489 Japan’s post-war economic success: Deming, quality, and contextual realities

Importing US technology
The Japanese have successfully used a variety of means to acquire the US
technology that formed the basis of their economic and commercial success. For

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Journal of
Management
History
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496
a nation which has long been noted for having one of the lowest rates of
spending for pure, non-commercial, research and development activities how
did they manage to acquire the technology necessary to leap-frog from being a
third-rate manufacturer to the dominant force in the “high-quality” consumer
product marketplace? A technical answer is extraordinarily complex, but,
simply stated, the Japanese bought it, extorted it, or stole it. The Japanese
government and private sector employed a variety of non-tariff barriers that
“encouraged” licensed manufacturing agreements to ensure entry into the
Japanese market and a highly discriminatory patent registration system that
allowed domestic businesses to pre-empt foreign inventors seeking to secure
protection from counterfeiters.
Licensing 
The concept of licensing rather than reinventing manufacturing technology
dovetailed perfectly with Deming’s concepts of statistical process control and
the infusion of quality throughout the production process. He helped the
Japanese to understand that the high-output, high-precision, nature of modern
manufacturing standards required the infusion of state-of-the-art technology
with the capability to reduce product inconsistencies arising from variations in
both the human factor and the idiosyncratic machinery employed throughout
the production process.
The Japanese have long regarded the USA as the most important source of
advanced technology, which they acquire through licensing agreements.
Licensing – whereby one company provides another company with the rights to
make, use, or sell a proprietary product – is the most common alliance between
Japanese firms and those in the USA. Licensing enables firms to acquire needed
technology as well as to gain access to markets and overcome regulatory
obstacles. While Americans license from and exchange technologies with
Japan, the majority of licensing agreements involve Japanese purchases of
licensing rights from the USA.
Table II summarizes the imbalance in technology licensing flows between
the two countries. For instance, the ratio of licensing and royalty fees paid by
Japan to the USA, versus fees paid by the USA to Japan, was approximately
9:1 in 1982, more than 5:1 in 1990, and greater than 6:1 in 1991.
1982
1990
1991
($ billion)
($ billion)
($ billion)
Paid by Japan to USA
< 0.9
2.58
3.2
Paid by USA to Japan
< 0.1
<0.5
<0.5