Japan's former deficiency in semiconductor technology
led MITI to organize an effort to reduce the gap:
“Japan began attempting to promote the semiconductor
industry through subsidized and government-encouraged
collaborative research, especially the famous very
large scale integration program.”15 This project arranged
for disparate firms to work together for maximum efficiency
by not duplicating each others' efforts, provided
heavy protection from competition from outside firms,
and took advantage of “the openness of the U.S. semiconductor
industry to foreign investment” to introduce
exogenous sources of technology.16 As a result, Japan
reached a level equivalent to or beyond that of the U.S.
By 1987, the U.S. Department of Defense found that
Japan held the lead in twelve of 24 major categories of
semiconductor technology, with a 50% share of the
world market, up from 30% a decade earlier.17
Since then, however, the Japanese edge in semiconductors
has declined, raising questions concerning the
appropriateness of continued MITI involvement. This
involvement has accordingly fallen off: “Japanese semiconductor
makers [are] able to achieve, even at best, a
20% profit rate on their sales,” while the industry
standard is around 35%.18 Furthermore, “Japan's R&D
projects display a decline in the government's interventionist
capabilities as the country's computer and semiconductor
industry dramatically moves from industry
follower to technological pioneer.”19 Only time may tell if
this step will lead to a rebound in the semiconductor
industry.
Patent Mischief
By gathering multiple groups in the semiconductor
field and encouraging cooperation, MITI temporarily
hastened progress by reducing the inefficiencies inherent
in redundant research. Yet in the long run, this strategy
proved to reduce innovation. Because each firm's breakthroughs
were instantly accessible to its competitors, the
incentives to create additional such breakthroughs
diminished, harming the enterprise in the long term.
The problem of protecting innovation is not new, and
has long been resolved via patents and other intellectual
property protections that give the inventor of a new scientific
process exclusive rights to use or license it for a
fixed period of time. There is an inherent tradeoff in any
patent system between the short-term gains due to wide
availability of technology and the long-term gains due
to innovation that accrue from strong intellectual property
rights; the longer the time period, the more longterm
innovation, but also the more short-term inefficiency.
To a much greater extent than the U.S. and most
other industrialized countries, Japan has systematically
favored the former objective, preferring to avoid the
short-term inefficiencies of each firm reinventing the
wheel. The Japan Patent Office openly cautions against
people or firms “needlessly spend[ing] resources in order
to invent the same thing” as a product already developed.
20 Japanese patents are cited more on average than
U.S. patents, suggesting that the weaker patents were
unable to make it through the system in the first place.21
While the Japanese government theoretically needs
permission from a firm to distribute its technology to
avoid violating its private property rights, in practice
MITI is sufficiently powerful, and the government-industry
connections are so close, that the firm would be hardpressed
to avoid giving at least conditional approval:22
“ndustries are valued for the knowledge they generate
as much as the products they produce.”23 MITI wants to
take full advantage of that knowledge, although the fact
that Japan no longer needs to play catch-up has led to a
partial reassessment of this strategy.