Japan's Key Technology Center (JKTC) program was established in 1985 by the Japanese government as a means of stimulating private sector research and development in three broad areas of technology. JKTC is a public policy tool designed to address issues of public support for research and development that are common to most market-oriented economies as well as to address policy issues specific to Japan's political, economic, and budgetary history since the early 1980s.

This report presents findings on the organization, strategies, activities, and impacts of the JKTC program, and its contributions to the standing of Japan's research activities in selected physical sciences, engineering disciplines, and life sciences technologies. Based on these findings, the report assesses the relevance of the JKTC program to policy formation and program management of related civilian technology programs in the United States.

Government support for the development of key technologies is frequent among industrialized nations. This support is typically provided to attain national imperatives-e.g., military technology-and national aspirations-e.g., space exploration. In an era of the increased importance of technological innovation as a source of economic growth, global competition, and shortened product cycles, government R&D funding also is provided to protect or enhance international economic competitiveness. This last objective provides a generic rationale for the support of domestic or civilian technologies, that is, those technologies that are primarily employed in the production of goods and services for civilian consumption, both domestic and foreign.

Sharing essentially similar objectives, nations differ in their innovation systems (Nelson 1993). They differ in the relative roles allotted or taken by the private sector, government, or other sponsors of the research that leads to technological innovation, in the choice of performers of this research (e.g., government research institutes, industrial R&D laboratories, universities), and in the institutional arrangements for transferring research from research performers to producers of goods and services. They differ too in as priority-setting processes and the importance assigned to evaluation. Among these differences, few are as important as the relative role of government as a sponsor of the development of key technologies, and relatedly, given the size of the government role, the mechanisms used by the government to support technological innovation.

JKTC projects represent a mode of funding collaborative research between the Japanese government and the private sector in which the government is an investment partner in creating new companies. This is in contrast to the typical U.S. model for government R&D funding, in which the government is the sponsor of research and development projects with industry providing cost sharing.

This report is based on site visits to JKTC, its parent organizations, the Ministry of International Trade and Industry (MITI), and the Ministry of Post and Telecommunication (MPT), to cognizant Japanese science and technology agencies, and to a cross section of industrial firms formed with JKTC support. It is also based on a review of documents provided by both agencies and firms, as well as a review of the WTEC panel's draft final report by the Japanese site visit hosts. These sources provide the basis for a general assessment of the workings and impacts of the JKTC program.

The assessment, however, refers to but only indirectly touches on cultural factors that pervade the organization and behavior of economic life. As Peter Temin has recently written, "Current Japanese economic culture . . . is the product both of long-standing Japanese ways of acting and thinking and of specific decisions made to solve specific historical problems" (Temin 1997). The relationships affected by these values range from the appropriate bounds of government involvement in developing civilian technologies (as well as the policy mechanisms used to support such development) to the mix of specific R&D allocation mechanisms, such as formula-based and peer-reviewed competitive proposals.

Data on several key variables and impacts that would facilitate comparison between Japanese and American practices either are not collected by JKTC or related agencies or were not accessible to the WTEC site visit team. Strong causal relationships between the terms of enabling legislation, formal, administrative arrangements, and final outcomes are thus difficult to formulate. Moreover, prior analysis of the workings of the Japanese economy, particularly of relationships between government agencies and the private sector, highlight the importance of informal, culturally rooted modes of decision making. Decision making practices are often not transparent and visible to external observers. In this recognition, the panel's views were supported by statements of representatives of Japanese government agencies and firms interviewed during the site visits, which frequently highlighted the importance of informal consultations and understandings.

The members of the WTEC panel recognize the limitations of extrapolating science and technology development policies from one socioeconomic system to another. They also are mindful of recent and pending government proposals to significantly restructure key elements of Japan's national science and innovation system. Both the gestating effects of recent changes, particularly those that have sought to strengthen the research and technology transfer capabilities of Japanese universities, and new proposals advanced since the date of the WTEC site visits may have an effect on the position of JKTC amid other science and technology programs. These developments could not be taken into account in the panel's assessment.

Still, as a long history of fact-finding commissions and reports attest, assessment of practices and experiences of major competitors is a basic feature of benchmarking. Constant scanning of the external environment to determine which approaches, if any, of others may be worthy of emulation or adaptation is a necessary part of remaining competitively vital.

The report is organized as follows: Chapter 1 is an introduction to the report. Chapter 2 describes the history and current organization of the Japan Key Technology Center program. Chapter 3 reviews the contributions of JKTC-funded activities to selected fields of physical sciences, biotechnology, and life sciences. Biographies of study participants are included in appendices A and B. Appendix C contains brief reports on each of the site visits conducted by the WTEC team in Japan. Appendix D is a list of projects supported under JKTC.

Published: September 1999; WTEC Hyper-Librarian