Corporate R&D as a Way to Lead Japan out of its Pricing Slump

ABSTRACT

The Japanese economy remains in the grips of persistent deflation, with unit prices of almost all products continuing to tumble. The reasons for this are twofold: tough competition in the domestic market and a slump in demand. In response to this challenge, actions are currently being taken to reduce material purchase costs. Ultimately, the goal is to develop new products and higher value-added content.

In order to attain these development goals, Research and Development (R&D) is required. During the late 1990s, Japanese companies were actively engaged in R&D with a focus on IT products; success in these goals was limited, however.

The first reason for Japanese companies' lack of success is that many companies tried to create identical products and became "bandwagon hoppers", consequently resulting in fierce price competition. The second reason is a lack of attention to new markets; most companies focused only on preexisting conventional markets. The third reason can be found in a lack of innovation; many companies' R&D did not focus on breakthrough technologies, but rather on the development of incremental technologies that were actually detracting from their high value-added goal.

In the future, it will be necessary to restructure and replace old corporate organization and to generate a greater degree of product differentiation; only those who are capable of making these difficult decisions will have what it takes to be a manager. The value-added fields of health, comfort and safety are the areas where market development will be needed. To this end, the inclusion of social science graduates in R&D programs will be required. For the creation of breakthrough technologies, it will also be necessary to offer much higher patent rewards to researchers to overcome the great mood of dissatisfaction that currently exists in the research community. The best system for evaluating the value of patents is to have assessments conducted by outside specialists.

Introduction