MIT professor Eleanor Westney sees U.S., Japanese R&D trends headed in opposite directions

February 10, 1995

By Jeffery Kahn,

In many respects, the United States and Japan have been headed in opposite directions since the 19th Century, says Eleanor Westney, MIT associate professor of management. Common to both countries, however, is the ongoing debate about the appropriate role of research and development.

Speaking at LBL on February 7, Westney discussed the history behind U.S. industrial re-engineering and the current Japanese effort to reconfigure its industrial technology development juggernaut. An expert on the evolution of organizations and business systems in Japan, Westney spoke as part of the Science and Technology in a Competitive World lecture series, which is jointly sponsored by LBL and UC Berkeley.

In the 1980s, Westney said, Japanese and U.S. industrial R&D budgets were headed in opposite directions. As budgets grew an average of more than 10 percent per year in Japan, expenditures shrank in the U.S.

During that decade, the best job in Japan was R&D director, she said. Not only were you building the products of the future, but you were in line to help lead the company. That was because of the Japanese conviction that business leaders must have a firm grasp of the nuts and bolts of technology.

Things were very different in America. During the '80s, business leaders complained that corporate R&D was doing too much unfruitful and fundamental research. The credo in the U.S. was to scale back R&D and make it more responsive to the business side. The result was that the bottom line showed incredible profits for the Japanese and dwindling markets for the U.S. Then in 1992, just when Japanese industry thought it was on top of the world, the bubble burst. Concurrently, American industry, which had looked like it had lost its ability to compete globally, began to turn around.

"Japan thought it had solved the problems of creating innovative, globally competitive products and that the U.S. had lost its way," Westney said. "Then in 1992, Japan was confronted with many of the business pressures the U.S. had faced in the '80s--among them, more competitive U.S. products. The Japanese were shocked."

Westney said that as profits have fallen in Japan, corporate R&D budgets have been cut. This has occurred every year since 1992. She said the Japanese are now agonizing over how to reconfigure their industrial technology programs. Worried about the dearth of science and technology from which new products will evolve, they believe they must strengthen what has been a weak basic science infrastructure.

Westney said this is a formidable challenge. Japan has no counterpart to America's research universities, and the problem cannot be solved on a company level. Rather, she said, this is a national problem that is rooted in the culture. Product orientation is so strong within corporate R&D programs that fundamental science programs can quickly transform into applied efforts.

In the United States, corporate fortunes have see-sawed and improved in the 1990s. "In the '80s," Westney said, "there were attempts at mutual learning. The Japanese flew here, we flew there to learn about each other. I believe the Americans turned out to be better at learning from Japan than vice-versa. Certainly, it has been easier for the U.S. to adapt Japanese business systems than it has been for Japan to create a national basic science infrastructure."