year lead times over Japa-nese competitors in the introduction of computer and semiconductor products.However, by 1978 in the case of semiconductors and 1983 in the case of computers,those U.S. lead times had literally vanished. By 1987, the U.S. Department ofDefense reported that with respect to twenty-four major categories of semiconductortechnology, the Japanese held the lead in twelve, there was U.S.-Japanese parity ineight other categories, and the U.S. enjoyed leadership in only four areas (DefenseScience Board, 1987).

The technological advances of the Japanese have been translated into spectacularcommercial gains in semiconductors. Between 1978 and 1988 the share of the worldsemiconductor market held by U.S. producers declined from almost 60 percent tounder 40 percent, whereas the Japanese share rose from less than 30 percent to justover 50 percent. The competitive gap between Japan and the U.S. has sincere-tightened, with the U.S. holding a two-percentage-point lead in 1995 (40.9% vs.38.9%); still, there can be no doubt about the arrival of the Japanese at the industrialfrontier (Semiconductor Industry Association, 1996).

Such Japanese semiconductor inroads have begun to be replicated in computermarkets. By 1996 Japanese manufacturers held the number-one position globallyin laptop computers (Toshiba); third position in the U.S. personal computermarket, including the top spot in the home PC market (NEC/Packard Bell); andover a 90 percent world market share in flat panel displays (led by Sharp). In 1996a Japanese supercomputer maker (NEC) received its first order from a U.S. federalagency, and according to Fortune Magazine (1996), the Japanese threaten to captureup to 50 percent of the U.S. PC market by the year 2001.

From the perspective of the relative competitiveness framework, this dramaticcompetitive transformation should alter the political economy of computers andmicroelectronics in Japan. Institutional arrangements put into place for a pursuertrying to catch up to a pioneer should be transformed by the very differentimperatives of a “follower at the frontier.” Such transformations should be reflectedin our case studies of MITI research projects.

3 As illustrated by the maxims “birds of a feather flock together” and “opposites attract,” common sense does notenjoy internal validity. Using common sense to anticipate Japanese behavior may be particularly problematic.

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That the Japanese political economy should change along with the competitive-ness of its industry may appear utterly unsurprising and assuredly common sensical.But besides classic warnings against common sense guidance for scientific inquiry,3it is important to recognize that three prominent bodies of literature would not infact anticipate significant changes in Japanese domestic structures.

First, the macrocomparative work on domestic structures points to continuity andstasis rather than change and dynamism in political economies. The historicalgrounding of political and economic institutions and their persistence over time areemphasized (Katzenstein, 1978a; Krasner, 1984; Krasner, 1988). Structural attrib-utes are said to be the products of rare defining moments, usually wars or economiccrises. Precedent-setting episodes in Japanese history, for instance, are commonlyidentified as the Meiji Restoration of 1868 and, to a lesser extent, the postwaroccupation. The domestic structures that emerge from such episodes impinge uponpolitical and economic affairs long after they were originally cast, and serve as potentobstacles to subsequent deviation and evolution. Save another extraordinary na-tional crisis, structural characteristics of political economies are, by definition,resistant to dynamic change.

In Japanese studies, two other bodies of literature would not envision the typesof structural change anticipated by the relative competitiveness argument. Interest-ingly, while these two schools of thought—the strong-state interpretation of Japanand their critics—intensely disagree over the nature of the Japanese polity generally,their analyses converge when it comes to the political economy of high technology.4They also share the second-image view that Japanese economic performance isrooted in distinctive domestic structures.

The strong-state argument highlights such embedded characteristics of theJapanese state as its institutional centralization, relative autonomy from societalpressures, and vast array of interventionist policy instruments (Johnson, 1982;Pempel, 1978). With respect to the Ministry of International Trade and Industry,the sponsor of our case studies of government research projects, strong-stateattributes are said to be particularly evident. This literature spotlights MITI’sexpansive authority over industrial and technology policy, the esprit de corps of itselite bureaucrats that enhances their insulation from political pressures, and thevast array of its industry-specific policy tools with which to purposefully andselectively target Japanese industries.

It is important to point out that updates in this literature emphasize the continuedpersistence of such statist characteristics as well as other embedded structures inJapan’s political economy (Gerlach, 1992a, 1992b; Johnson, 1995; Van Wolferen,1993). Moreover, news reports out of Japan have carried headlines such as “Reform?Ministry Officials Unfazed,” “Ministry ‘Twists Arms’ Behind Scenes,” “How Old-Line Pols Squelched Great Political Revolt of ’93,” and “Return of Japan’s OldGuard” (Asahi Shimbun, 1996a, 1996b; Wall Street Journal, 1996; Washington Post,1997). By pointing out enduring features of the Japanese political economy, suchreports reinforce the expectations of macrocomparative structural analyses as wellas the strong-state thesis.

With respect to MITI research projects in particular, the ministry’s considerableleverage has been particularly emphasized by the strong-state school. The powerfulinfluence of the Japanese state is said to be especially applicable to high-technologysectors such as computers and semiconductors (Anchordoguy, 1989; Borrus et al.,1983). The Japanese government has targeted the information electronics sector askey to the country’s continued economic well-being, and computers and microelec-tronics lie at the core of the much-cited MITI “visions” of the future. With the

4 Portions of this section build upon Fong, 1990.


Japanese government doing its “utmost” to promote advanced electronics (Yama-mura, 1986:48), some observers have concluded that this sector has literally“emerged from the drawing boards of Japan’s economic planners” (Kaplan,1972:48). Expectations are that the state’s role in this sector will only become “evenmore activist” (Yamamura, 1986:204).

The designation of Japan as an exemplar of state strength is, of course, a matterof intense scholarly debate. But significantly, even critics of the strong-state thesis asit applies generally to Japan acknowledge the primacy of the Japanese state in arenasof high technology. Hence, while stressing both private as well as public sources ofJapan’s technological achievements, Peck (1975:572) points to the Japanese com-puter industry as an “exception” exhibiting “the most extensive government in-volvement in a particular industry.” Lincoln (1984:36), who makes the overallargument that Japan’s industrial policies have been rolled back since the 1950s and1960s, agrees that the computer industry may be “a prime example of an industrythat may actually owe some of its success to the existence of government policy.”

While highlighting private-sector contributions to Japan’s industrial achieve-ments, Levy and Samuels (1989:60) concede that “the success of Japan’s [computer]hardware manufacturers derives from a number of factors, notably a range ofsupportive public policies.” Similarly, while developing the larger position thatJapan is closer to an industry-led than a state-led economy, Calder (1993:20, 247)argues that in cases such as computers and semiconductors, MITI has a “free reinto order an industrial sector’s development and to hone its international competi-tiveness,” and is able to “clearly achieve strategic results, with little need to strugglein achieving desired outcomes.”

Moreover, critics join advocates of the strong-state argument in pointing to MITIresearch programs in particular as constituting the “main thrust” of current Japa-nese targeting efforts in semiconductors and computers (U.S. International TradeCommission, 1983:148). Hence, Patrick (1986:xvii–xix)—a leading proponent ofthe antistatist market-based approach to explaining Japan’s economic “mir-acle”—while noting the dismantling of traditional instruments of Japanese indus-trial policy (e.g., tariffs, foreign exchange controls, licensing restrictions), arguesthat “the government will focus its sector-specific policies and resources increasinglyon organizing and coordinating large-scale, long-term, high-risk joint genericresearch projects.” And Okimoto (1983:39), whose “societal state” conceptionrepresents one of the major critiques of the strong-state thesis, nevertheless con-cludes that “where microelectronics research is concerned, MITI is firmly incommand.”

In sum, and in contrast to the relative competitiveness framework, critics as wellas advocates of the strong-state thesis in Japanese studies join macrocomparativework on domestic structures in highlighting the persistence, if not intensification,of a powerful Japanese state with commanding influence over Japanese high-tech-nology industry.

MITI Research Projects and Domestic Structures

Our nine case studies provide unique insight into fundamental aspects of Japaneseindustrial policy and domestic structures:

• In 1962 Fujitsu, Oki, and NEC were brought together in the $2 million,26-month FONTAC Project. MITI thus pioneered the multifirm cooperativeR&D model, which it has since further developed.

• MITI launched its first “national,” “large-scale” research effort with the $64.5million High-Speed Computer Project in 1966. NEC’s strengths in memory

GLENN R. FONG 345

devices today can be traced back to the firm’s specialization in such devices inthis program (Fransman, 1990:32).

• To overhaul the country’s computer industry, MITI launched the massive $455million New Series Project in 1972. As a result of the program, Japanesemanufacturers were able for the first time to field a full product line includinghead-on competition for IBM’s larger mainframes.

• In 1976 MITI initiated a $360 million program to develop very large scaleintegration (VLSI) technology for the next generation of computer systems. TheVLSI Project produced over 1000 patents and has been singled out by U.S. sourcesas providing the underpinning for Japan’s export drive into the U.S. semicon-ductor market (Semiconductor Industry Association, 1983:21–23; U.S. Inter-national Trade Commission, 1983:15, 149).

• The $104.5 million Supercomputer Project was established in 1981 to propelcomputer processing speeds 100 to 1000 times faster than conventional com-puters. Breakthroughs were sought in high-speed semiconductor devices usingnon-silicon technologies,5 and in parallel processing systems allowing for thesimultaneous execution of programs.

• Also established in 1981, the $300 million Future Electron Device (FED) efforthas sought advances in six areas of advanced semiconductor technology:radiation-hardened, superlattice, three-dimensional, bioelectronic, supercon-ducting electron, and quantum functional devices.

• In 1982 MITI inaugurated the $700 million Fifth Generation ComputerSystems (FGCS) Project to catapult the Japanese into the next generation ofcomputing. The project produced computer systems with logical reasoning,problem-solving, and inference capabilities “at the level of, or ahead of, theU.S.” (Denicoff, 1987:4).

• The $172 million SIGMA Project was established in 1985 to advance Japan’ssoftware capabilities. The project sought to develop computer programs thatwould automate 80 percent of the software development process and cutprogramming time by 75 percent. The program also sought to design astandardized computer operating system that would allow SIGMA softwaredevelopment tools to be run on machines made by different manufacturers.

• MITI’s most recent computer initiative is the $700 million, 10-year Real WorldComputing (RWC) Program. Established in 1992, RWC’s aim is to develop the“sixth generation computer” with brain-like, human-like information process-ing characteristics including intuitive, optimization, learning, and adaptivecapabilities.

With regard to industrial policy, and as alluded to above, national R&Dprojects have become central among the policy instruments at the disposal ofthe government to influence the direction of Japan’s industrial and technologicaldevelopment. The nine case studies provide unique windows on a potent gov-ernment ministry targeting strategic sectors of the late twentieth century andinto the next.

With regard to domestic structure, our case studies can also provide remarkableinsight. Generally, the array and types of policy instruments at the disposal of a stateare rooted in domestic structures (Katzenstein, 1978a:297–98, 303, 308). R&Dprojects in particular reflect the institutional capacities of the state, and the rela-tionship between state and society. These national initiatives place rigorous de-mands upon government capabilities by calling for technological forecasting and

5 To date, silicon has served as the predominant substrate material for semiconductors.


concerted long-range planning, the marshaling of public and private resources andexpertise, and the management of powerful industry participants. The responsesto such demands should exhibit the extent and limits of state intervention andgovernment-industry collaboration.

In analyzing our cases, we isolate three specific attributes of the MITI researchprojects that carry structural implications:

• Programmatic initiative: MITI’s ability to strategically and autonomously formu-late policy initiatives including R&D projects

• Technology targeting: the ministry’s ability to “target” specific technologies forstate support

• Industry targeting: MITI’s capacity to selectively “pick” favored corporate “win-ners” for participation in its research projects

Each of these attributes raises issues of domestic structure: can MITI engage inautonomous, strategic behavior in launching national research projects? Or, in-stead, are technology initiatives products of industry pressure or nonstrategicconsiderations? Can MITI pinpoint technologies for targeting? Or, in contrast, dothe initiatives reflect unfocused technology agendas? And can MITI selectivelyanoint corporate participants to the exclusion of others? Or, to the contrary, isproject participation more open ended?

Along these lines, case-specific details carry direct implications for domesticstructure. Moreover, care will be given to identify behavioral patterns or seculartrends manifested by the cases. If “routinized procedures” and “patterns ofbehavior” can be established, then the structural nature of our findings arereinforced.6 Finally, it is along these three behavioral dimensions that we cantrack a set of key structural changes anticipated by the relative competitivenessframework.

Programmatic Initiative

Reflecting mainstream perspectives, a recent analyst of MITI research programsobserves:

In Japan, there is a methodological system for aligning R&Dprojects with strategic policy and for evaluating and selectingtechnology themes. . . . [There is] a well-developed hierarchy forpolicymaking, with national institutions defining general prioritiesand industry filling in the details. (Hane, 1993–94:57–58)

A foremost specialist elaborates how MITI in particular

takes vigorous initiative in organizing and administering jointresearch projects. . . . Extremely significant . . . in these MITI-initiated joint research projects is that the MITI officials . . . oftenexert leadership quite openly. . . . [I]t is not an overstatement toobserve that the MITI officials are exhibiting a strong sense of“mission” and unusual zeal in promoting joint R&D activities.(Yamamura, 1986:193, 195)

6 Institutions and structures are variously referred to as “routinized procedures” and “patterns of behavior” (Krasner,1988:73).

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While certain of our earlier case studies do, in fact, conform to these orthodoxconceptions, the more recent MITI research projects do not. The initiative for theprojects has shifted away from a sole bureaucratic preserve and toward more privatesector concerns. And within MITI, programmatic motivations have less to do withstrategic considerations of national industrial development than nonstrategic,technical, and incremental bureaucratic concerns. Such changes are consistent withthe expectations of the relative competitiveness argument.

Prior to the mid-1970s MITI technology efforts were indeed initiated in central-ized, hierarchical top-down fashion. MITI’s very first R&D subsidies to the computerindustry grew out of high-level government deliberations and directives in 1957.MITI worked closely with the leadership of the ruling Liberal Democratic Party forDiet passage of the Electronics Industry Act of 1957. The act organized MITI toformulate computer industrial policy and authorized the ministry’s first direct R&Dsubsidies to computer manufacturers.

Subsequent Diet legislation, the 1961 Engineering Research Association Law,authorized MITI funding for groups of companies engaged in cooperative R&D.Subsequently, MITI launched the 1962 FONTAC Project bringing together Fujitsu,Oki, and NEC.

High-level concerns also led to the High-Speed Computer Project. The 1964introduction of IBM’s System 360 and General Electric’s acquisition of MachinesBull (France’s largest computer manufacturer) triggered grave concern and high-level discussions between MITI, the LDP, the Keidanren (Japan’s foremost nationalbusiness peak association), and the financial community. By 1966 consensusemerged that development of the computer industry was of highest priority andcritical to Japan’s economic future.

In 1966 MITI called upon its Electronics Industry Deliberation Council (a keyconsultative link between the bureaucracy and industry) to develop a systematicstrategy for the further development of the industry. Part of the strategy announcedin March 1966 included the quadrupling of MITI’s R&D budget for computers andthe launching of a series of “large-scale” R&D projects. Among our nine major casestudies, the 1981 Supercomputer Project was implemented under the “large-scale”banner. But the very first such project was the 1966 High-Speed Computer Project.High-Speed Computers was budgeted at $64.5 million compared to the $2 millionFONTAC effort.

The New Series Project had similarly high level origins being “initiated solely byMITI” (Doane, 1984:159). In early 1970 IBM shocked the computing world andthreatened to undermine the competitiveness of other manufacturers, domestic aswell as foreign, with the introduction of its System 370. General Electric droppedout of the mainframe business in April 1970; RCA followed suit in September 1971.Japanese manufacturers may have been next, especially in light of the 1971Japanese commitment to liberalize its domestic computer market by the end of1975.

To rescue the domestic industry, MITI devised the 1971 Law for ProvisionalMeasures to Promote Specific Electronics and Machinery Industries. This legislationallowed for corporate mergers and called for expanded subsidies and low-interestloans for computer research. The 1971 law was implemented a year later with thelaunching of New Series.

With the Very Large Scale Integration Project in 1976 we have the beginnings ofvery different dynamics in MITI project origins. In fact, both high-level speculationof another competition-busting IBM product breakthrough and the imminent tradeliberalization in computers motivated MITI to launch the VLSI Project. But themanufacturers themselves also shared concerns about foreign developments. Andthe industry, just reeling from the 1974–75 recession, looked to their governmentfor support, both financial and technological (Interview materials).


In this setting, a proposal for the VLSI Project was put forward in October 1975by a subcommittee of the Japan Electronics Industry Development Association, acomputer manufacturer trade association. The subcommittee included forty-onemembers from three government bodies (MITI’s Machinery and InformationIndustries Bureau, its Electrotechnical Laboratory, and Nippon Telephone andTelegraph);7 six companies (Fujitsu, Hitachi, Matsushita, Mitsubishi, NEC, andToshiba); and two universities (Tohoku University and University of Tokyo). Thiscommittee outlined the project’s technological agenda and proposed major areasfor research including large-scale integration and lithography (Sigurdson, 1989:40–44). In contrast to the classic picture of MITI acting as an industrial vanguard,the VLSI Project should best be seen as a product of the convergence of governmentand industry interests. While the FONTAC, High-Speed Computer, and New Seriesprojects were solely government-initiated, the same cannot be said for VLSI.

If the VLSI Project was not solely the creation of high-level government directives,then the Future Electron Device, Supercomputer, Fifth Generation Computer,SIGMA, and Real World Computing efforts also do not fit the classic mold giventheir incremental, lower-level bureaucratic origins. On the one hand, it may appearthat MITI is still taking the initiative in these cases in accordance with mainstreamexpectations. On the other hand, and more precisely, its motivations have becomeless strategic than inwardly bureaucratic.

Future Electron Devices grew out of relatively low level 1977 discussions in theResearch Department within the Agency for Industrial Science and Technology(AIST), MITI’s research and development arm (Fransman, 1990:177–79). Unlikethe high-level national concern and debate that led to the launchings of FONTAC,High-Speed Computers, New Series, and VLSI, the AIST deliberations were largelyincremental bureaucratic efforts to devise a follow-up to the successful VLSI Project.

FED’s incrementalist origins have been matched by its incremental “missioncreep” over time. The program was originally slated to end in 1990, but new,ten-year projects were added in 1986, 1988, and 1991 in bioelectronic, supercon-ducting electron, and quantum functional devices, respectively.

Bureaucratic rather than strategic motivations also manifested themselves in thedeliberations that led to the Supercomputer Project. The origins of this effort canbe found within the technical staff of MITI’s Electrotechnical Laboratory (ETL).Guided by pure technical considerations, ETL staff sought to develop galliumarsenide– and Josephson Junction–based semiconductor devices that offer superiorspeed and lower temperature advantages over silicon devices (Fransman,1990:147–150). Outside of ETL, MITI’s strategic industrial policy types disassoci-ated themselves from the technology-driven Supercomputer Project (Interviewmaterials).

The Fifth Generation Computer Systems Project illustrates how even one of thenation’s most prized government initiatives can have very obscure origins. Threeyears of low-level bureaucratic planning and technical debate were led by fourindividuals: Kiyonori Konishi, a fifth and lowest-echelon MITI bureaucrat;8 Dr.Tohru Moto-oka, Professor of Electrical Engineering, Tokyo University; Dr. Hideo

7 The Machinery and Information Industries Bureau is one of three vertical bureaus within MITI responsible fordeveloping industrial and trade policies for specific industrial sectors; in this case, high-technology and machineryindustries. The Electrotechnical Laboratory is the largest of sixteen in-house research laboratories operated by MITI,and focuses on computer and semiconductor research. Prior to its privatization in 1985, Nippon Telephone andTelegraph was the government’s telecommunications monopoly.

8 Specifically, a staff member in the Electronics Policy Division of the Machinery and Information Industries Bureau.The five levels of the MITI hierarchy are minister, vice minister, bureau chief, division head, and division staff. TheElectronics Policy Division is one of eleven divisions within the Machinery and Information Industries Bureau, and isresponsible for the computer and semiconductor industry.

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Aiso, Professor of Electrical Engineering, Keio University; and Dr. Kazuhiro Fuchi,a fourth-level official in MITI’s Electrotechnical Laboratory.9 Konishi, who initiatedthe planning process in 1978, wasn’t even career MITI. Instead, he was on loanfrom Nippon Telephone & Telegraph, participating in a one-year exchange pro-gram between the ministry and the telecommunications giant (Interview materials).

To sketch out the outlines of the Fifth Generation Project, Moto-oka, Aiso, andFuchi formed a Japan Information Processing Development Center (JIPDEC)10

study group consisting of 120 government, industry, and university representatives.This JIPDEC committee ended up resolving a crucial dispute between two majorvisions of a next-generation computer and therefore two visions of the governmentproject itself. While Aiso pushed for a highly distributed system of workstationsnetworked with a large-scale multi-processor computing system, Fuchi championedan integrated knowledge processing system that could make parallel inferencesbased on a logic programming language. After intense debate the JIPDEC groupsided with the Fuchi approach, and Fuchi became FGCS’s first project director (Aiso,1988:160–65; Fuchi, 1992:22; Interview materials). FGCS emerged, then, from theefforts of a government technologist, two professors, and a low-level bureaucratictemp.

In “marked contrast” to its well-publicized predecessors, the Real World Com-puting Program “has had a relatively low public profile” (Stanford U.S.-JapanTechnology Management Center, n.d.). Such a low profile is due, in large part, tothe program’s lower-level bureaucratic origins. First, in 1989, with the Supercom-puter and Fifth Generation projects winding down, researchers in MITI’s Electro-technical Laboratory went into gear putting together a “sixth generation computerproject.” ETL was particularly interested in carrying on the work of the Supercom-puter Project. The “massively parallel systems” component of RWC provides aprogrammatic home for sixty ETL researchers who are continuing their work onthe earlier project’s 128-processor system known as SIGMA-1 (Kahaner Reports, Nov.11, 1991).11 While technologically ambitious, RWC is, then, programmatically anincremental off-shoot of its two immediate predecessors.

Second, Real World Computing served as a “budgetary placeholder” to maintainfunding commitments extracted from the government’s budgetary authority, theMinistry of Finance (Interview materials). It is not by coincidence that the $700million Fifth Generation Project was succeeded by another $700 million effort.Bureaucratic inertia and budgetary turf protection more than any strategic calcula-tion of national interest are at play here.

Third, RWC emerged out of an open planning process even more accessible thanthe FGCS case. At the center of this process was a 100-member Feasibility StudyCommittee established in March 1989. This committee met over a two-year periodand included not just specialists in computer science and electrical engineering butalso researchers in such disparate fields as neuro-physiology, cognitive science,economics, and philosophy. The committee held four open forums and incorpo-rated the advice of not just Japanese industrial experts and academics but alsoforeign researchers from twenty-seven institutions and ten countries (KahanerReports, Nov. 11, 1991; Jan. 30, 1992).

9 Specifically, Chief of the Speech Processing and Machine Inference Sections in ETL’s Information SciencesDivision. The five levels of the ETL hierarchy are director-general, deputy director-general, division director, sectionchief, and section staff. The Information Sciences Division is one of fourteen ETL divisions. There are four sections inthis division including the Speech Processing and Machine Inference Sections.

10 JIPDEC is a quasi-governmental, quasi–private sector organization established in 1967 to promote Japaneseinformation processing.

11 The SIGMA-1 supercomputer is to be distinguished from the software-oriented SIGMA project.


All through this process high-level MITI officials were more in an “informationgathering” than a proactive mode. For instance, when asked whether RWC parallelsystems would build upon more than neural networks—a fundamental issue at thecore of different visions of the “sixth generation computer”—the Director of ETL’sIntelligent Systems Division responded with a “who knows” expression, and ETL’sChief Scientist for Computer Architecture replied with a “I hope so” (KahanerReports, Dec. 26, 1990).

Finally, the SIGMA Project was the product of both lower-level bureaucraticinitiatives and industry pressures. To begin with, SIGMA is a direct descendent ofa series of unsuccessful MITI software initiatives that stretch back to the mid-1960s:the Japan Software Company (1967–72), the Software Module Project (1973–75),the Software Production Technology Development Program (1976–81), and theSoftware Maintenance Engineering Facility Project (1981–85). Displaying an “if atfirst you don’t succeed” persistence, MITI would answer the failure of one effortwith the launching of another. SIGMA was the fifth such iteration. In this way SIGMAcan be seen as an incremental response to the failure of its immediate predecessor,just as the Future Electron Device and Real World Computing programs can be seenas riding on the coat-tails of their respective forerunners. In all three cases lower-level MITI bureaucrats championed their respective agendas without top-down,higher-level direction.

In conjunction with bureaucratic trial-and-error, important industry forcesforged the SIGMA Project. Small Japanese software houses, particularly throughtheir Information Processing Promotion Association (IPA) and the Joint SystemDevelopment Corporation (JSDC),12 pressured MITI for software developmentsupport. While many of the larger computer makers did not take a direct role inSIGMA’s formulation, IPA and JSDC planning committees played key roles inproposing and designing the initiative (Interview materials).

To summarize these case results, Figure 1 illustrates the shift that has taken placein MITI project origins. These findings reveal a subtle yet significant trend. On theone hand, MITI research projects were once the product of high-level ministerialdirectives, crafted as components of grand “visions” of the future, carrying outnational, political mandates for advancing the global position of Japanese technol-ogy and industry. The experiences of FONTAC, High-Speed Computers, NewSeries, and partially VLSI fit such a mold.

On the other hand, more recent MITI research projects have emerged from morediffuse and incremental processes.13 Initiatives have come from industry as well asgovernment, and within the government, lower levels of the bureaucracy. The VLSI,Future Electron Device, Supercomputer, Fifth Generation Computer, SIGMA, andReal World Computing cases evidence how champions of national R&D efforts cannow be industrial engineers or lower-level bureaucratic officials.

The dissipation of the commanding role and control of high-level governmentofficials reflects dynamics of Japan as a “follower at the frontier.” High-levelofficials now have greater difficulty keeping tabs on technology, and have cededinitiative to a more dispersed set of players in closer touch with technologicaldevelopments. As natural as this development might appear, such findings areimportant correctives to our interpretations of the Japanese state and politicaleconomy.

12 IPA is a quasi-governmental organization established by MITI in 1970 to promote small independent softwarehouses. JSDC is a joint venture of seventeen software houses established in 1976 to coordinate software development.

13 The diffused and incremental nature of the policy-making processes is similar to Campbell’s (1992) “inertial”model of Japanese policy change and Nelson’s (1993) framework incorporating firms and industrial research laborato-ries into the Japanese “national innovation system.”

GLENN R. FONG 351

Technology Targeting

A noted scholar has observed that, with respect to government research projects,MITI officials “are playing a much more visible, as well as important, role indetermining the research agendas than they ever did in promoting the technologi-cal capabilities of the major industries during the rapid growth period” (Yamamura,1986:195).14 And an analyst who has conducted a careful examination of JapaneseR&D projects reports that MITI has “played an important role in specifying thegoals to be met [and] selecting and organizing qualified participants. . . . Participat-ing companies were assigned a specific task by the government ‘sponsor’ ” (Doane,1984:138–39).

Such direct, if not surgical, government targeting of specific technologies andfirms is directly tied to domestic structures. The interventionist capability of a stateis enhanced if it can turn to such precise and immediate forms of intervention,compared to less selective or diffuse policy instruments such as macroeconomicpolicy changes or general science and education policies. The availability of suchintrusive policy instruments also reflects a sufficiently amenable government-

High-levelgovernment

initiative

Lower-levelbureaucratic

origins

Industrysources

High-SpeedComputer

Real WorldComputing

Fifth GenerationComputer

Future ElectronDevices

FONTAC

New Series

VLSI

Supercomputer

SIGMA

FIG. 1. Programmatic Initiative

14 Yamamura refers to 1945–1973 as Japan’s rapid growth period.


business relationship. Such instruments are constrained under conditions of moreadversarial state-industry relations.

To examine the intrusiveness of MITI research projects, in this section we lookat MITI’s targeting of specific technologies. The targeting of selected firms for R&Dsupport is addressed in the next section. In both instances the cases evidencestructural change along the lines anticipated by the relative competitiveness frame-work.

The degree to which MITI has targeted specific technologies in its nationalresearch projects can be operationalized in two ways: (1) by classifying the targetedtechnologies according to standard stages of the research and development process,and (2) by identifying the number of competing, alternative technological ap-proaches supported by the ministry.

First, the stages of the R&D process refer to standard distinctions drawn betweenbasic research, applied research, exploratory development, prototype develop-ment, and engineering development.15 Each successive stage is progressively moretargeted and focused in the sense that more specific technologies, processes, andproducts are identified and developed:

• Basic research: original investigations advancing scientific knowledge. Thisresearch may or may not be relevant to or guided by practical or commercialobjectives but does not itself devise or develop products or processes.

• Applied research: scientific investigations guided by and leading toward practicalor commercial applications of knowledge.

• Exploratory development: technical activities concerned with translating scientificknowledge to meet practical or commercial purposes. This work includesassembly of hardware used to test technologies without regard to form factors.

• Prototype development: technical activities concerned with development of proto-types of materials, devices, systems, or processes for experimental and opera-tional testing.

• Engineering development: technical activities concerned with pre-productionengineering of specific materials, devices, systems, or processes.

While research in “earlier” R&D stages, including basic research, may havesignificant practical implications, those implications are more uncertain, morediffuse, less direct, and less immediate than work in later stages of the R&D process.Government projects oriented toward the “latter” stages focus on nearer-termtechnical objectives of more immediate relevance to industry.

Utilizing these distinctions, the FONTAC, High-Speed Computer, and NewSeries projects can be classified as narrowly targeted engineering development and,to a lesser extent, prototype development efforts. These first cases conform tomainstream analyses by highlighting MITI capabilities to “determine researchagendas,” “specify goals,” and target specific technologies for development.

FONTAC sought the immediate development of hardware to directly counterIBM’s popular 1401 small computer. Fujitsu directly incorporated FONTAC tech-nologies into its 230 series computer (Fransman, 1990:30). Similarly, the High-Speed Computer Project sought a direct answer to IBM’s System 360. MITI’sElectrotechnical Laboratory outlined the design of an entire mainframe computerand identified specific memory and logic circuit technologies for development.

15 These stages of the R&D process are derived from distinctions used by the U.S. National Science Foundation andDepartment of Defense. While subsequent references will be made to “earlier” and “latter” R&D stages, utilization ofthis typology does not imply a linear and especially unilinear relationship between the five stages.

GLENN R. FONG 353

Hitachi commercialized its project work in its 8700 model mainframe, and Fujitsuused its work to upgrade its 230 series (Fransman, 1990:32).

The New Series Project also resulted in the development of specific computersystems; sixteen in all. MITI even designated which systems were to be developedby whom: IBM-compatible systems by Fujitsu and Hitachi; General Electric- andHoneywell-based systems by NEC and Toshiba; and specialized industrial systemsby Mitsubishi and Oki. The ministry even specified which product lines would beproduced by which companies. Fujitsu and Hitachi were to develop four large“M-series” mainframes; Fujitsu, the largest and smallest models, and Hitachi, thetwo mid-line models.

In each of these first three cases specific electronic devices and computer systemswere developed for almost immediate commercialization. In contrast, the VLSI,Supercomputer, and SIGMA projects can be classified as broader exploratory andprototype development efforts, while Future Electron Devices, Fifth GenerationComputers, and Real World Computing are closer to applied research.

The VLSI Project avoided direct effort to develop specific products. Its researchon integrated circuit devices, semiconductor manufacturing, and silicon crystalmaterials certainly found their way into the marketplace, but not nearly as quicklyas in the cases of earlier MITI research. Representative of the distance of its workfrom the marketplace was VLSI’s development of 256-kilobit dynamic randomaccess memory (256K DRAM) technology, one of the major priorities of the project.Whereas project research began in April 1976 and ended four years later, Japanesemanufacturers first moved into commercial production of 256K DRAMs only in late1983. More generally, “it took a number of years before its results began feedinginto companies which were members of the VLSI Project” (Fransman, 1990:82–83).

A major objective of the Supercomputer Project was to achieve calculation speeds100 to 1000 times faster than conventional computers. Although these speedobjectives were impressively met by a demonstration system of four parallel proces-sors, the demonstration “was not a prototype of a machine that could be directlycommercialized” (Kahaner Reports, June 28, 1992). A second, much more ambitious128-parallel processor system was developed with a programming language thatwas “only partly a functional language” (Kahaner Reports, July 2, 1990). Conveyingthe project’s exploratory development nature, one expert observed that the initia-tive was “all hardware, no software” (ibid.). A third major thrust of the project wasthe development of gallium arsenide and Josephson Junction circuits to be testedin the supercomputer demonstrations. Few of the former devices and none of thelatter reached the demonstration stage (Kahaner Reports, June 28, 1992).

The “unfinished” as well as long-range nature of the Supercomputer Project’sresearch is reflected in the fact that a major portion of the project’s work has beencarried over into the current Real World Computing Program. Putting the twoprojects together, a full twenty-year effort will be devoted to the advanced systems.

While the SIGMA Project was forged as an effort at prototype development of astandardized software development platform, its results were largely of an explora-tory development character. SIGMA’s original mission called for “the constructionof a prototype system” and a “practical system . . . to be put into widespreadcommercial use beginning in April 1990” (Akima, 1987)—one year after theproject’s conclusion. Such expectations were far from realized when the projectended up producing “only external specifications of the hardware and operatingsystem” (Kahaner Reports, Feb. 29, 1992).

SIGMA work devolved from prototype to exploratory development, whereasthe Future Electron Device and Fifth Generation Computer programs wereexplicitly designed as exploratory development and applied research efforts.The FED Program was launched in 1981 as part of MITI’s larger “Basic Tech-nologies for Future Industries” (BTFI) initiative. Distancing itself from near-


term applied work, BTFI criteria for project selection included “technology whichgenerally requires 10 years or more of research and development risk” (KahanerReports, Feb. 18, 1993). FED research in particular has been “highly uncertain”and “not of great commercial importance within the planning horizon of theparticipating companies” (Fransman, 1990:196). Reflecting an applied researchorientation, much of FED work has involved “a significant conceptual dimen-sion” (Fransman, 1990:182).

With regard to the Fifth Generation effort and its central research organization,the Institute for New Generation Computer Technology (ICOT), U.S. experts haveobserved:

The 5G Project is not trying to produce prototypes for commercialproducts . . . but rather research prototypes. . . . ICOT is not doingshort-term development, with specific low-risk goals, they are do-ing innovative long-term applied research, and they know that thisis high risk, and that a lot of blind alleys will have to be explored.(Goguen and Hewitt, 1987:13)

To draw a contrast with other Japanese and foreign “pre-competitive” govern-ment research projects, ICOT director Kazuhiro Fuchi dubbed his effort “pre-pre-competitive” (Fuchi, 1992:27). Fuchi resisted pressures to identify specific, practicalapplications as guides for FGCS research, arguing that such applications-orientedwork should be left to the private sector. Instead, he stressed the long-term,fundamental nature of FGCS research: “I do not believe that the basic research . .. which we have been working on will be completed within the next five years. . . .There are problems that will not be solved in five years, ten years, or even a hundredyears in some cases” (Fuchi, 1992:28). Near-term technologies of immediate appli-cation in industry were certainly not the target of the FGCS effort.

The Real World Computing Program does the Fifth Generation Project onebetter by extending its research back up the R&D process formally into the basicresearch category. To begin with, RWC officials have repeatedly stressed that“the primary goal of RWC is not to develop a computer but instead to explorebasic technologies that are not yet established” (Kahaner Reports, Jan. 30, 1992,emphasis in original). Underscoring RWC’s basic research thrust is the fact thatone of the four core components of the program is designated as “theory” andis designed to “provide a theoretical foundation for flexible information pro-cessing” and “clarify the theoretical framework of ‘soft logic’ ” (Kahaner Reports,Mar. 9, 1992).

RWC officials are cognizant of the distinctiveness of their effort:

In the 1960s and ’70s, Japan conducted national R&D projects thattargeted the performance of American-made computers. . . . Now,in the 1990s, Japan aims through the RWC Program to originatebasic technologies of the 21st-Century computer and diffuse theseto the rest of the world. (Kahaner Reports, July 19, 1993)

While most of its work falls in the formal category of applied research, RWC is thefirst MITI project to encompass pure basic research.

Figure 2 summarizes the shift that has occurred in the R&D orientations of theMITI technology projects. On the one hand, the shift away from engineeringdevelopment and toward basic research is not surprising. For years now leadingJapanese public and private authorities have announced the need for makingprecisely this transition in government technology policy and industrial R&D. Assummarized by MITI’s 1988 (pp. 15–16) White Paper on Industrial Technology:

GLENN R. FONG 355

“R&D in Japan has made rapid progress chiefly in the application and developmentareas of industry. Now, the nation’s industrial technology R&D programs stand ata turning point, calling for . . . a more aggressive approach to basic and originalresearch.” This shift in R&D priorities reflects, of course, Japan’s transition to a“follower at the frontier.” Having successfully caught up by applying and refiningforeign technology, the country has moved into indigenous technology creation andinnovation.

On the other hand, it is often not recognized that this shift toward basic researchrepresents a dissipation of MITI’s technology targeting capability. The more basicresearch thrusts of more recent MITI projects may be vital to Japan’s long-termtechnology base, but they are less relevant to the short-term needs of Japaneseindustry. MITI’s support for industrial technology has become less focused andmore uncertain, and less direct and immediate for commercialization. Such are theconsequences of becoming a “follower at the frontier.”

Along with the shift of MITI R&D projects toward basic research has been MITI’sfinancing of broader ranges of alternative technologies. As R&D efforts move backtoward basic research, it becomes more difficult to identify the precise technologywith the greatest technical and market potential. Accordingly, instead of selectinga specific technological target, MITI has increasingly moved toward a “shotgun”approach to R&D: funding multiple, competing, and alternative technologies.Table 2 displays this second indicator of MITI’s targeting capacity, the number ofcompeting technological approaches in major research areas pursued in our ninecase studies.

Demonstrating bureaucratic resolve, MITI stipulated the development of singlecomputer architectures in the FONTAC and High-Speed Computer projects. A dual

Basicresearch

Appliedresearch

High-SpeedComputer

Real WorldComputing



FONTAC

New Series

VLSI

Supercomputer

SIGMA

Exploratorydevelopment

Prototypedevelopment

Engineeringdevelopment

Basicresearch

Appliedresearch

High-SpeedComputer

Real WorldComputing



FONTAC

New Series

VLSI

Supercomputer

SIGMA

Exploratorydevelopment

Prototypedevelopment

Engineeringdevelopment

FIG. 2. Technology Targeting: R&D Stages


but still relatively narrow strategy was adopted in the New Series Project with thedevelopment of both IBM and GE-Honeywell architectures. These earlier casesmanifest a more intrusive, interventionist Japanese state as well as closer, if notsymbiotic, relations between government and industry.

The mid-1970s emerge, once again, as a breakpoint. MITI moves from “picking”one or two “winning” technologies to casting wider technological nets across severaland up to over a dozen competing, alternative approaches. To begin with, a shotgunstrategy was put into place in the VLSI Project for work on lithography equipmentfor fine line circuit etching. Not only were all three major lithographic approachespursued—ultraviolet rays, x-rays, and electron beams—but three different electronbeam systems were developed (Interview materials).

In the Future Electron Device Program, six groups of circuits have been devel-oped—radiation-hardened, superlattice, three-dimensional, bioelectronic, super-conducting electron, and quantum functional devices. In addition, alternativesubtypes within each group have been explored. Similarly, in the SupercomputerProject, three different types of gallium arsenide devices along with one JosephsonJunction circuit were investigated. Also, three divergent paths to parallel processingwere researched (Fransman, 1990).

In the Fifth Generation Computer Project, initial plans to survey and identify keynext-generation computing technologies were abandoned; instead, the project waslaunched with only vague outlines of the areas to be developed. These “visions”roughed out desired technical performance levels, but how they were to be achievedwas left open ended (Interview materials). Subsequently, five demonstration systemscompeted to meet the project’s “inferences per second” speed targets. The fiveparallel inference machines differed in terms of their computer architectures,machine instructions, processor connections, device technology, and process tech-nology (Uchida, 1992:43).

On the software side, the programming language used by these machines was farfrom preordained at the outset of the project. Instead, one language would beexplored, its limitations determined, and an off-shoot effort initiated. This trial-and-error process repeated itself at least five times, and along the way ICOT

TABLE 2. Technology Targeting: Number of Approaches

Research Area Approaches

FONTAC mainframe architecture 1High-Speed Computer mainframe architecture 1New Series mainframe architecture 2VLSI lithography 5Supercomputer non-silicon devices 4

parallel processing 3programming languages 2

Future Electron Devices three-dimensional devices 4superlattice devices 4biochips 2

Fifth Generation Computer parallel inference machines 5programming languages 5

SIGMA operating systems 3workstation architectures 13

Real World Computing massively parallel systems 5programming languages 5neural network models 3VLSI neuro-chips 4

GLENN R. FONG 357

“repeatedly created and discarded” alternative programming languages (Uchida,1992:32).

The SIGMA Project ratchets up the technology shotgun approach a couple morenotches. In this case, no less than thirteen different workstation systems, each withits own system architectures, were drawn up to demonstrate software automationtools.

Our extreme case of the “non-picking” of technology winners is the Real WorldComputing Program. RWC has been explicitly designed to “pursue a wide range ofresearch targets” (Kahaner Reports, Jan. 30, 1992). Within each of RWC’s fourresearch areas—theory, massively parallel systems, neural networks, and optoelec-tronics—multiple, alternative, and competing approaches are being pursued. Forinstance, in massively parallel computing, five architecture paradigms and fivedifferent programming languages are being investigated. In neural networks threesystem architectures and four VLSI chip architectures are being explored.

Altogether, forty-two distinct RWC major projects were being carried out atnineteen different sites as of 1994. Additional funding was going to anotherforty-four smaller projects at another forty-two sites. One specialist remarked that“there are enough research topics listed to keep an army of researchers busy fordecades” (Kahaner Reports, Mar. 9, 1992). Moreover, each of eighty-six projectsconstitutes “highly individual research” (ibid.), each being “organizationally equalin relation to one another” (Kahaner Reports, July 19, 1993). Putting it all together,RWC looks less like a coherent, cohesive research effort and more like a “generalumbrella under which a large number of research topics [are being] covered”(Kahaner Reports, Dec. 26, 1990).

The reason MITI has not been more targeted in its RWC research is that it issimply not in a position to do so: “MITI admits that they do not really know theright approach to many of the problems they want to solve, so . . . competitiveapproaches to the same target will be tested by different groups” (Kahaner Reports,Jan. 30, 1992).

In the RWC program, then, the shotgun approach to technology developmenttakes on the added attributes of “shots in the dark.” Intriguingly, MITI officialsmake a geographic analogy to highlight the distinctiveness of RWC’s technologyagenda:

Until the Fifth Generation Computer Project, all the large-scaleprojects established a single, clear development goal at the outset.The research progressed towards this goal directly as in the “Climb-ing Mt. Fuji” metaphor. In contrast, RWC has adopted for itself themetaphor of “Climbing the Eight Peaks,” derived from the moun-tain chain “Eight Peaks” in central Japan. . . . Multiple researchgroups will start in parallel on the basis of their own distinct theoriesand principles to pursue identical goals. (Kahaner Reports, July 19,1993)

MITI’s more recent shotgun approach to technology development may be veryprudent given the uncertainties of more basic research. This approach can also yieldtechnological “hits” if not “bull’s eyes” in terms of commercial payoffs. But in theprocess MITI’s support for any one technology is being spread thin and watereddown. MITI’s ability to “pick winners” in technology terms has dissipated as itsresearch projects have moved closer to basic research and, more generally, as Japanhas moved into the status of a “follower at the frontier.”


Industry Targeting

Besides targeting “winning” technologies, MITI has been credited with picking“winner” companies—i.e., designating specific firms for government favor andlargess; hence references to MITI’s “picking,” “selecting,” “organizing,” ”recruit-ing,” and “mobilizing” participants for its research projects (Doane, 1984:138–39;Hane, 1993–94:58–59).

Quite notably, exclusive industrial targeting by MITI has been acknowledged andindeed elucidated even by critics of the strong-state argument such as Haley,Okimoto, and Samuels. In policy arenas that are certainly not limited to either MITIor technology policy, Haley (1991:167–68) notes that Japanese bureaucrats “expendconsiderable efforts at reducing the number of participants” with which they deal.Okimoto (1989:38–39) considers how MITI’s selective industrial targeting is moti-vated by concerns over “excessive competition” in Japanese industry where “anexcess number of producers possess supply capacities that far exceed demand.”

To reduce the number of domestic producers in computers and microelectronics,MITI not only has encouraged corporate mergers (Anchordoguy, 1989) but hasused its research projects to influence which Japanese firms would become majorplayers in the industry. Samuels, while a prominent critic of the strong-stateinterpretation of Japan, captures the essence of the use of R&D projects as aninstrument of industrial targeting:

Six firms . . . have participated in virtually every MITI-sponsoredventure since the mid-1960s. What is more, they have been the onlyparticipants in these ventures. Prior to the 1980s, efforts to gainadmittance by electronics giants such as Sharp and Sanyo wererebuffed by MITI, which served as the industry’s gatekeeper.(Samuels, 1994:69; emphasis in original)

Given this context, it would be appropriate to use the number of corporateparticipants in MITI research projects as a third indicator of the bureaucracy’sinterventionist capability and relationship with the private sector. More selectivecorporate participation in government projects can be taken as evidence of MITI’scapacity to identify specific firms for government support as well as the capacity todeny such support to other firms. On the other hand, more widespread participationin MITI projects is an indication that the ministry is less able or less willing to targetselected firms for support.

Table 3 displays the number of corporate participants in our nine case studies.The first column lists the number of full-fledged contractors in each MITI project;the second and third columns refer to the number of companies and researchinstitutes that have been affiliated with each effort. With respect to prime contrac-tors, the FONTAC Project starts off with Fujitsu, NEC, and Oki. The High-SpeedComputer and New Series programs add Hitachi, Mitsubishi, and Toshiba. TheVLSI Project drops Oki. The Supercomputer Project reincorporates Oki. The FifthGeneration Computer Project adds Matsushita and Sharp. The SIGMA Projectbrings on Mitsubishi Research Institute and Nippon Telephone & Telegraph. TheFuture Electron Device Program incorporates Matsushita Research Institute, Mit-subishikasei, Sanyo, Sony, and Sumitomo Electric. To these fifteen companies theReal World Computing Program adds another ten contractors.

Over a thirty-year period, then, the number of MITI research contractors hasexpanded from three to twenty-five. This withering of exclusivity in MITI’s industrytargeting is further reinforced when one considers the even greater numbers ofcompanies that have been affiliated with the more recent MITI projects.

GLENN R. FONG 359

Consistent with other findings, MITI’s industrial targeting was at its zenith in itsearlier research projects. Not only were there only three participants in FONTAC,one of them—Fujitsu—was designated for favored treatment, receiving the lion’sshare of project subsidies. Similarly, of the six participants in the High-SpeedComputer Project, Fujitsu, Hitachi, and NEC were “picked” as the strongestcompanies, and received most of the project’s funds. In contrast, the other threemembers of the project—Mitsubishi, Oki, and Toshiba—were consigned to workon peripherals. These latter firms were being “nudged” away from mainframecomputers and toward the less sophisticated end of the industry (Anchordoguy,1989:46–47).

MITI continued to play favorites in the New Series Project. Forty-five percent ofproject subsidies went to the Fujitsu-Hitachi team, 40 percent to the NEC-Toshibapair, and only 15 percent to Mitsubishi and Oki (Anchordoguy, 1989:108). More-over, the first team was favored by MITI in developing large IBM-compatiblemainframes while the other two teams worked on less prominent technologies.

In these first three cases MITI is explicitly attempting to shape the very structureof Japan’s computer industry. By way of selective project participation and skewedfunding, certain firms were “crowned” national champions while others wererelegated to “ladies in waiting.” In this context, and as anticipated by orthodoxanalyses, MITI’s capacity for pinpoint industrial targeting is set in bold relief.

Cracks in this interventionist might emerge, however, after the New SeriesProject. Under the MITI-stipulated New Series division of labor, Fujitsu and Hitachiwere to target different market segments so that their products would not competedirectly against one another. Immediately upon completion of the project in 1976,however, each company introduced new products that competed directly againstthe other’s New Series–sponsored systems (Gresser, 1980:13). By the mid-1970s,MITI’s ability to structure competition in computers was beginning to crumble.16

MITI’s last substantial attempt at selective industrial targeting and restructuringin computers and microelectronics was the VLSI Project. To thin out the ranks ofJapanese manufacturers, MITI excluded Oki Electric—a participant in the minis-

16 On the related theme of MITI’s difficulty in engendering cooperation among its project participants see Fong,1990.

TABLE 3. Industry Targeting

Associated AssociatedResearch Japanese Non-Japanese

Contractors Institutions Institutions Total

FONTAC 3 0 0 3High-Speed Computer 6 0 0 6New Series 6 0 0 6VLSI 5 50 0 55Supercomputer 6 0 0 6Future Electron Devices 13 12 0 25Fifth Generation Computer 8 20 10* 38SIGMA 10 177 5 192Real World Computing 25** 33 4*** 62

*Non-Japanese institutions with FGCS exchange agreements; **includes six members of the Japan Ironand Steel Federation and four non-Japanese research contractors; ***includes joint research agreementwith the U.S. government, does not include four non-Japanese research contractors


try’s first three projects—from the VLSI effort. MITI determined that Oki’s tech-nological and financial weaknesses prevented the company from becoming a majorplayer in the industry (Interview materials).

While MITI was successful in dropping Oki from the VLSI Project, it is importantto point out that the ministry could not prevent the company from becoming a majorsemiconductor producer including in the VLSI market. Oki’s semiconductor high-lights include serving as a producer of the IBM AT chip set and supplier of themicroprocessor for the Tandy 100, the first successful laptop computer. Thecompany has been a second source manufacturer of the Intel microprocessor andhas become a producer of the reduced-instruction-set-computing (RISC) micro-processor. Oki has established major semiconductor production facilities inCalifornia and has entered into licensing agreements with U.S. chip makers forwhich the Japanese company has served as the supplier of chip technology. Thecompany has been an active and early participant in every generation of memorychips from the 16K DRAM through the 64K, 256K, 1-megabit, 4-megabit, 16-mega-bit, and 64-megabit generations. In 1985 Oki was implicated as a culprit in thedumping of memory chips in the U.S. market; hardly what one might expect froma MITI-designated non-player.

Not only has MITI’s attempt to structure Oki out of the mainstream semiconduc-tor business clearly failed, but the ministry has given up altogether in its efforts to“untarget” the firm. MITI has reversed course by including Oki in every one of itsresearch projects since the VLSI effort.

It is not even accurate to say that the VLSI Project targeted only its five formalproject participants. In fact, fifty other companies “worked in close cooperation”with the VLSI project (Sakakibara, 1983:9). These companies were mostly suppliersto the large semiconductor makers, specializing in lithography and testing equip-ment, semiconductor raw materials and chemicals, and semiconductor packaging.These companies were provided with technical specifications directly from VLSIlabs around which they could design their products. They were awarded VLSIsubcontracts that subsidized up to one-fourth of their development costs. Indeed,the upgrading of Japan’s semiconductor supplier industries has been highlightedas a major VLSI Project outcome (Kodama, 1991:88–92; Sigurdson, 1989:68–93).

The trend toward “unselective” industry targeting continued with the FutureElectron Device Program. From five formal contractors in the VLSI Project, corpo-rate participation expands to thirteen in this direct successor program. In addition,twelve other companies are members of the Research and Development Associationfor Future Electron Devices which oversees the effort. These companies have directaccess to the project’s research and results, and include such nontraditional MITIR&D beneficiaries as Seiko Instrument and Sumitomo Metal Mining.

This trend explodes with the SIGMA Project’s ten research contractors and 182other affiliated companies that directly participated in the project’s research. Withthe affiliates, MITI reached out to numerous, smaller software development houses,rather than reserve research assistance for a narrow range of favored firms.

Moreover, SIGMA was the first MITI research project open to foreign participa-tion. Five of the SIGMA affiliates were foreign firms—AT&T, IBM, NCR, Olivetti,and Burroughs—which gained direct access to the project’s work. Any targeting ofdomestic firms is significantly diluted when foreign entities have access to projectresearch and results.

Regarding the Fifth Generation Computer Project, while there were only eightformal members of its Institute for New Generation Computer Technology, in fact,the research of some twenty other Japanese companies, research institutes, anduniversities was sponsored by ICOT. And following the SIGMA precedent, the FifthGeneration effort was open to foreign researchers. ICOT received technical visitsfrom approximately one hundred foreign researchers from some twenty-four

GLENN R. FONG 361

different countries. Included were visits by U.S. computer concerns Alliant Com-puter Systems, Cimflex Teknowledge, and the Microelectronics and ComputerTechnology Corporation. Moreover, ICOT-sponsored research was undertaken bysome ten foreign universities and research institutes—including Stanford Uni-versity and SRI International. ICOT also established formal exchange agree-ments with ten foreign institutes including the Argonne National and LawrenceBerkeley Laboratories. In the summer of 1990 ICOT installed two of its parallelinference machines at Argonne and networked them with systems at ICOT’sTokyo headquarters.

In addition, with the project’s completion in April 1993, MITI launched a“Follow-on Project” with the express purpose of widely disseminating FGCS results.Without precedence, one hundred FGCS computer programs have been releasedas public domain software over the internet. As of July 1996, 25,000 files hadbeen downloaded to over 2200 sites in forty-seven countries. Two-thirds of thesefiles were downloaded outside Japan, and half of those to the U.S. (Uchida,1994:2; Hirose, 1995:9; Research Institute for Advanced Information Technol-ogy, 1996).

Inclusivity rather than exclusivity is further enhanced in the Real World Com-puting Program. The core of RWC work is carried out by twenty contributing“partners”—up from eight FGCS prime contractors. Moreover, one of the RWCpartners is the Japan Iron & Steel Federation which serves as a conduit for theparticipation of Nippon Steel, NKK, Kawasaki Steel, Sumitomo Metals, KobeSteel, and Nisshin Steel. With the inclusion of these steel firms along with RWCpartner Nippon Sheet Glass, MITI has come a long way from narrow selectivityin its research projects. Add thirty-six universities and research institutes thathave received RWC subcontracts, and the number of RWC participants rises tosixty-two.

As in the case of SIGMA and Fifth Generation Computers, RWC’s accessibilityextends to foreign participation. The difference from these earlier programs,however, is that from the very outset the Real World Computing Program wasconceived with foreign participation in mind (Kumano, 1993; Stanford U.S.-JapanTechnology Management Center, n.d.). As raised earlier, input from non-Japaneseresearchers was solicited during the program’s very formulation. One U.S. officialappreciated participating “in what would normally be considered internal discus-sions about a program that is still taking shape” (Kahaner Reports, Dec. 26, 1990).

A full 10 percent of the RWC budget is reserved for non-Japanese participants.Four of the twenty core “partners” and three of the thirty-six subcontractors arenon-Japanese research institutes and universities. Moreover, RWC became the firstMITI project with a formal collaborative research tie with a foreign government. InJanuary 1993 MITI’s Electrotechnical Laboratory and the White House Office ofScience and Technology Policy launched a Joint Optoelectronics Project to supportthe merging of optical and electronic technologies. A formal component of the RWCProgram, the financial backing for this joint effort comes entirely from the Japanesegovernment.

In light of these developments MITI can hardly be accused any longer ofhusbanding its sponsored research for the exclusive benefit of a handful of Japanesefirms. To draw upon yet another analogy, MITI has replaced a precision fishingspear with which it could single out firms literally one by one for a trawling net thatcan take in literally hundreds of firms, some of which are not even native to Japanesewaters.

Paralleling our analysis of MITI’s technology targeting, this more inclusiveapproach to corporate participation in MITI research projects may be a soundstrategy for a “follower at the frontier.” The putting of MITI’s eggs all in one or afew baskets may be imprudent from the standpoint of stimulating innovation. Access


to leading-edge foreign technology and expertise also motivates reciprocal accessto MITI-sponsored research.

Moreover, as Japanese computer and semiconductor producers have moved from“followers” to “pioneers,” MITI is unable and finds it unnecessary to target selectedfirms for exclusive support. Industrial heavyweights are more difficult to excludefrom MITI projects. And the success of scores of Japanese high-tech firms relievesMITI of the burden of having to pick “winners” from a weak field.

What is important to recognize is that MITI support for any one Japanese firmand the exclusive targeting of domestic firms altogether has dissipated in theprocess. These findings provide further substantiation of the relative competitive-ness framework.

Conclusion

The case results evidence the secular decline of MITI’s interventionist capabilityalong three dimensions. First, programmatic initiative for MITI research projectshas shifted from top-down strategic ministerial directives to bottom-up industrypressures and/or lower-level bureaucratic incrementalism. Second, MITI’s technol-ogy targeting has shifted from precision-focused development of commercializabletechnologies toward broad-based support of multiple alternative technologies,many with uncertain commercial payoff. And third, the ministry’s selection of firmsfor support has moved from exclusive targeting of a select few to inclusive supportof broad ranges of firms including non-Japanese firms.

One certainly could not generalize from the placement of one or two case studiesalong any one of the three comparative dimensions. Instead, we have nine casestudies arrayed across three indicators resulting in an n, respectable for caseresearch, of 27.

The earlier MITI research projects—particularly FONTAC, High-Speed Com-puters, and New Series—do, in fact, conform with mainstream domestic structures-based analyses. In these cases, MITI played the vanguard role in launchinghigh-priority national initiatives, identifying key technological objectives, and selec-tively anointing firms as national champions.

Such top-heavy, heavy-handed features are also consistent with the relativecompetitiveness argument. From the 1950s through the early 1970s, MITI-spon-sored research manifested the needs of an industrial follower trying to catch up withforeign pioneers. Playing out a central Gerschenkronian tenet, as long as theJapanese computer and semiconductor industry was in the “follower” mode, intru-sive government intervention and proactive state direction were in order.

In contrast, the six more recent MITI projects—VLSI, Supercomputers, FutureElectron Devices, Fifth Generation Computers, SIGMA, and Real World Comput-ing—display the very different attributes of a “follower at the frontier.” With theascension of Japanese firms to the forefront of technology and global markets,MITI’s need and capacity to identify key technologies and to limit corporateparticipation in its research projects has diminished. Indeed, government intrusive-ness can become counterproductive for the pioneering of new technologies. Hence,MITI research projects have increasingly emerged from technical and industrialcircles rather than from high-level political, strategic, or national decrees. Ashighlighted by the relative competitiveness framework, the competitive transforma-tion of Japan’s computer and semiconductor industry has also transformed Japa-nese industrial policy.

These case results provide penetrating windows on the Japanese political econ-omy and its future. In the first instance, MITI research projects serve as microcosmsof the broader political economy of computers and microelectronics in Japan. Thatbroader picture, to be sure, includes continued efforts on the part of the Japanese

GLENN R. FONG 363

state to advance the technological and industrial base of the Japanese economy.Indeed, in July 1996, the Japanese government made the remarkable commitmentto double its R&D expenditures by the year 2000 (Government of Japan, 1996). Butthe case results highlight the limits of government intervention and state-industrycollaboration in Japan. While the efforts of the Japanese state to push technologydevelopment are not abating, international concerns may be tempered by a keenerappreciation of the qualified nature of the government’s efforts.

Second, if MITI research projects reflect broader features of the political econ-omy of computers and microelectronics, the latter may also be indicative of thebroader national political economy of Japan. Computers and semiconductors are“leading sectors” that can set the tone for government industrial policies across theboard and for the overall relationship between public and private sectors (Kurth,1979). To gain a grasp of trends in MITI research projects, then, is to be offered aglimpse of the future for the entire Japanese political economy. With respect to thatfuture, two respected analysts have underscored the importance of Japan’s interna-tional setting:

To understand how Japan is changing, and where it appears to beheaded, requires an analysis not only of its domestic institutionsand processes but also, equally important, of the changing inter-national environment within which Japan’s political economy func-tions. Perhaps the strongest impetus for change in Japan comesnot from within, but from the impingement of international devel-opments. (Okimoto and Inoguchi, 1988:8)

In particular, our case research illustrates how shifts in the competitive balancebetween nations can induce changes in government policies, state institutions, andgovernment-industry relations. The relationship between international competitionand domestic political economy is therefore a two-way street. While orthodoxanalyses have highlighted how trends in global competition are determined by thedomestic political-economic characteristics of the competitors, the causal arrowsalso run in the opposite direction. Domestic structures can be restructured andreorganized as a nation’s competitive position and the competitive balance betweennations shift over time.

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