2002 Reports

Has Japan's innovative capacity declined?

Branstetter, Lee; Nakamura, Yoshiaki

This paper examines Japan's R&D performance since the early 1980s using several complementary modes of analysis. First, we examine evidence from aggregate economic statistics concerning changes in Japanese corporate R&D. Second, we analyze comprehensive data on R&D inputs and outputs for a panel of nearly 200 Japanese firms. Microeconometric analysis of this data set allows us to examine where any downturn in R&D activity is concentrated, what Japanese firms are themselves doing to rectify the downturn in performance, and what effects these steps have had to date. Third, we relate the results of interviews with corporate R&D managers and informed industry observers concerning their perceptions of changes in Japanese innovative capacity and the reasons for these changes. We find evidence, at the micro level and the aggregate level, of a slowdown in the growth rate of Japanese research productivity in the 1990s.