Optoelectronics in Japan: A Market Evaluation of Government High-Technology Policy

Abstract

In survey after survey of US firms, the business environment is viewed as the greatest area of disadvantage for high-technology firms. In this area such surveys suggest that American high-technology firms are at their greatest disadvantage when compared with firms operating in Japan. It is argued that the role the Japanese government plays within the Japanese economy puts American firms at a particular disadvantage when competing globally with Japanese firms. The most commonly cited Japanese government practices include ‘financial support . . . . . including R&D grants/credit, favorable tax treatment and low interest rate loans to finance exports, R&D and investment’ (US Department of Commerce, 1994, p. V-8). This particular characterization of Japanese government practices comes from the responses of firms included in the US Department of Commerce’s assessment of the US optoelectronics industry. When these firms were asked, however, to provide specific examples of such practices, the US Department of Commerce notes many companies mentioned MITI of Japan, but few gave specific examples of how MITI programs benefitted the optoelectronics industry’ (p. V-8). This paper attempts to fill this gap. The first section of the paper discusses the distinctive characteristics of the optoelectronics industry and why a government might want to promote its competitiveness. The second section catalogues aid given by the Japanese government and contrasts these programs with US government activities. In the final section of the paper, the impact of Japanese government programs on the competitiveness of Japanese and US firms is assessed.