Academic Entrepreneurship: A Comparison of U.S. and Japanese Promotion of Information Technology and Computer Science

Abstract

Manufacturing hardware is increasingly a commodity product with low margins. The reason for the diminished value of hardware is that more and more of the value in high-tech products is contributed by software meeting user needs, through enabling new functionalities and services. Those firms better able to create and use software advances, improve their competitive outcomes. Japanese high-tech firms have been slow to recognize and act on the growing importance of software and have suffered competitively. The reasons are many. It is widely recognized that human capital is a critical component of software innovation and thus would be central to any explanation of Japanese firms’ weakness in software. For this reason, I focus on the role of university engineering education in IT, comparing the U.S. and Japan. My analysis documents the leadership role played by U.S. universities and in particular, the academic entrepreneurship demonstrated by leading computer science departments. The contrasts with leading Japanese universities are striking. On the Japanese side, they include a slowness in recognizing the importance of software and in adopting state of the art curriculum, a failure of MEXT to regulate the way in which universities implemented their mandate to develop information technology, an egregious sabotaging of the new information technology departments by university administrators, and a reluctance of leading firms to hire computer science graduates. Finally, centralized faculty decision making allowed engineering faculty in other departments to resist changing student quotas (teiin) in favor of the new discipline. Taken together, these factors inhibited the development of computer science as a distinctive discipline and put a break on any faculty entrepreneurs seeking to promote the new discipline. By contrast, I will show how institutional practices in the U.S. acted to promote academic entrepreneurship enhancing the growth of the new discipline. Academic Entrepreneurship: A Comparison of U.S. and Japanese Promotion of Information Technology & Computer Science How do we explain why the world’s third largest economy, Japan, second only to the U.S. in software sales, nevertheless, lags so significantly in other key measures of software performance? One can measure these lags in its miniscule software and information services exports, large software and information services imports, absence of path breaking software firms, absence of a large independent software sector, and its growing weakness in patentable software relative to the U.S. In this paper, I aim to add a piece to the puzzle solution by examining U.S. and Japanese university efforts to provide a new generation of students with the knowledge, analytic skills and tools to address the rapidly evolving field of information technology and computer science (CS). I begin by documenting one of the key challenges for the Japanese software industry, software innovation. To this end, I examine results from Arora, Branstetter and Drev’s recent study of US and Japanese IT patents granted by the U.S. Patent Office (USPTO) from 19832004. The authors examined U.S. and Japanese embedded, application, system and enterprise application software patents in the high tech sector. They found that IT innovation has become increasingly software intensive. Researchers first looked at hardware patents in the high tech sector from 1990-2003. They found that these hardware patents increasingly cite software patents. This is true in patents emanating from all countries including Japan. How big a change has there been? For the total dataset, an IT patent granted in 2003 was almost 3.2 times more likely to cite a software patent than one granted in 1990. This represents a remarkable shift over just 13 years suggesting the rapidly growing importance of software. Even though this trend is apparent in both Japanese and U.S. patents, the researchers found that Japanese IT hardware patents were systematically less likely to cite software patents over time than non-Japanese firms. Consistent with this finding, they found that Japanese firms file fewer software patents than their U.S. counterparts and that the difference has grown steadily since the late 1980s and especially after the mid-90s. Their findings indicate first that IT inventions have become much more software intensive over time. U.S. firms also have more actively incorporated software inventions into their products and services than have their Japanese counterparts. Even more telling, they find that U.S. firms have improved their innovation performance vis a vis Japanese firms in just those IT segments which are most software intensive (computers and peripherals). The researchers also find that within IT, Japanese firms are now disproportionately located in less software intensive sectors. 3 Innovation performance was measured in a number of different ways , including patent productivity per dollar invested in R&D. Using these and other measures, they found that the