Comparative Studies of Technological Evolution: Volume 7

This paper reviews 16 empirical studies of the impact of technological change upon incumbent firms. While all 16 studies have strong internal validity, their external validity is unclear. These studies employ different definitions, use different taxonomies, and rely on differing causal mechanisms. Their evidence, though extensive, draws largely upon U.S. contexts. This complicates an assessment of their cumulative external validity. An overall analysis concludes that there is a need to expand our research to other countries, because the impact of technical change may differ across countries. The paper integrates these phenomena into a new paradigm with three dimensions that condition the impact of technical change: the management of complexity, the external linkages of innovating firms, and the institutional environment.

Does the mobility of engineers facilitate international knowledge spillovers and help newly industrializing countries catch up with developed countries? This study attempts to answer this question by tracing knowledge flows through the international mobility of semiconductor engineers. The paper uses patent data to track the mobility paths of engineers to examine whether knowledge flows occurred more than expected. The study finds that engineers who moved from the U.S. to Korea or Taiwan built their subsequent innovations based upon the knowledge of their previous firms in the U.S. Case studies based on field interviews further suggest that these mobile engineers have played significant roles in the technological catching-up of Korea and Taiwan.

Biotechnology revolutionized drug discovery in the pharmaceutical industry, making adoption a key determinant of long-term survival in the industry. In the U.S., where and when firms adopted biotechnology was largely determined by location of actively publishing academic “star” bio-scientists. The location of “stars” in Japan had a similar effect but significantly lower impact. Restrictions on stars in national universities on holding equity interest or founding roles in new firms (in contrast to their American colleagues) were especially important. In general, Japanese institutions reduced the importance of star scientists in developing a biotechnology industry in Japan compared to the U.S.

In this chapter we profile the strategies of two large Japanese firms with expertise in ‘old’ biotechnology, which successfully developed the technological capabilities to enter ‘new’ biotechnology. We suggest that these ‘new entrants’ differed from traditional pharmaceutical companies in their response to the technological discontinuities of the biotechnology revolution, and in the technological trajectories they traversed. We propose that technological distance and spatial distance from sources of new knowledge determined their development of technological capabilities. Finally, we conclude that such firms, not the much-touted new Japanese biotechnology start-up firms, are the true counterparts to American and European biotechnology start-ups.

The differences between patent systems in the United States and Japan suggest that in Japan, R&D spillovers are more rapid, large firms have greater incentives to innovate, incremental innovations are encouraged, and firms employ alternative appropriability mechanisms more than U.S. cases. Empirical findings are largely consistent with these predictions, but recent empirical literature casts doubt on the widely assumed close relationship between patent system and firm innovation. Weak linkage between patent system and firm research, and the use of patents for strategic and defensive purposes are possible causes of the apparent lack of firm response to the change of patent systems.

This paper compares the evolution of the venture capital industries in the U.S., Germany and Japan. Private initiatives, a competitive science infrastructure and a favorable legal environment contributed to an early success of the industry in the U.S. Early public efforts to create venture capital firms in Germany and Japan failed. Only when the regulatory environment changed did venture capital firms evolve in both countries with Japan adjusting its regulatory environment about ten years later than Germany. At this point the industry in the U.S. is highly developed, the industry in Germany is growing rapidly, and the industry in Japan is ‘budding’. Future convergence to the U.S. industry model seems likely.