Measuring stocks of technological knowledge to enable decisions on R&D investment

Summary form only given. Following World War II, Japanese companies imported basic technologies from Europe and the US, and successfully utilized them to their advantage. However, at the beginning of the 1980s, both European and American companies began protecting their intellectual properties. Therefore, Japanese companies have recognized the need to develop fundamental technologies themselves, and that they need substantial investment in research and development (R&D) to do so. This situation creates the important question of how R&D funds should be allocated, given the many areas of research. For these reasons, this paper first tries to focus on a process between the investment aspect of R&D and its effect on Japanese industry. Second, it introduces a concept of technological knowledge with a transportation mechanism. Third, it defines how the output of R&D clearly depends on technological knowledge, and finally, offers future R&D investment strategies. This paper creates a "techno-dynamics model." It introduces the decision-making process as "ratio of R&D expenditure to sales" and "distribution ratio in terms of R&D character." Also, it redefines the concept of technological knowledge, based on the notion is that it is an accumulation of information about how to produce output-papers, patents and goods-that can be measured by R&D expenditure.