General Purpose Technology, Spin-Out, and Innovation: Technological Development of Laser Diodes in the United States and Japan PDF
Preview General Purpose Technology, Spin-Out, and Innovation: Technological Development of Laser Diodes in the United States and Japan
Advances in Japanese Business and Economics 21 Hiroshi Shimizu General Purpose Technology, Spin-Out, and Innovation Technological Development of Laser Diodes in the United States and Japan Advances in Japanese Business and Economics Volume 21 Editor in Chief RYUZO SATO C.V. Starr Professor Emeritus of Economics, Stern School of Business, New York University Senior Editor KAZUO MINO Professor Emeritus, Kyoto University Managing Editors HAJIME HORI Professor Emeritus, Tohoku University HIROSHI YOSHIKAWA Professor, Rissho University; Professor Emeritus, The University of Tokyo TOSHIHIRO IHORI Professor Emeritus, The University of Tokyo; Professor, National Graduate Institute for Policy Studies (GRIPS) Editorial Board Members YUZO HONDA Professor Emeritus, Osaka University; Professor, Kansai University JOTA ISHIKAWA Professor, Hitotsubashi University KUNIO ITO Professor Emeritus, Hitotsubashi University KATSUHITO IWAI Professor Emeritus, The University of Tokyo; Visiting Professor, International Christian University TAKASHI NEGISHI Professor Emeritus, The University of Tokyo; Fellow, The Japan Academy KIYOHIKO NISHIMURA Professor Emeritus, The University of Tokyo; Professor, National Graduate Institute for Policy Studies (GRIPS) TETSUJI OKAZAKI Professor, The University of Tokyo YOSHIYASU ONO Professor, Osaka University JUNJIRO SHINTAKU Professor, The University of Tokyo MEGUMI SUTO Professor Emeritus, Waseda University KOTARO SUZUMURA Professor Emeritus, Hitotsubashi University; Fellow, The Japan Academy EIICHI TOMIURA Professor, Hitotsubashi University KAZUO YAMAGUCHI Ralph Lewis Professor of Sociology, University of Chicago Advances in Japanese Business and Economics (AJBE) showcases the work of Japanese and non-Japanese scholars researching the Japanese economy and Japanese businesses. Published in English, the series highlights for a global readership the unique perspectives of Japan’s most distinguished and emerging scholars of business and economics. It covers research of either theoretical or empirical nature, in both authored and edited volumes, regardless of the sub- discipline or geographical coverage, including, but not limited to, such topics as macroeconomics, microeconomics, industrial relations, innovation, regional development, entrepreneurship, international trade, globalization, financial markets, technology management, and business strategy. At the same time, as a series of volumes written by Japanese and non-Japanese scholars studying Japan, it includes research on the issues of the Japanese economy, industry, management practice, and policy, such as the economic policies and business innovations before and after the Japanese “bubble” burst in the 1990s. AJBE endeavors to overcome a historical deficit in the dissemination of Japanese economic theory, research methodology, and analysis. The volumes in the series contribute not only to a deeper understanding of Japanese business and economics but to revealing underlying universal principles. Overseen by a panel of renowned scholars led by Editor-in-Chief Professor Ryuzo Sato, AJBE employs a single-blind review process in which the Editor-in- Chief, together with the Managing Editors and specialized scholars designated by the Editor-in-Chief or Managing Editors, rigorously reviews each proposal and manuscript to ensure that every submission is a valuable contribution to the global scholarly readership. More information about this series at http://www.springer.com/series/11682 Hiroshi Shimizu General Purpose Technology, Spin-Out, and Innovation Technological Development of Laser Diodes in the United States and Japan Hiroshi Shimizu Faculty of Commerce Waseda University Tokyo, Japan ISSN 2197-8859 ISSN 2197-8867 (electronic) Advances in Japanese Business and Economics ISBN 978-981-13-3713-0 ISBN 978-981-13-3714-7 (eBook) https://doi.org/10.1007/978-981-13-3714-7 © Springer Nature Singapore Pte Ltd. 2019 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. 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The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Preface How does a small seed grow into a big tree with a solid trunk? How can we obtain more abundant fruit from the tree? These sorts of questions apply equally to the field of technological innovation. The “big tree with a solid trunk” that we are imagining here is technology a that can be utilized in various fields. The “fruit” refers to va rious applications of the technology. Highly versatile technology is called general purpose technology (GPT) in eco- nomics. A representative example is the steam engine, which brought about the greatest change out of all technologies created during the British Industrial Revolution. With the advent of the steam engine, sailing ships changed to steam ships and horse-drawn carriages turned into steam locomotive trains. Steam engines became widely used as power sources for pumping mines, mills, and cotton facto- ries and changed the world significantly. Highly versatile technologies have had significant impacts on economy and soci- ety. Thus, it is important to produce as much highly versatile technology as possible and harvest the many fruits that follow. In other words, it is important to grow a seed into a big tree with a thick trunk and create the conditions for numerous fruit to ripen. However, the process of achieving these two points is not necessarily straightforward. First of all, few technologies are highly versatile at the moment of conception. The idea of using steam for power was already present in the middle of the seven- teenth century. In the 1670s, a French physicist, Denis Papin, had already created a model steam engine. However, Papin’s model did not lead to practical applications. The first practical steam engine was developed by Thomas Newcomen in 1712 for drainage of a mine. The Newcomen steam engine was used in the Cornwall region of the UK, but even it did not have a big ripple effect. Further improvements were necessary. James Watt increased its thermal efficiency and improved upon Newcomen’s steam engine. However, it still had not generated a big impact even by the year 1800, when Watt’s patent expired. At this stage, the steam engine was still relatively unrefined; its thermal efficiency was 5% or less, which was considerably low. In addition, it produced about 15 horsepower, meaning the difference between v vi Preface a windmill and water mill was slight. Furthermore, the steam engine was heavy, and many suffered failure during use. Numerous cumulative improvements were needed to make steam engines more widely viable in various applications. With the devel- opment of lighter and stronger metals and precision tools, together with deepening thermodynamic knowledge, high-pressure steam engines were realized. As a result of these cumulative improvements, the efficiency and power of the steam engine greatly improved. These improvements were manifested through the accumulation of very small technological developments that are often not noticeable individually. It takes time for such advancements to accumulate. Without these cumulative improvements, however, technology never evolves to be highly versatile, or in other words, never becomes “a big tree with a solid trunk.” Even though one can grow the big tree with a solid trunk, a solid trunk does not always guarantee a bountiful yield, nor are fruits necessarily everlasting. As succes- sive improvements accumulate and technologies mature, the gains obtained from further small improvements will gradually decrease. When a technology becomes mature, it is important to explore new applications for that technology. The greatest argument in this study is that a trade-off exists between the conditions needed to advance a technology to become a solid trunk and the conditions to promote the development of such new applications, to nurture many fruits. In other words, under some conditions, the foundation for a solid truck may exist, but the fruits yielded may not be satisfactory. Alternatively, fruit may grow ahead of the branch leaves, but the trunk is too flimsy to support the fruit. Launching from this analogy of trunk size vs. fruit yield, this study analyzes the influence of spin-outs on innovation. This study explores the case of the laser. Lasers were first created in the 1960s. They have been regarded as highly versatile and have been used in a wide range of applications, such as communications, processing, measurements, and medical treatments. However, as we see in Chap. 4, the wavelength, output, efficiency, mate- rial, and size of the laser vary widely even if all can be called lasers. As such, this study focuses more explicitly on the history of laser diodes, which, of the various laser types, are the most widely used in different applications. Of primary interest are the researchers who conducted laser diode research and development at firms, universities, and research institutes in the U.S. and Japan from the 1960s to 2000s. Via archival documents and oral history interviews, this study analyzes the competi- tion among those R&D researchers, the wider social and economic systems in which they were embedded, and the dynamics between spin-outs and innovations around laser technology. The reason why this study chose to focus on the U.S. and Japan is closely related to arguments surrounding the so-called “Silicon Valley model.” In the 1990s, there was a growing belief in the importance of developing fluid capital markets and labor markets to create innovation. Even in Japan, evidence has often indicated that it is important to develop venture capital and to increase labor mobility that can encour- age startups. In addition, the existence of a network that spreads information regard- ing business opportunities quickly has been considered equally important. It is clear that the Silicon Valley was the inspiration for these beliefs. However, should these systems be improved? That is, do these factors really promote innovation? This is the simple and fundamental question behind this study. How do institutions, such as Preface vii fluid capital markets, labor markets, or flexible networks, influence the two out- comes of “growing a big tree with solid trunk” and “yielding many fruits?” To answer these questions, the chapters in this study will clarify the differences in innovation patterns between the U.S. and Japan as follows. In the U.S., since spin-out competition for submarkets is more widely present, technological trajecto- ries tend to peak out at an early stage while branching widely. Meanwhile, competi- tion in submarkets is not as prominent or fierce in Japan, as many firms advance their own R&D on the same technological trajectory. As a result, Japanese R&D tends to remain continuous over a long period of time, but tends to branch in variety much less frequently or easily. In terms of tree trunks and fruits, for example, under the social system where institutions exist to promote spin-outs, such as fluid capital and labor markets, many fruits are obtained from a highly versatile technology. The original technology is difficult to cumulatively develop as a thick trunk. On the other hand, in a social system with poor institutional support for spin-outs, a technology may grow a thick trunk, but it is not necessarily capable of growing many fruits. This study consists of three main sections. Part I provides background contexts to the analysis of this study. It starts by clarifying the aims and focus of this study. Chapter 1 discusses the purpose and contribution of this study in a more general, rather than academic, context. Chapter 2 reviews previous research and academi- cally positions the aims of this study by identifying the frontier of research on this topic. Chapter 3 presents data analyzed in this study and identifies obstacles and concerns associated with quantitative and qualitative examination of technological development. This study combines a variety of data for analysis; thus, Chap. 3 addresses specific concerns and possible biases related to each data type. Chapter 4 outlines the basic technological characteristics of the laser diodes discussed in this study. This somewhat technical chapter provides background to the main argument of this study. However, this information is not essential to the main argument, and some readers may choose to use it as a glossary rather than reading it straight through. Together, these four chapters of Part I serve to lay out the arguments and data used in Part II’s analysis. The second part depicts the process of technological change from the birth of laser diodes to the present. It describes the process of technological development and dynamics of competition in the U.S. and Japan. Chapter 5 explores the history of R&D of microwaves, which served as a foundation to the birth of laser diode. Chapter 6 looks at R&D competition over continuous room-temperature oscillation of laser diodes and Japanese catch-up, exploring the birth and role of Japan’s researcher community. Chapter 7 looks at the market competition for laser diodes in optical communications since the late 1970s, after room temperature continuous oscillation and sufficient product longevity had been achieved. From the late 1970s, the focus of R&D competition shifted to the longer wavelength band, and Japanese firms and universities were catching up with the US ones. Since the late 1970s, laser diode R&D has been divided between two main applications: (1) optical communi- cations, which we examine in Chaps. 6 and 7; and (2) optical information recording such as CD and DVD players using shorter-wavelength laser diodes, touched upon in Chaps. 8 and 9. Chapter 8 examines the competition over the process of shorten- ing wavelengths during the development of laser diodes for laser discs, CDs, and viii Preface DVDs. Chapter 9 explores how Japan, by focusing on R&D competition over blue laser diodes, produced impressive results leading to the 2014 Nobel Prize in Physics. Chapter 10 explores firms’ strategic actions that took place during this short- wavelength-c entered competition by examining the cases of Panasonic and Sumitomo Electric. Chapter 11 examines changes in industrial organization in the U.S. and Japan. Incumbent firms withdrew from laser diode R&D and simultane- ously numerous spin-outs emerged in the U.S. beginning in the 1980s. In Japan, on the other hand, the withdrawal of incumbent firms seen in the U.S. did not occur until the middle of the 2000s, and almost no spin-outs occurred thereafter. Part III discusses how the different patterns of R&D competition described in Part II emerged in the U.S. and Japan and how they resulted in different patterns of technological development. Using the concepts of technological trajectory and sub- markets, Chap. 12 examines how different patterns of R&D competition emerged in the U.S. and Japan. Chapter 12 contains the central analysis of this study. It argues that the more submarkets develop, the earlier technological development, along with the existing technological trajectory, is stalled or halted. Chapter 13 draws on the history of laser didoes to consider how a technological continuity is maintained within a society. Previous literature indicates that while Japanese firms tend to make a decision from a long-term perspective, the US firms tends to focus on short-term profits because of relatively strong pressure from the capital market. However, the comparative analysis on the technological evolution of laser diodes in the U.S. and Japan clarifies that scientists’ and engineers’ expertise can be easily diverted by managerial coordination in Japan, whereas the continuity of the scientists’ and engi- neers’ expertise is maintained by market mechanisms in the U.S. Through these chapters, this study longitudinally explores technological devel- opment patterns in the U.S. and Japan. However, some important points are not included in these chapters; they are summarized as appendices instead. Appendix 1 discusses the role of universities as a source of human resources in areas with high relevance to science. Several university laboratories played leading roles as centers of excellence in laser diode research both in the U.S. and Japan. These universities produced many experts in laser diodes, many of whom, after graduation, became involved in laser diode R&D by utilizing knowledge accumulated in the university laboratory. Appendix 2 focuses on vertical-cavity surface-emitting lasers (VCSEL), an excellent scientific finding that originated in Japan and came to be industrialized well in the U.S. Appendix 2 examines why the US firms rather than Japanese ones industrialized this technology. Appendix 3 explores high-power laser diodes, one area where R&D progressed well in the U.S. but did not advance much in Japan. All chapters and sections are interrelated, including Appendices. However, those interested in the policy aspects related to innovation might wish to concentrate on Chaps. 1 and 3. If interested in the patters of innovation from the perspectives of a business practitioner, Chap. 9 and Part III may be more relevant. Readers interested in the history of technological evolution of laser diodes should mainly read Part II. Tokyo, Japan Hiroshi Shimizu Acknowledgements This is a book about innovation and mobility. This book evolved from my doctoral dissertation from the London School of Economics. Without my graduate study at LSE, this book would not have existed. I am immensely indebted to Janet Hunter. Her warm support and constructive criticism have been essential to my graduate study. I would like to thank Tom Nicholas, who invited me to analyze technological development. The intellectual and emotional support of both Janet Hunter and Tom Nicholas has been a constant source of encouragement. The weekly graduate semi- nars were always very stimulating. At them I learned a great deal from discussions with faculties and friends. Comments made by Max Schulze and Peter Howlett were particularly important for this book. Nick Craft’s class inspired me to tackle on general purpose technologies. I am indebted to Laura Hein and Joel Mokyr at Northwestern University, where I majored in history of science and technology. My graduate studies at Northwestern provided the important basis for this study. I am greatly indebted to Seiichiro Yonekura, who was my supervisor at Hitotsubashi University. He always greatly encouraged and inspired me. Without him, I would have not been a scholar of Innovation Studies. I cannot express enough thanks to him. And he gave me the opportunity to visit Alfred D. Chandler Jr. Chandler invited us to visit his home and talk about our research and this experience was one of the main factors in my decision to study abroad. Unfortunately, Chandler passed away in 2007. My doctoral thesis did not make it at the last minute. However, it was a big turning point in my life. After I completed my Ph.D., I began to work as a post-doctoral fellow at the Technische Universiteit Eindhoven (TU/e) in the Netherlands. I am indebted to Alessandro Nuvolari, who was my boss there. He is always active and powerful in research and provided me with a lot of insightful research ideas. I am indebted to the Institute of Innovation Research (IIR) at Hitotsubashi University. Discussion with colleagues at IIR contributed greatly to this research. Asami Onuki has always helped me with research, teaching and administration. Thus, this research project has been supported by many scholars and staff. I would also like to express my heartfelt thanks to the scientists, engineers, and ix
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