Technological Innovation and Economic Development in Modern Japan

Guan Quan

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000245691
• Edition: 1
• Topic: Commerce
• Subtopic: Commerce Général

As the first volume of the two-volume Industrial Development in Modern China: Comparisons with Japan that studies the different paths of industrialization and economic modernization between China and Japan, this book analyzes the relationship between technological innovation and economic development in Japan before World War II.

The author deploys econometric analysis, multivariate statistical analysis and case studies from different industries to shed light on technological innovation in the Japanese context with particular emphasis on the importance of the patent system. A great deal of new inventions and patents in this period led to fast economic growth in Japan characterized by the simultaneous development of both traditional and modern industries. These insights help reshape the understanding of Japan's economic development and industrial advancement at an early stage and provide pointers to developing countries as to how human capital, social capabilities and thereby technological innovation can figure in economic growth.

This volume will appeal to academics of the East Asian economy, development economics and modern economic history as well as general readers interested in the miracle of the Japanese economy as the first to achieve economic development and modernization among non-Western countries.

Part I

Preliminary investigation

1Topic and outlook

Section 1 Introduction

Nowadays, it is recognized that technological advance and technological innovation are the driving force for the long-term economic development of a country. The first and second industrial revolutions in the eighteenth and nineteenth centuries, as well as technological advances in scientific fields, for example, the semiconductor revolution in the late twentieth century, have spurred on economic development. People also eagerly await the great scientific and technological advances in the near future, and the resulting economic growth. This expectation can be explained by the fact that the economic development in major countries to date has indeed benefited from legions of scientific and technological advances that have occurred. Western Europe, North America, Japan, and even China have seen rapid economic growth in recent years have benefited tremendously from the great strides in technology such as IT and the internet.

Economic research on the role of technological advance and innovation in economic development can be traced to the 1950s.¹ It has became more colorful since the 1970s and includes groundbreaking theoretical research, and a wealth of empirical analysis; it is geared to developed countries in Europe and the U.S., and has produced huge results in developing countries. It covers the current short-term changes, and also provides research on historical changes. It can be said that there is a cornucopia of literature on the subject.²

Nevertheless, the study theme of this book is Japan before World War II. There are achievements galore regarding Japanese economic development in this period, but studies on technological innovation are few and far between. Japan at that time was the first country with a non-Western culture to learn from the West and it made significant achievements. If we say Western European and North American countries adopted similar Christian cultures, Japan is part of the East Asian Confucian cultural circle and has its unique features. In the early days of economic development, it lagged far behind the West. Despite the “advantage of backwardness,” it would be hard to catch up if there was too large a gap, as evidenced by the reality in many developing countries today. There is a huge gap between developing and developed countries. Even if there is the “advantage of backwardness,” few countries can now catch up with the developed countries. The reasons for this are myriad: political, economic, social and cultural. However, the lack of “social capability” is an indisputable fact. Social capability embraces many aspects, such as natural resources, human resources, science and technology, the education system, and government competence. This book studies the relationship between technological innovation and economic development in modern Japan, while technological innovation and advance is also part of social capability.

Section 2 Topic, perspective, materials, methods, scope

I. Topic and perspective

(1) Research topics

Except for industrial technology policies, the research on technological advance in Japan before World War II have probably been conducted using the following two methods: the calculation of total-factor productivity (TFP) or the rate of technological advance, and case studies. The former studies the whole country or the major industrial categories, while the latter is geared towards individual industries, individual periods, and individual enterprises. Based on the results of these two kinds of research, it can be said that technological advances in Japan before World War II can largely be explained. However, the former shows the “surplus” after the contribution of factor inputs to output growth is eliminated. It is, in a sense, a black box and cannot account for the specific content of technological advances. In other words, it does not explain what specific factors constitute the TFP, although it is generally recognized that it includes technological advance, economies of scale, improved management, and improved proficiency. The endogenous growth theory that emerged after the 1980s gets rid of this weakness of using technological advance as an exogenous variable, while human resources, research and development (R&D) and other factors become endogenous. Considerable progress has been made in this regard. However, this endogenous growth model may be applicable to developed countries or middle-income countries, but not to countries that have yet to see economic take-off or are just seeing the start of modern economic growth, because good education resources and technology, a mature market, pioneering entrepreneurs, and a promising government are absent in these countries. Compared to this type of research, the accumulation of case studies is vital, but a drawback of this kind of research is that it is hard to produce a universally applicable theory. Therefore, the combination of theory and practice, and macro and micro perspectives offer the best solution. Nevertheless, due to a lack of data, this is extremely difficult. This is also the top subject in the research in this field, namely how to overcome these difficulties and the approach truth as far as possible.

The second subject is that previous research on technological advances before World War II concerned technology choice rather than technological innovation, and comprehensive studies were few and far between. The reasons are twofold: first, Japan achieved technological development before World War II mostly by importing technology from advanced countries, studying it, then making some improvements. All in all, this is imitation. Because the overall technological level in Japan at that time was low, it was hard to produce high-level innovation and, as a result, research had a low value. However, compared to technological innovations, the import or the popularization of technology is more closely related to economic activity, and is therefore more appropriate for economics research. Second, in comparison to the technology choice and the popularization of technology, the data on technological innovations is scarcer. For instance, data on R&D expenditures and R&D personnel at the industries and enterprises are practically nonexistent, and information on new products and processes is also few and far between.

This book attempts to study the two topics above. It is an analysis of the relationship between industrial development and technological innovation in Japan before World War II, in the hope of figuring out the type of relationship between economic development on the one hand and industrialization and technological innovations on the other hand, as well as the underlying reasons and conditions. We believe that economic development in Japan before World War II was, in large measure, linked to technological advances and technological innovation. We hope to perform studies from the perspective of the entire industry and specific sectors.

(2) Research perspective

Economic development always follows on the heels of changes in the industrial structure. The most basic logic and empirical rule about changes in the industrial structure is Petty-Clark’s law,³ which is verified by the fact of economic development in the vast majority of countries.⁴ Moreover, W.G. Hoffmann divided the manufacturing sector, a main sector of the second industry, into consumer goods and investment goods. Through the measurement of added value, it has been concluded that the higher the proportion of investment in the goods sector, the lower the consumer goods sector. This is called the “Hoffmann ratio.”⁵. Moreover, the approach of dividing the manufacturing industry into light industry and heavy industry is similar to Hoffmann’s idea. This classification was popular in the early days, especially in socialist countries and Japan.⁶ Nowadays, the manufacturing sector is often classified using labor-intensive and capital-intensive approaches, but this is not absolutely accurate, in that some industries have a dual character and are both capital- and labor-intensive, such as the electronics sector. Some industries have a high technology content, resulting in a technology-intensive category.

“Dual structure” is often mentioned in development economics, especially when studying the developing countries in the early days and the present developing countries. The so-called “dual-structure” theory divides the economy into traditional and modern sectors. Traditional sectors include those which have low productivity without using modern machinery and equipment such as agriculture and handicraft. Modern sectors are those which have high productivity by using machinery and equipment. It is generally recognized that as the share of modern sectors increases in economic development, the share of traditional sectors will dwindle.⁷ In addition, the concept of dual structure is sometimes applied to other sectors, such as large enterprises and SMEs in manufacturing, and traditional and modern industries.

Furthermore, research on traditional industrial theory emerged in Japan after the 1970s. These scholars chiefly researched the issues of traditional industries in the early days of economic development. These scholars including Takeshi Abe (1989), Takafusa Nakamura (1997), and Masayuki Tanimoto (1998) mainly researched the issues of traditional industries in the early days of economic development as far back as the Edp period?

(3) Insights

This book conducts analysis from the viewpoint of dual structure. This is chiefly based on the reality in modern Japan, which had been pressing ahead with modernization and industrialization since the Meiji period. On the one hand, it imported modern industries and technologies from Western Europe. On the other hand, traditional sectors played an important role. The two coexisted for a long time. Research results are abundant from this perspective, but most of these are attributed to the field of labor economics.⁸ There were also some studies from the angle of technological advance, albeit they are small in number. Closely related to this book are those by Susumu Hondai (1992), Yukihiko Kiyokawa (1995), and Husao Makino (1996). The research by Susumu Hondai is geared to the manufacturing sector, which is divided into large enterprises and small and medium enterprises (SMEs). Analysis was conducted using the data contained in the Statistics Table of Factories, especially the problem of organizational innovation issues caused by the division of labor among enterprises. Yukihiko Kiyokawa’s research chiefly concerns the issue of technology popularization in traditional industries, including the agricultural sector. The research of Husao Makino selected some representative industries from traditional sectors and modern sectors for comparison. The analysis focuses on technology choice and technology popularization.

As distinct from the perspectives of the above researches, this book mainly divides the manufacturing industry into traditional and modern industries, and carried out quantitative analysis of the manufacturing industry. It is concluded that this plays a greater role in traditional industries in modern Japan. On this basis, by gleaning and analyzing patent data, the author analyzed industrial development and technological innovation, and concluded that technological innovation has played an important role in industrial development.

II. Data, methods and scope

(1) Data used

As the quantitative data on the intensity and speed of technological innovations, the R&D expenditure and the number of researchers (sometimes technicians) are usually used as input indicators. New products and processes, as well as the number of papers and patents are used as indicators of output. However, in Japan before World War II, there were no other types of data, especially data on the manufacturing sector except for patent statistics. There are barely any statistics for individual companies and industries, much less data that can be pieced together over a long time. This book chiefly collects and uses material on patents, so that it can be used to measure the output of R&D activities as far as possible.

There are a few results in which patent materials are used to study industrial and economic development in Japan before World War II. Tadashi Ishii (1980–1982) analyzed the data on patents, but this was limited general observations and explanations, and did not provide comprehensive in-depth analysis of industrial development. Keijiro Otsuka (1987) and Yukihiko Kiyokawa (1995) analyzed the fiber industry from different perspectives. In the case of the cotton industry, the former used relevant investigations as indicators of adaptive technological innovation, and studied how imported technologies induced domestic technological innovation. The latter cited technological innovations in six different aspects of the fiber industry, and compared their characteristics with others from the perspective of entrepreneurship. Further, Tadashi Ishii (1979) specifically analyzed individual inventors.

In the six decades from the establishment of the patent system in 1885 to the defeat of Japan in 1945, Japan granted some 160,000 (490,000 applications) invention patents. In forty years from the promulgation of the Utility Model Act in 1905 to 1945, a total of 340,000 (950,000 applications) utility models were granted. This mass of patent data was not valued by scholars in the past and was rarely used. Of course, in addition to a poor understanding of technological innovation at the time, there are also problems with the patent materials. For example, technology and industry classifications are different, and many adjustments are required before these can be used.

The material on patents used includes statistical data and data from literature. The statistical data are chiefly based on official publications such as the Annual Report (Table) of Japan’s Patent Office,⁹ the Japanese Statistical Yearbook, and the Statistics Table of Agriculture and Commerce, as well as statistical data from Japan’s Patent Office. Document literature includes the Detailed List of Inventions and biographies of inventors, as well as literature featuring the commendations and evaluations of inventors. The specific literature is explained in detail in each chapter. The basic data is explained according to the purpose of this book, and any problems and limitations are pointed out.

For example, there are concerns about the data on quantity. Continuous data on the number of invention patents and utility models by category and country mainly stem from the Annual Report (Table) of Japan’s Patent Office, the Japanese Statistical Yearboo...

Table of contents

• Cover
• Half Title
• Series Information
• Title Page
• Copyright Page
• Contents
• List of figures
• List of tables
• Foreword
• Part I Preliminary investigation
• Part II Characteristics of innovation and development
• Part III Conditions for innovation and development
• Part IV Cases of innovation and development
• Part V Concluding remarks and implications
• References
• Index