Magazine article Journal of Services Research

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

Magazine article Journal of Services Research

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

Article excerpt

(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).

These observations prompt us to take a hypothetical view that the vision system and university system share a similar function as a soft policy instrument in inducing innovation, with the former being compatible with an industrial economy initiated by manufacturing technology (Komiya and Yokobori, 1991) and the latter corresponding to a service-oriented economy supported by an advancement of information technology (IT) of a self-propagating nature (Watanabe et al., 2003). Both provide future direction of innovation and develop general consensus. While vision system identifies future direction by advance foresight and gaining general consensus thereon (Watanabe et al., 1991;, Watanabe and Clark, 1991), university system provides moving foresight, in other words, projecting by running and gaining consensus not in advance but in self-propagating way. While vision system corresponds to the manufacturing technology nature formation mechanism, university system corresponds to the similar process in IT (Neil and Huff, 2001). In addition, this can be attributed to the US government's policy of promoting university-industry partnership (Rosenberg, 2000; Crow and Tucker, 2001) and this policy functions well in activating the above mechanism by stimulating resonance among relevant institutional innovation systems.

In light of the crucial role that soft policy instruments play more significantly in a service-oriented economy than an industrial economy, this paper, on the basis of a comparative empirical analysis on the role of the vision system and university system in Japan and the US, attempts to demonstrate the above hypothetical view with respect to the roles of the vision system and university system as soft policy instruments corresponding to an industrial economy and a service-oriented economy, respectively.

Section 2 reviews role of soft policy instruments in a paradigm shift from an industrial economy to a service-oriented economy. …

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