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Assessment of Policy

Case Aims: To assess the benefits claimed for one nation's innovation support policy

One the best-known examples identified as critical for Japan's global economic success in the late twentieth century was the activities of the country's Ministry of International Trade and Industry (MITI). The accepted view of external observers in countries such as the UK and the USA was that MITI's economic policies and expenditure prioritisation were the key reason for success in sectors such as semiconductors, consumer electronics, computers and cars.

In their assessment of the claims of the role of MITI, Beason and Weinstein (1995) concluded that the organisation had a much lower impact than had previously been claimed. They noted that although the Japanese government provided assistance to a sector of industry and this sector exhibited growth, this does not necessarily imply that government assistance caused the growth. They pointed out that supporters of the MITI model do not mention poor outcomes for Japanese aircraft projects, biotechnology projects or the fifth-generation computer project. This is because these and many other industrial policy favourites yielded few positive results. Furthermore many of MITI's projects were in place for years or decades before the successful industry began to grow. This time lag possibly indicated that the emergence of appropriate market conditions, and not expenditure by MITI, was the more likely sector catalyst.

From an extensive review of Japanese industry, Beason and Weinstein concluded that industrial policy tools used to support high-growth industries in Japan were of no real benefit. In fact it appeared that sectors most favoured by government interventions tended to be slow-growth industries. As a consequence, subsidised sectors such as textiles, mining and steel continued to get bigger and this mis-allocation of resources may well have damaged less subsidised sectors such as consumer electronics. Furthermore they found the application of industrial-sector support tools was highly unsystematic, with some sectors benefiting from one measure and simultaneously suffering from some other contradictory one. This outcome caused the researchers to conclude that Japan exhibited traits in relation to supporting innovation very similar to those used by the French and American governments—politically driven, favour-based, uniformed and biased decisions that in most cases have been unhelpful to the respective overall economic performances of these nations.

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