TEAMING UP : When It Comes to Forging Alliances, Japan Proves a More Willing Partner

Four years after Amgen negotiated its first joint venture with a Japanese firm, the biotechnology company’s bargainers are still marveling at the speed and simplicity of the talks and at the unlikely identity of their new partner.

Amgen’s previous joint ventures in the United States typically involved months of haggling, and the 40- to 50-page written agreements that emerged explicitly addressed every contingency. In contrast, the Thousand Oaks-based company struck its Japanese deal to commercialize a genetically engineered substance for treating kidney disease in just three days.

More strikingly, when Amgen bargainers read some of Kirin’s two- or three-page agreements with other companies, the Americans were astonished to find such phrases as “this will be worked out,” “this will be considered later” and “this will be refined.”

Recalled Philip J. Whitcome, Amgen’s director of strategic planning: “There was no nit-picking--the focus was on the big picture, on the long-term success of the venture. They came into the talks with a positive attitude. They weren’t thinking about what their bailout position might be if things soured.”

The Amgen-Kirin linkup underscores a key finding in an international survey of top corporate executives conducted by The Times and the Booz-Allen & Hamilton management consulting firm: that Japanese are much more comfortable than Americans about entering into alliances, consortiums and other cooperative ventures. In an era of rapidly changing technology, where each new advance is more costly than the one that came before, this could give the Japanese a key edge--not only in the battle against U.S. rivals but also in dealings with the other growing Pacific economic powers.

“The era of U.S. technological self-sufficiency has come to an end,” said Herbert I. Fusfeld, director of the Center for Science and Technology Policy of the Rensselaer Polytechnic Institute School of Management in Troy, N.Y. “As a nation, we need to better develop our skills and our confidence to negotiate purchases of technology.”

Although American executives acknowledged the growing need for cooperative research ventures, both in the United States and abroad, the survey found that U.S. firms were not as upbeat about alliances as their Japanese or other Asian counterparts. Fully 84% of the Japanese firms said alliances are beneficial, compared to 78% of the non-Japanese Asian firms and just 57% of the U.S. firms. Remarkably, almost three out of 10 of the U.S. participants in the survey said that alliances are dangerous--compared to just 4% and 5% of the Japanese and other Asian firms, respectively.

There was similar divergence on the question of whether industrywide consortiums are an effective approach to developing technology. In the United States, 33% found such cooperative ventures effective or somewhat effective; none found them highly effective. In Japan, on the other hand, 8% found consortiums highly effective and an additional 55% rated them as effective or somewhat effective.

“The urge to be self-sufficient remains strongly rooted in the American psyche at a time when economic realities dictate that neither companies nor even countries can go it alone,” said Alan G. Chynoweth, vice president of Applied Research of Bell Communications Research, the research arm of the seven Bell regional operating companies.

“In our society, which glorifies the rugged individualist and emphasizes confrontation, cooperation is the recourse of last resort,” added William C. Norris, chairman emeritus of Control Data and one of the most vocal backers of cooperative research ventures in the United States. “You cooperate when nothing else works.”

Held Back Top Talent

“It took me 12 years and three tries to get MCC organized,” he added, referring to the ground-breaking Microelectronics & Computer Technology Corp., the private sector cooperative venture in Austin, Tex., that funds long-term research aimed at significant advancements in computer technology.

When the consortium finally got off the ground, members were reluctant to send their best scientists to work there, according to retired Admiral Bobby Inman, MCC’s former chief executive. Inman rejected 90%of the top researchers offered by consortium members. Today, eight out of 10 of MCC’s 294 scientists are direct hires and only 20% come from member companies.

Even MCC’s most ardent backers admit that it is too early to tell whether the 6-year-old venture is a success. “We’re ahead on some projects, behind on others,” said William D. Stotesbery, MCC’s director of government and public affairs. And while some incremental product improvements have resulted--NCR recently introduced an artificial intelligence product based on research from MCC--there have been no great breakthroughs from the venture’s laboratories.

Still, Charles E. Sporck, chairman of Sematech, the new government-funded consortium of major semiconductor makers, and also the head of National Semiconductor, is optimistic about prospects for cooperation in the United States. “American views about cooperation are changing but only because we have been humbled by international competition,” he said. “Humble people have a way of cooperating more effectively than people riding a crest of success.”

Indeed, since 1984, when Congress unanimously passed the National Cooperative Research Act relaxing antitrust laws, 69 research consortiums have registered with the government, according to the Commerce Department’s Office of Productivity, Technology and Innovation. Lansing R. Felker, a department official, called the new groupings “a first tentative step away from traditional U.S. corporate individualism,” but he fears that not enough is being done.

For example, Felker criticizes U.S. managers for their faith in acquisitions as a source of new technology. “Relying on acquisitions is a pain-averse strategy that is far less threatening than, say, cooperative research,” he said. “Acquisitions can be done by the numbers, on purely investment criteria. You don’t have to go through the agony of rethinking what you are doing and why you are doing it.”

The Times/Booz-Allen survey found that 53%of U.S. companies look to acquisitions as one of their three leading sources of new technology for the next 10 years, compared to just 7% of the Japanese companies.

“The traditional American concept of a deal means buying another company and controlling it totally,” said survey participant Gary E. Liebl, president and chief executive of Cipher Data Products. “By comparison, the challenges and complexities of strategic partnering are enormous.”

In his view, Japanese companies are more comfortable getting technology through cooperative ventures “because they have more experience. They had do it in the aftermath of World War II.”

Forced to License

If U.S. companies are wary of alliances, it may be because they have been burned so many times in the past. “The U.S. experience, especially in terms of Japan, has not been too positive,” noted John Choy, senior economic analyst of the Japan Economic Institute of America in Washington. “Early on, the Japanese government was able to force U.S. companies to license technology to Japanese companies at very advantageous terms.”

For example, when IBM sought permission to set up a wholly owned operation in Japan, the government set as a condition the licensing of IBM’s key patents to all interested Japanese firms. Similarly, Texas Instruments was forced to license a basic patent for the manufacture of semiconductors to Sony in the mid-1960s. A license gives its buyer the right to use the seller’s proprietary technology for a one-time fee or royalties.

“The Japanese managed to obtain licenses fairly inexpensively for the entire technology that launched them in integrated circuits,” Choy said. “They took that technology and they ran with it. And now, the Japanese are being cautious about licensing their own technology to the Koreans and to other Asian nations because they know what can happen.”

Indeed, between 1950 and 1978, Japanese entities entered into 32,000 contracts to import technology to Japan, paying $9 billion during the period, according to a study by Akio Etori, a Japanese writer on science and technology. “In other words, for a fraction of the U.S. annual expenditure on science and technology, Japan closed the technology gap,” Etori wrote in 1980.

American leaders in such cutting-edge fields as biotechnology and superconductors are trying hard to prevent the experience from being repeated. “Biotechnology was starting to go down the same path as semiconductors, but the American companies realized what was happening and they pulled back,” Choy said. “Today, you will see a lot of joint production agreements (between U.S. and Japanese firms), but there are few transfers of core technology.”

Some of the American protectiveness may stem from a feeling of having been burned in dealings with Asian companies. Even Amgen, while boasting of its good relationship with Kirin, cited “a Japanese effort to penetrate and ultimately dominate the U.S. biotechnology industry” in a complaint last week with the International Trade Commission against a different Japanese company. The complaint, which charges that Chugai Pharmaceutical infringed on Amgen’s patent, seeks to bar Chugai’s imports of erythropoietin into the United States. This is the same substance Amgen is developing with Kirin.

Ahead in Alliances

Still, the Times/Booz-Allen survey found that U.S. companies were widely viewed as somewhat or very willing to share technology--in marked contrast with the Japanese. Only 3% of the non-Japanese Asian respondents, for example, said that U.S. companies were unwilling to share technology; 46%said the Japanese were unwilling to share technology.

Despite this perceived Japanese stinginess, the Asians seemed about equally disposed toward forming alliances with U.S. and Japanese firms. This may reflect Japan’s proximity to the developing nations of Asia and Japan’s perceived edge in manufacturing technologies.

Already, the Japanese are substantially ahead of the United States in developing alliances with companies in the rapidly growing nations of Asia. Three times as many South Korean firms have formed alliances with Japanese firms as with U.S. firms, the survey found.

“The data disputes the widely held view that memories of World War II would hurt Japan’s economic penetration of Asia,” said Eric R. Zausner, senior vice president in charge of business consulting in the United States for Booz-Allen.

A PIONEERING U.S. RESEARCH CONSORTIUM Microelectronics & Computer Technology Corp., or MCC, is a private-sector research consortium aimed at significant advances in computer technology. Founded in 1982 in Austin, Tex., the consortium’s objective is to develop generic technology that can be used by its members to produce their own proprietary products and services. Shareholders include; Advanced Micro Devices, Boeing, Control Data, Digital Equipment, Eastman Kodak, General Electric, Hewlett-Packard, Hughes Aircraft, Lockheed Missiles & Space, 3M, Natioanl Semicondeuctor, NCR, Rockwell International and Westinghouse Electric.