To Rival Japan, Rival Its R&D

To a U.S. executive busy downsizing his company, competition from Japan may seem less threatening against the backdrop of Japan's plunging profits and impending credit crunch. But to executives at the keiretsu that dominate Japanese industry, big is still beautiful. They continue to invest heavily in long-term research and development and rely on synergy to keep their global competitive edge.

Hitachi, Toshiba, Fujitsu, NEC, Mitsubishi Electric, and Matsushita are all sticking with the same vertically integrated model. There's no more striking example than Hitachi Ltd.. Its board of engineer-managers is making plans very similar to those of the past three decades. The goal is growth, more integration, and the discovery of new synergies among its 33 research labs, 28 factories, and 800 subsidiaries.

Hitachi builds nuclear reactors. How about a nationwide energy network? It also makes Shinkansen bullet trains. How about a magnetic-levitation railway? Hitachi's giant computers, automated steel plants, and rolling stock factories will be essential to such systems. Says r&d Chief Yasutsugu Takeda: "People think Hitachi is an integrated company now. They haven't seen anything yet." With world-class design and manufacturing skills in chips, fiber optics, wireless and video technology, Hitachi is made for multimedia--the biggest industry buzzword since color TV.

Forget Japan's financial turmoil. Are its competitors investing enough in r&d to counter the long-term investments of the keiretsu? U.S. companies are not. In this election year, government policy that included vastly increased r&d encouraged by tax incentives would be a good idea.

Before it's here, it's on the Bloomberg Terminal.