Support Policies For Technological Innovation In The United States And Japan: A Comparative Analysis

The support policies for technological innovation are means of great importance and effectiveness in dealing with the problems of financing for technological innovation. The policies, which are financial guarantees of the completion of National Innovation System (NIS), are well developed in the United States and in Japan. However, because of the differences in economic structures and cultural background between the two countries, the support policies for technological innovation differ. Therefore, a comparative analysis of the support policies for technological innovation would set us be particularly aware of the significance of the policies, and what is more, reveal the regularity and draw the morals, in order to develop the support policies for technological innovation in China, as well as to strengthen the technological innovation ability of Chinese enterprises in international competition.With positive analysis and comparative study, this thesis attempts to provide for its readers a precise description and illumination of the support policies for technological innovation in the United States and Japan. The comparative analysis consists of three facets1, namely, the policies of government subsidy for technological innovation, the policies of tax preference for technological innovation, and the policies of risk investment for technological innovation, followed by the enlightenment on Chinese support policies for technological innovation.The thesis is composed of five chapters. The first one illuminates the related theories of technological innovation, the financing of technological innovation and its policy. By now, no coherent definition has been made for technological innovation. However, a common ground could be generated from those definitions about it, which means the process from the research and development (R&D) of a product to its commercialization for the first time. Many theories expounded the stimulative mechanism for technological innovation after J. A. Schumpeter. The Uncertainties of technological innovation settle on the high-risk of technological innovation and the policy-making of financing. The thesis discourses two theoretical principles of financing for technological innovation, namely, the uncertainties (by K. J. Arrow) and the capital for innovation (by J. A. Schumpeter). Meanwhile, it also discourses two theoretical principles of the support policies for technological innovation, namely, technological innovation diffusion and NIS (by C. Freeman). This beginning chapter thereupon finished the construction of the theoretical system of the thesis.The following three chapters from the second to the forth are based on the analysis of three aspects, government subsidy, tax preference and risk investment separately, as well as comparisons of them between the two countries. In the second chapter, it is demonstrated that the two governments both give prominence to their policies of government subsidy for technological innovation, however, with some differences in their influence and objects. The US government grants special preferences to the loan guarantees for technological-innovation enterprises, with most of direct subsidy flows to basic science research. Japanese government, by contrast, is in preference of direct subsidy. Japanese government, instead of the market, sets the orientation, the speed and the size of the development of industry and technology.The third chapter presents an analysis of polices of tax preference for technological innovation in the United States and in Japan. A large amount of analogy could be found in the policies of tax preference between the two countries, for example, preferential treatment to the excess disbursal for R&D, depreciation of fixed assets, and encouragement to the cooperation among the government, enterprises, universities and institutions. However, the activities of technological innovation in American enterprises tend to be stimulated by market competition, while on the other hand, in Japan, by government intervention. Generally, the differences in policies of tax preference between the two countries are slight.Comparisons on policies of risk investment for technological innovation between the two countries constitute the forth chapter, which demonstrates that the affection of risk investment is more obvious in the United Stated than in Japan. American risk investment is completely based on market mechanism, with little influence from banking and insurance upon enterprises' behaviors. Therefore, American enterprises could make more eligible choices on projects of technological innovation. Both the developed free market economy and the over-the-counter market provide American risk investment with better development and easier withdrawal. On the contrary, Japanese risk investment is less developed, and is much affected by banking and insurance. As a result, the venture capital is difficult to be concentrated for technological innovation in high-technology enterprises, considered as an un-neglectable obsession. Japanese venture capital, compared with its American counterpart that focuses onto the early stage, flows into the intermediate and advanced stages of the innovation process. Moreover, its speed of circulation is extremely slow.The fifth chapter, the last one of the comparative analysis, enumerates the disadvantages of support policies for technological innovation in China, as well as the enlightenment generated from above. China has its particular background and environment of technological innovation and the economic system. Therefore, the experiences from the two developed countries could not be imitated. We are supposed to construct support policies for technological innovation with Chinese characteristics, according to the basic condition and the fundamental realities of our nation. We should strengthen applied research, based on the intensification of fundamental research. We should also increase the investment in fundamental research and high-technology industry in the field of policy of government subsidy for technological innovation. As to the policy of tax preference, we should enact more detailed preferential clauses according to different degrees of risk in different R&D fields, as well as balance the emphasis and average preference. The policy of tax preference should retain for a long time in order to benefit the construction of the NIS and the development of the society. In the aspect of the policy of risk investment, we should use available capital to combine the strategic restructuring of the resources and the development of high-technology industry. The stock market and the bond market should play their very important roles to make venture capital ope into and from the market.The characteristics of this thesis lie on the illumination of the theoretical principles of the financing for technological innovation and its policies, based on which positive analysis is used as the main research technique for a thorough comparison of the support policies for technological innovation between the United States and Japan. However, the discussion remains to be deepened. On one hand, we advocate that the market should function more effectively to achieve the allocation of resources. The commercialization of products is the necessary outcome of technological innovation. Therefore, Chinese enterprises should carry out the innovation activities in accordance with market's requirements2. On the other hand, since the support policies for technological innovation is part of government intervention, Chinese government should meet the needs of the development of enterprises and the requirements of the construction of NIS. For this reason, the formulation of the support policies for technological innovation should take into account every aspect of the whole process of innovation. Therefore, the research on and the analysis of the support policies for technological innovation, as it were, are burdens of heavy responsibilities, which will proceed in the future.1 No comparison on the policies of government procurement for technological innovation in included in this thesis. Please see Note 26 on P. 47 for the explanation.2 Here the ?market? refers not only to perfect competitive market, but also to captive market, such as a market formed by the government purchasing a series of products of technological innovation.