The necessity of inter-industry mediation for harmonized industrial progress
Book chapter, 2012
Introduction The evolution of human society can be charted by the amounts of energy it has consumed, and by the resulting environmental problems that have resulted. Of particular note is the global warming issue, specifically carbon dioxide (CO2) emissions, which have attracted significant attention, resulting in mandates governing fossil fuel consumption and other environmental technology developments. These developments have, in turn, increased awareness of the need for social science research into understanding how we can facilitate further lowcarbon innovations. The historical evolution of social science research for sustainable societies has been explored in depth (Smith et al., 2010). In their paper, research topics ranging from the success or failure of special new technologies, to the relationships between ‘green engineering’, economics and society were discussed from various viewpoints, including how the concept of environmental innovations should be promoted at national and corporate levels, how the economical rationality of ‘green engineering’ should be explained, and so forth. Why should the economic rationality of ‘green engineering’ be discussed? It has been mandated that technologies that consume exorbitant amounts of fossil fuel be replaced by clean technologies, and that traditional technologies be replaced by new technologies that offer higher energy efficiency. For the power generation sector, this could mean that efforts to switch from thermal power generation techniques that emit significant amounts of CO2 to emission-free technologies such as wind, solar and nuclear power should be accelerated. For illumination, there has been a recent shift from incandescent electric lamps to light emitting diodes (LEDs), while in the transportation sector, there are hopeful developments towards a future shift from internal combustion engines (ICEs) to electric, hybrid-electric and fuel-cell vehicles. However, new technology does not always result in across-the-board increased benefits and convenience. For example, photovoltaic and wind power generation technologies remain economically less efficient than power generation sources that utilize fossil fuel, while nuclear power generation has yet to obtain an appropriate level of social acceptance, and hydrogen fuel carriers struggle with high costs. Similarly, the performance and driving range of electric and fuel cell vehicles are inferior to conventional vehicles, and LED lighting is more expensive than incandescent lamps. Furthermore, the safety levels of lithium-ion batteries, which contain flammable chemicals, as well as those of hydrogen delivery systems, remain an issue. For these reasons, when introducing clean technologies, it is necessary to accept that additional expenses and unexpected accidents may result. Thus, arguments addressing the economic and social rationality of ‘green’ technologies must also address concerns over whether such new technologies are actually beneficial or harmful. The economic and social rationality of new technologies has been one of the primary themes driving innovation research. Henderson classified innovation into four types (Henderson and Clark, 1990). Those innovations achieved by changing the technology core components are ‘modular innovations’ and ‘radical innovations’. The difference between the two is whether the innovation is accompanied by a change in a core concept to the composition of the system. Therefore, an innovation that is actively discussed as a sustainable innovation is a ‘modular innovation’ of a ‘radical innovation’. However, there are also ‘incremental innovations’ and ‘architectural innovations’, which do not require changes in the technology characterizing the core component of the innovation. In such situations, it is not thought that an economical or social disadvantage would result because the adoption of new technology is not indispensable for these innovations. Thus, the economic and social rationality of these innovations have not been the topic of excessive discussion. Instead, innovation procedures introduced from the studies of ‘Kaizen’ (incremental alteration) have been the primary focus of discussion. When a product innovation is achieved within a firm or industry, profit distribution problems can usually be solved by following the rules or trade practices of the particular sector. To achieve sustainable innovations, however, we often have to deal with the fact that these innovations are rarely achieved in a single firm or industry. However, when two or more technologies existing at several industries independently are combined to achieve an innovation, profit distribution among the suppliers of those technologies often becomes an issue. A lot of technologies grown in different industries are necessary for achieving even one environmental criterion. Moreover, many technologies grown in different industries are needed to solve it. To achieve sustainable innovation, therefore, it is necessary to resolve how to distribute profits or other benefits among the multiple independent industries. This chapter explores a case in which profit distribution problems between two traditional industries in Japan become a barrier to the achievement of sustainable innovations that could be achieved by combining leading-edge technologies developed in each industry, and discusses possible measures for how to overcome this barrier. The case focuses on the reasons why the automotive and semiconductor industries in Japan have found it difficult to build effective and mutually beneficial relationships in the field of automotive semiconductor product development. Through the case we intend to identify the government’s role to accomplish the solution.