OVERVIEW: Japan's success at adaptive RD but they also cooperate on major projects--especially when faced with external competition. Yet this model while effective when a known outside competitor (and clearly defined goals exist, may not be appropriate for the kind of path-breaking research Japan now seeks. As a result, Japanese companies are setting up R&D centers in other countries to benefit from cross-cultural exchanges that may bypass these cultural patterns. From feudal times until the beginning of the 20th century, Japan was an agrarian nation structured as a rigid pyramidal hierarchy, with the farming families at the bottom. These families, in turn, belonged to clans (hans), each of which was governed by a daimyo. Each small farm village was led by a resident samurai whose allegiance was also to the daimyo. Japan's 200 daimyos were subordinate to the shogun, who governed Japan in the name of the emperor. The efficient production of rice, Japan's primary agricultural product, required social cooperation and group contributions. At the same time, families, clans and villages competed among themselves--urged on by the local samurai--to produce the most rice and thereby prove their superior loyal to the daimyo. The feudal pyramidal structure of the country is still evident in corporate organizations (see Figure 1), as is the collaborative mentality that Japanese workers have inherited from their rural ancestors.(Figure 1 omitted) Although the correspondence between an agricultural and a corporate/national culture may not be exact, I believe it provides a useful heuristic device for exploring the successes of the corporate system. JAPAN'S HOMOGENEOUS CULTURE Japan is much more homogeneous ethnically and linguistically than other industrialized countries--a status resulting in part from more than 200 years of deliberate national isolation imposed by the shogunate (which ended with Perry's opening of Japan in 1853). The dichotomy between the nation and the outside world--the we-versus-they viewpoint--continues to inform Japanese notions of the world and is another important factor in Japan's competitive environment. The federal government's role in primary and secondary education has helped to reinforce this cultural homogeneity. Because the Ministry of Education oversees schooling, all Japanese students study the same curriculum at more or less the same time and, importantly, are inculcated with the same nationally-espoused values. Moreover, Japanese universities provide students with the same general course content (including emphasis on reading English to enable them to learn about offshore developments). Thus, basic received knowledge tends to be both uniform and universal. Added to this uniforming is the role that the larger group--society as a whole and, on a smaller scale, the corporation--plays in Japan: The group comes first, with individual desires traditionally subordinated to its good (although young Japanese have become more individualistic in recent years). These cultural and historical forces have important commercial and industrial implications for competitive and cooperative behavior. When a Japanese corporation hires graduates of Japanese schools, it knows that its managers will share cultural values with the new workers and therefore find it easy to communicate with them. In addition, the new employees will bring a common education to their jobs. These two factors facilitate training and help attain the corporate goal of a tightly organized and interdependent staff. …