SANO: In some cases it is accurate, and in some cases not. My company has some joint-business relationships with a certain American company, so let me speak from my experience, if I may. First, we think that any technology that can be copied is not a true technology. Our company is based on high technology: We develop tools to develop microprocessor-based systems. Since the day we founded the company, we knew that our technology, by its very nature, could not be easily copied.
But that said, it is still very important to choose the right partner. You have to choose a company that's not in the same field you are. For example, we had an alliance with a software company in the States, a small company in Silicon Valley. The two of us are in different fields. We are not interested in software, and they are not interested in developing tools to make microprocessors. We are, in a sense, complementary businesses.
Another example. We are talking with a company in Oregon at the moment. In the first stage, we are going to have joint marketing; in the second stage, joint manufacturing. The third stage will involve joint engineering.But once again, we have made sure that we don't have head-on competition, that we're going to be complementary to each other.
NAGAMORI: I agree with all that, but let's look at Japan proper and ask who it is that we should have the greatest misgivings about. And the answer is: large Japanese businesses. They have a tendency to steal technology from medium-size and small companies in Japan. We know this from experience. We established our company, and came up with a very outstanding product at the outset. But we were very small, and although we should have applied for a patent, we didn't have the capability. So we put our product on the market, and suddenly the big companies began producing the same things; most people, in fact, probably think that it was we who copied the product from the big companies. So I would say to you Americans, when you think about doing a joint venture in Japan, beware of big Japanese companies. You shouldn't be suspicious of the small companies. We are proud of our own technology; we would never be so cheap as to steal technology from you.
KATO: Over the past 30 years, I have dealt with three of what might be called joint ventures. In terms of numbers, they were successes, but in terms of mentality, they were failures. For the American side, they were successes, but for the Japanese side, they were failures. Let me explain why.
The American manager who shook hands on one of the ventures was a man of very high standing. He could speak and read Japanese, and he knew Japanese Bushido, the Japanese discipline of the samurai. But in the next 30 years, the presidency of the U.S. company changed three times, each time for the worst with respect to their understanding of Japan. Meanwhile, 10 years ago, the Japanese partner was on the brink of bankruptcy, with the result that the U.S. partner acquired a majority interest in the venture. This was most unfortunate, for the American managers proved to be very shortsighted. They were myopic. Revenues of the joint venture were registered on a consolidated basis, so that despite the Japanese losses, the American company could show a profit. Each president had a short-term investment in that profit: It would improve his stock options during his tenure in office. But this also meant that they did not want to invest in the Japanese company for the longer term; indeed, each president seemed to quit as soon as he had maximized his stock options.
INC.: Myopia is also causing problems in U.S. venture businesses. In the past six to nine months especially, we've seen many venture businesses going under because of just that sort of shortsightedness. At the same time, larger companies in the United States are becoming more aggressive, leaner, much stronger competitors. They've learned a lot from the venture businesses. It may even be true that, in a sense, we are seeing the end of the venture business boom in America. Is this happening in Japan as well?
KATO: Japanese venture business is still in its embryonic stage, the boom having started in Japan only in 1980 or 1981. So, yes, there are people in this country who say that venture businesses are not working out, that the big businesses are on the counterattack, and that the venture businesses will soon disappear. I don't go along with this. It is much too early to tell. I would like to stress that point.
NAGAMORI: This is perhaps off the point, but earlier I made some provocative remarks about American businessmen, and I'd like to correct them. I am very grateful to the Americans. I was born in 1944, and I was able to grow, literally, because of the powdered milk that was supplied to us by Americans. It was also thanks to Americans that I was able to grow my business. I established my company in 1973. We started with only four people, and I used my house as the office. Japanese big business never accepted our products. Big businesses in this country are always very particular about your past achievements, your performance, your age. They didn't trust us, which is why we went to the United States. And the American big businesses were very warm to us. We told them that we were a new company, that we hadn't any history, and they simply said, "We praise your courage." More importantly, they bought our products. This would have been inconceivable in Japan. In Japan, even if it was me sitting on the opposite side of the desk, even I would probably say, "I won't buy those products." But American businesses were very open-hearted: They provided us with indispensable support. So you see, I started out feeling that the United States was a wonderful society, which is why I so regretted the problems I ran into later. I just want to qualify, somewhat, my earlier statements. I also want to make sure some of our American deals don't get canceled. [Laughter]
