Soft Policy Instruments for Inducing Industrial Innovation in a Service-Oriented Economy: A Comparative Analysis of the Vision System and University System

Article excerpt

Under the new paradigm characterized by a shift from an industrial economy to a service-oriented economy that emerged in the 1990s the role of soft policy instruments as Japan's vision system inducing industrial innovation has become crucial. However, it has not functioned as effectively in a service-oriented economy as it did in an industrial economy in identifying and providing future direction, instilling confidence and developing general consensus to induce vigorous R&D investment by industry. Contrary to this, the university system has played a significant role in the United States in stimulating innovative leading-edge activities in a way that is similar to Japan's vision system in the 1980s. These observations suggest that the vision system and university system share a similar function in inducing innovation, with the former being compatible with an industrial economy and the latter corresponding to a service-oriented economy. Both provide future direction for innovation and develop general consensus. However, while the vision system identifies future direction by utilizing in advance foresight and developing general consensus, the university system provides mobile foresight. In other words, it functions and achieves consensus not in advance but in a self-propagating way. While the vision system corresponds to the nature formation mechanism for manufacturing technology, university system corresponds to the similar process in information technology (IT) that leads a service-oriented economy. In addition, this can be attributed to the US government's policy for promoting university-industry partnership and this policy functions well in activating the IT nature formation mechanism by stimulating resonance with relevant institutional innovation systems. This paper, on the basis of a comparative empirical analysis of the role of the vision system and university system in Japan and the United States, attempts to demonstrate the above hypothetical view with respect to the use of the vision system and university system as soft policy instruments corresponding to an industrial economy and a service-oriented economy.

(ProQuest Information and Learning: ... denotes formulae omitted.)

INTRODUCTION

Despite many handicaps, Japan achieved a rapid enhancement of its technology and productivity levels during the course of an industrial economy by focusing its efforts on improving the productivity of the relatively scarce resources in each respective era (Watanabe, 1992). Such remarkable improvement can be largely attributed to private industry's vigorous efforts to invest in R&D, resulting in a rapid enhancement of its technology contributing to economic development (DOC, 1990) which again induces further vigorous R&D, leading to the construction of a virtuous cycle between technology and economic development (Watanabe, 1995).

While investing in technology plays a trigger role in constructing this virtuous cycle, because of high risk, high cost and a long lead-time, private industry generally flinches from challenging technological investment without certain conditions which makes private industry confident for technological investment. Vision system played a significant role in leveraging this trigger by identifying future prospects, providing direction, developing general consensus, and thereby instilling confidence in investors (Watanabe, 1997). Thus, vision system functioned effectively as a soft policy instrument for inducing technological development in an institutional innovation (Ruttan, 2001).

However, under the new paradigm characterized by a shift from an industrial economy to a service-oriented economy that emerged in the 1990s, vision system does not function effectively as it did in the 1980s in Japan (Watanabe, 2000). Contrary to such situations in Japan, university system has played a significant role in the US, particularly in the 1990s (Harayama, 2001). The US university system, particularly in the 1990s, functioned similar to Japan's vision system in the 1980s in stimulating leading edge innovative activities by identifying future prospects, providing direction, developing general consensus, and instilling confidence in private industry (Morgan and Strickland, 2002). …