General Purpose Technology, Spin-Out, and Innovation: Technological Development of Laser Diodes in the United States and Japan

319 Pages·2019·5.676 MB·English

by  Hiroshi Shimizu

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
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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
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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