Paradigm Shift in Technologies and Innovation Systems John Cantwell • Takabumi Hayashi Editors

Paradigm Shift in Technologies and Innovation Systems

123 Editors John Cantwell Takabumi Hayashi Rutgers University Newark, NJ, USA ,

ISBN 978-981-32-9349-6 ISBN 978-981-32-9350-2 (eBook) https://doi.org/10.1007/978-981-32-9350-2

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Innovation is essential to maintain market competitiveness and sustainable growth, as well as to drive socioeconomic development. Accordingly, at all times, larger companies have been committed to research and development (R&D) investment, securing outstanding R&D personnel, and building an effective R&D management system. However, there is no universally desirable R&D strategy that a firm should pursue. For example, the nature of the qualities required for R&D talent appropriate to drive innovation will change over time and will vary across industries. The importance of cooperative relationships with other companies in R&D also chan- ges, and the purpose of cooperation also varies. A critical reason is that technology continues to evolve and the technological structure required by firms and industries changes. As the set of technologies at the core of the technological system changes, not only the size of the R&D project required and the composition of researchers will change, but so too the combination of proprietary development and technical cooperation with other institutions. In other words, the paradigm of innovation in a systemic sense continues to evolve. The sustained growth of a firm’s market competitiveness depends upon its capacity to reflect, respond and adapt to this evolving paradigm. The most common reason for the decline of an excellent company in the past has been the failure to adapt to a shift in the prevailing paradigm. Understanding the changing character of the technological paradigm is, therefore, an important research theme in management and economics. The purpose of this book is to elucidate various unexplored aspects of a technological paradigm, and of paradigm change over time. As is well known, information technology (IT) has been at the core of techno- logical architecture since the late-twentieth century. IT has streamlined factories, office labor, and social infrastructure not only in the electrical and electronics industries, but in all industries, and it has spurred numerous product innovations to create a variety of innovative new products, thereby creating a new kind of con- sumer society. It appears that Japanese companies were initially successful in adapting successfully to the IT-centered innovation paradigm and strengthening their market competitiveness.

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However, the technological architecture has evolved further, now becoming centered on digital technology, and the paradigm of innovation has changed accordingly. As symbolized by the concept of a knowledge-based economy at the end of the twentieth century, innovations in the massive and highly sophisticated use and processing of data and knowledge have continuously emerged. Within IT, software technologies such as computer programming, computer system design, and artificial intelligence have become the core of the technology system rather than hardware. The foundations for the primacy of these software technologies include the explosive evolution of the internet, the digitization of data, and the dramatic improvement in computer information processing capabilities. This new technological architecture is in the process of further transforming the paradigm of innovation. For example, we have witnessed the emergence of an open modular industrial system in place of a closed integral system as in the past, which had taken the form of a vertically integrated business model in which all tech- nologies were developed and produced internally. The current shift toward an open modular business model is based on the premise of a global division of labor, and therefore, a platform-type business model that acquires global standards through an increasingly open international division of labor, and this has been gradually undermining strategies of concealing and monopolizing technologies in specific firms or locations. Software development and the explosive spread of the internet, which do not require large-scale equipment and funds, have enabled some areas of knowledge to be disseminated throughout the world including in developing countries, as well as facilitating the sharing and integration of excellent knowledge from around the world. As a result, the globalization of R&D systems, which can take advantage of geographically diversified talented human resources, has become an indispensable R&D strategy. Furthermore, since basic research has become more important for the development of these advanced technologies, a strengthening of the collaboration between private companies, universities, and other research institutions has become an important strategic issue. Firms that failed to adapt successfully to this new paradigm have lost their competitive advantage and have stagnated, whereas those that have succeeded in adapting have gained a competitive advantage. What kinds of strategic adaptation will enterprises and industries need to adapt to the new paradigm in the future? From this viewpoint, the book will analyze the state of internationalization of corporate R&D, the new development of global stan- dardization strategies, and the role played by large cities, where research institutes are concentrated, in the exchange of technical knowledge, the development of human resources for knowledge, and methods for formulating research and development strategies. Accordingly, the book consists of two parts. The first part, which consists of the following five chapters, mainly discusses the concept of a techno-paradigm from the perspective of its historical and macroeconomic sides. Then, in the second part, paradigm shifts are examined from the perspective of specific industrial sectors and companies. Preface vii

Here we would like to highlight some of the key themes to emerge from each chapter. Chapter 1 of the first part, entitled “The Philosophy of Paradigm Change in the History of Social Evolution” by John Cantwell, begins by defining and explaining the meaning of a technological paradigm, and of paradigm shift. The chapter places the idea of paradigm change in a philosophical context, arguing that a paradigm shift can be seen as representing a Hegelian evolutionary process in a social or cultural setting. The development of a techno-socio-economic paradigm at a society-wide level is a process of continual co-evolution between three sets of factors: knowledge, institutions, and technology in production. In Chap. 2, “Paradigm Changes in Technological Knowledge Connections in Urban Innovation Systems” by Salma Zaman, it is argued that innovation today cannot be realized by only one company or even by one location in isolation, and often there is a need for cross-city and cross-firm knowledge exchange. Therefore, taking the world’s largest cities for innovation leading to patenting, this study examines between which cities knowledge flows occur more intensively. For this purpose, by analyzing the pattern of connections between cities from a mapping of the locations of the inventors of pairs of citing and cited patents, based on the data of the Patent and Trademark Office, this chapter elucidates the city-based knowledge network that shows the geography of knowledge exchange relationships. The chapter discusses the effect of paradigm shift on this subnational geography of knowledge sourcing in innovation. Chapter 3, “World-Wide Dispersion of Research and Development (R&D) Capabilities” by Takabumi Hayashi and Atsuho Nakayama, examines to what extent R&D capabilities have been geographically disseminated and dispersed worldwide over the past 40–50 years, analyzing scientific papers and US patents as R&D outputs. The analysis shows that the number of different nationalities of author affiliations on papers and the range of locations of the first-named inventors of U.S. patents have increased and diversified. Chapter 4, “International Standardization of the New Technology Paradigm: A Strategy for Royalty-Free Intellectual Property” by Yasuro Uchida, starts from the point that in the past, the international standardization of intellectual property (IP) was an important strategy. One of the roles of IP has been to generate a source of revenues from royalties, but what is now increasing in IT-related business fields is actually royalty-free exchange. This means that we have witnessed a paradigm shift in IP strategy in the IT-related fields. This chapter examines in detail why such royalty-free cases are increasing, and the background to this emergent phenomenon. Chapter 5, “New Roles for Japanese Companies at the Knowledge-Based Economy” by Fumio Komoda, examines how the technology paradigm has shifted from being hardware-oriented to becoming software-oriented in accordance with trends in the progress and adaptation of IT. The author argues here that one of the reasons for the downturn of Japanese companies is that they had not been suc- cessful in adapting themselves to the transition from hardware to software tech- nologies, remaining overly committed to their hardware heritage. viii Preface

In Chap. 6, moving into the second part of the book, “Paradigm Shifts in the TFT-LCD Industry and Japan’s Competitive Position in East Asia”, by Kazuhiro Asakawa, identifies paradigm shifts in the TFT-LCD industry that have directly or indirectly led to a change in Japan’s competitive position. The chapter shows that the declining competitiveness of a country and a firm cannot be fully understood without closely relating it to the shifts in the paradigm of the industry. In addition, this chapter shows the mutual alignment between paradigm shifts in the industry, the changing competitive positions of a country and a firm, as well as the changing locus of innovation, in terms of the distribution of efforts between domestic versus international or in-house versus collaborative activities. In Chap. 7, “Business-University Collaboration in a Developing Country in the Industry 4.0 Era—The Case of ” by Annamaria Inzelt, discusses how in recent years the majority of Hungarian business R&D expenditure has come from companies wholly, or majority-owned by foreign interests. This high proportion indicates the substantial role of foreign companies in the Hungarian research agenda and in business-university collaboration. This chapter focuses on how foreign companies are shaping business-university collaboration in research and experi- mental development and touches upon the role of government as facilitator. Chapter 8, “Text Mining Method for Building New Business Strategies” by Fumio Komoda, Yoshihiro Muragaki and Ken Masamune, examines how under a new technology paradigm, identifying market needs and finding appropriate tech- nical ideas become much more unpredictable. In order to solve this problem, using pinpoint focus type text mining may successfully provide useful solution methods for companies. To demonstrate this, the authors use the illustration of a neurosur- gical robot and discuss how well-founded ideas for the development of a surgical robot can successfully be discovered. Chapter 9, “Paradigm Change in the History of the Pharmaceutical Industry” by Sarah Edris, argues that with the advancement of molecular biology as a science, we see a paradigm shift in the nature of R&D in the development of new drugs from around the 1990s. As a result, many new forms of cooperation in R&D among private companies, universities, and public research institutions have now become unavoidable. Chapter 10, “Knowledge Transfer and Creation Systems: Perspectives on Corporate Socialization Mechanisms and Human Resource Management” by Tamiko Kasahara, explores the role played by corporate socialization mechanisms (CSMs) and human resource management (HRM) practices in knowledge sharing and creation in multinational corporations. Drawing on a longitudinal case study of Cambridge Technology Partners (CTP), the findings of this study show that CSMs were incorporated into HRM practices. Specifically, training and development practices played a role in transferring knowledge from the headquarters to a focal subsidiary at the corporate level, and from senior to junior consultants at the individual level. At present, CSMs have laid the foundation for further knowledge creation for CTP. Preface ix

Finally, Chap. 11, “Redefining the Internationalization of R&D Activities: How Far Have the Firms’ R&D Members of US and Japanese Companies Been Diversified?”, by Takabumi Hayashi, examines how the role played by foreign researchers and engineers engaged in R&D activities in the US and in the overseas R&D activities of US multinational corporations are no longer negligible. The chapter also examines the extent to which the internationalization of R&D by US companies would be affected if the outcomes of their activities in the US were included in the internationalization of R&D. Finally, analyzing the case of Canon Inc., the most active Japanese-based company in patenting, it is shown how much the internationalization of R&D activities differs between IBM and Canon. The further evolution of IT, and of international knowledge creation and sharing will doubtless continue to lead to further gradual changes in the innovation para- digm. The various themes presented in this book help us to better understand at least some aspects of this evolution. We encourage further research on these topics in the future, and hope to contribute to such efforts ourselves. Finally, in editing the book, we would like to express our gratitude to the following editing staff members of Springer publishing: Ms. Swetha Divakar, Mr. Yutaka Hirachi, and Ms. Shinko Mimura, for their valuable comments and kind cooperation.

Newark, USA John Cantwell Tokyo, Japan Takabumi Hayashi Contents

1 The Philosophy of Paradigm Change in the History of Social Evolution...... 1 John Cantwell 2 Paradigm Changes in Technological Knowledge Connections in Urban Innovation Systems ...... 17 Salma Zaman 3 World-Wide Dispersion of Research and Development (R&D) Capabilities ...... 57 Takabumi Hayashi and Atsuho Nakayama 4 International Standardization of the New Technology Paradigm: A Strategy for Royalty-Free Intellectual Property ...... 73 Yasuro Uchida 5 New Roles for Japanese Companies at the Knowledge-Based Economy ...... 105 Fumio Komoda 6 Paradigm Shifts in the TFT-LCD Industry and Japan’s Competitive Position in East Asia ...... 141 Kazuhiro Asakawa 7 Business-University Collaboration in a Developing Country in the Industry 4.0 Era—The Case of Hungary ...... 163 Annamaria Inzelt 8 Text Mining Method for Building New Business Strategies ...... 197 Fumio Komoda, Yoshihiro Muragaki and Ken Masamune

xi xii Contents

9 Paradigm Change in the History of the Pharmaceutical Industry ...... 239 Sarah Edris 10 Knowledge Transfer and Creation Systems: Perspectives on Corporate Socialization Mechanisms and Human Resource Management ...... 265 Tamiko Kasahara 11 Redefining the Internationalization of R&D Activities: How Far Have the Firms’ R&D Members of US and Japanese Companies Been Diversified? ...... 295 Takabumi Hayashi Correction to: Knowledge Transfer and Creation Systems: Perspectives on Corporate Socialization Mechanisms and Human Resource Management ...... C1 Tamiko Kasahara Editors and Contributors

About the Editors

John Cantwell (Co-editor, Chap. 1) (Ph.D., Reading) is Distinguished Professor of International Business at Rutgers University (New Jersey, USA) since 2002. He was previously Professor of International Economics at the University of Reading in the UK. His early work helped to launch a new literature on multinational companies and international networks for technology creation, beyond merely international technology transfer. Professor Cantwell’s total citation count on Google Scholar is well over 15,000. His published research spans the fields of International Business and Management, Economics, Economic History and Philosophy, Economic Geography, and Innovation Studies. He served as the Editor-in-Chief of the Journal of International Business Studies (JIBS)from2011–16. He was the elected Dean of the European International Business Academy (EIBA) Fellows from 2015–18. He is also an elected Fellow of the Academy of International Business (AIB) since 2005.

Takabumi Hayashi (Co-editor, Chap. 9 and Chap. 10) (Ph.D. in Economics, Rikkyo University) is Professor Emeritus of Rikkyo University, Tokyo. He suc- cessively filled the position of Senior Lecturer at Fukuoka University, Associate Professor, and Professor of International Business at Rikkyo University, and Professor at Kokushikan University, Tokyo. His recent research areas are innova- tion systems and R&D management, focusing on knowledge creation and diversity management. His works have been widely published in books and journals. His book “Multinational Enterprises and Intellectual Property Rights” (in Japanese; Moriyama Shoten, Tokyo, 1989.)” is widely cited, and “Characteristics of Markets in Emerging Countries and New BOP Strategies” (in Japanese; Bunshindo, Tokyo,

xiii xiv Editors and Contributors

2016) received the award from Japan Scholarly Association of Asian Management (JSAAM) in 2018. He has been sitting on the editorial board of several academic journals.

Contributors

Kazuhiro Asakawa Graduate School of Business Administration, , Yokohama, Japan John Cantwell Rutgers University, Newark, NJ, USA Sarah Edris Rutgers Business School, Rutgers University, Newark, NJ, USA Takabumi Hayashi Rikkyo University, Tokyo, Japan; Tokyo Fuji University, Tokyo, Japan Annamaria Inzelt IKU Innovation Research Centre, Financial Research Co., Budapest, Hungary Tamiko Kasahara School of Information and Management, University of Shizuoka, Shizuoka, Japan Fumio Komoda Honorary Professor, , Saitama, Japan Ken Masamune Institute of Advanced Bio-Medical Engineering and Science, Tokyo Women’s Medical University, Tokyo, Japan Yoshihiro Muragaki Institute of Advanced Bio-Medical Engineering and Science, Tokyo Women’s Medical University, Tokyo, Japan Atsuho Nakayama Marketing Sience, Tokyo Metropolitan University, Tokyo, Japan Yasuro Uchida Graduate School of Business, University of Hyogo, Kobe, Hyogo, Japan Salma Zaman Lahore University of Management Sciences (LUMS), Lahore, Pakistan