11. Changes in the Industrial Organization: Rise of Spin-Outs

Chandler, A. D. (1994): “The Competitive Performance of U.S. Industrial Enterprises since the Second World War,” Business History Review, 68, 1–72.

Interview [31, 62, 107, 108].

Bromberg, J. L. (1991): The Laser in America, 1950–1970. Cambridge, Mass: MIT Press.

In regards to the demolition of Bell Laboratories, see Temin, P., and L. Galambos (1987): The Fall of the Bell System: A Study in Prices and Politics. Cambridge; New York: Cambridge University Press.

Ibid.

Sarnoff was eventually integrated into SRI International in 2011.

Finisar’s optical transceiver was standardized by the American National Standards Institute in 1992. As a result, Finisar grew rapidly in the optical communication industry. Sales in fiscal year 2014 amount to approximately 1 billion dollars, making it one of the world’s leading optical communication device manufacturers.

Interview [111].

Optical Concepts was later acquired by Gore Photonics.

Agility Communications was later acquired by JDSU.

Terabit Technology was acquired by Ciena in 1998.

Lasertron was bought out by Oak Industries in 1995 at 108 million dollars. Oak Industries was acquired by Corning in 1999. And in 2003, Lasertron’s department was shut down. For details, refer to Purvis, G. (2005): “Axcel Gets Lasertron Pedigree,” III-Vs Review, 18, 40–41.

Ortel was acquired by Lucent Technologies in 1980.

As we will see later, Mooradian left Micracor in 1997 and founded a new startup called Novalux.

Regarding the establishment of SDL and its business, see Jacobs, R. R., and D. R. Scifres (2000): “Recollections on the Founding of Spectra Diode Labs, Inc.,” IEEE Journal of Selected Topics in Quantum Electronics, 6, 1228–1230.

Interview [144].

Jacobs, R. R., and D. R. Scifres (2000): “Recollections on the Founding of Spectra Diode Labs, Inc.,” IEEE Journal of Selected Topics in Quantum Electronics, 6, 1228–1230., p. 1228.

Interview [144].

Interview [144].

Interview [144].

Interview [144].

Interview [144].

Olsen, G. H. (2009): By Any Means Necessary: An Entrepreneur’s Journey into Space. Princeton, NJ: GHO Ventures, LLC., p. 62.

Ibid., p. 59.

Ibid., p. 64.

Interview [150].

Olsen, G. H. (2009): By Any Means Necessary: An Entrepreneur’s Journey into Space. Princeton, NJ: GHO Ventures, LLC., pp. 75–76.

Interview [105, 106].

Furthermore in 1998, Botez established a startup called Alfalight specializing in the design and manufacture of high-power laser diode. Interview [31].

Interview [31, 150].

Regarding the development of RCA’s video disc, see Graham, M. B. W. (1986): RCA and the Videodisc: The Business of Research. Cambridge Cambridgeshire; New York: Cambridge University Press.

Interview [144].

Forrest, S. R., L. A. Coldren, S. C. Esener, D. B. Keck, F. J. Leonberger, G. R. Saxonhouse, and P. W. Whumate (1996): “JTEC Panel on Optoelectronics in Japan and the United States Final Report,” Baltimore, Maryland: Japanese Technology Evaluation Center/International Technology Research Institute.

Industrial Bank of Japan (1990): “The Prospects for the Optoelectronics Industry (Hikari Sangyo no Shorai Tenbo),” Kogin Chosa, 250, 2–120., p. 77.

Regarding the relationship between venture capital and technology-intensive sector, see Bygrave, W. D., and J. A. Timmons (1992): Venture Capital at the Crossroads. Boston, Mass.: Harvard Business School Press, Florida, R., and M. Kenney (1988): “Venture Capital-Financed Innovation and Technological-Change in the USA,” Research Policy, 17, 119–137, — (1988): “Venture Capital and High Technology Entrepreneurship,” Journal of Business Venturing, 3, 301–319, Gompers, P. A. (1994): “The Rise and Fall of Venture Capital,” Business and Economic History, 23, 1–26.

Bygrave, W. D., and J. A. Timmons (1992): Venture Capital at the Crossroads. Boston, Mass.: Harvard Business School Press., pp. 52–62.

Robin Huang, who founded TeraDiode, said in an interview that “it was not so difficult to find a venture capital, as the technology was garnering quite a lot of attention.” Interview [81]. In addition, although the aforementioned Greg Olsen struggled because he had no experience of pitching a business to a venture capital, he said that finding a venture capital itself was not difficult. Interview [150]. Gill (2000) also points out that many venture capitals invested in optical communication lasers. Gill, J. M. (2000): “Lasers: A 40-Years Perspective,” IEEE Journal on Selected Topics in Quantum Electronics, 6, 1111–1115.

Ghosh, S., and R. Nanda (2010): “Venture Capital Investment in the Clean Energy Sector,” Harvard Business School Working paper, 11–020.

About DARPA, see Fuchs (2010). Intense debate has been made thus far on the relationship between the demands of the U.S. defense and the development of the technology and its appropriation to the private sector. For example, Utterback and Murray (1977) points out that demands from the national defense formed the initial market for the technology, and was responsible for supporting its development. However, as Gansler (1980) indicates, since the price elasticity for the demands of national defense and the private sector significantly differ, it is not that easy to divert technology developed for national defense. To divert something to the private sector, it is first necessary to lower the cost and standardize it. However, this is not always achieved for the production cost of technologies developed for national defense. Molina (1989) shows the transition of the impact of national defense in the R&D of electronics in the United States.

Fuchs, E. R. H. (2010): “Rethinking the Role of the State in Technology Development: DARPA and the Case for Embedded Network Governance,” Research Policy, 39, 1133–1147, Gansler, J. S. (1980): The Defense Industry. Cambridge, Mass.: MIT Press, Molina, A. H. (1989): The Social Basis of the Microelectronics Revolution. Edinburgh: Edinburgh University Press, Tirman, J. (1984): The Militarization of High Technology. Cambridge, Mass.: Ballinger Pub. Co, Utterback, J. M., and A. E. Murray (1977): The Influence of Defense Procurement and Sponsorship of Research and Development on the Development of the Civilian Electronics Industry. Cambridge: Massachusetts Institute of Technology, Center for Policy Alternatives.

Markusen, A. R., and J. Yudken (1992): Dismantling the Cold War Economy. New York: Basic Books, Slaughter, S., and G. Rhoades (1996): “The Emergence of a Competitiveness Research and Development Policy Coalition and the Commercialization of Academic Science and Technology,” Science, Technology, & Human Values, 21, 303–339.

For example, the U.S. Department of Defense budget for laser research in 1963 was about 20 million U.S. dollars Kragh, H. (1999): Quantum Generations: A History of Physics in the Twentieth Century. Princeton, New Jersey: Princeton University Press., p. 390.

Many researchers in the United States have pointed this out. Interviews [28, 31, 56, 63, 64, 141].

Interviews [74, 80].

Block, F. (2008): “Swimming against the Current: The Rise of a Hidden Developmental State in the United States,” Politics and Society, 36, 169–206, Fuchs, E. R. H. (2010): “Rethinking the Role of the State in Technology Development: DARPA and the Case for Embedded Network Governance,” Research Policy, 39, 1133–1147.

Ibid.

US Department of Defense (1986): “Defense Financial and Investment Review,” Washington, DC.

Lichtenberg, F. R. (1992): “A Perspective on Accounting for Defense Contracts,” Accounting Review, 67, 741–752, Rogerson, W. P. (ibid. “Overhead Allocation and Incentives for Cost Minimization in Defense Procurement,” 671–690, Thomas, J. K., and S. Tung (ibid. “Cost Manipulation Incentives under Cost Reimbursement: Pension Costs for Defense Contracts,” 691–711.

Thomas, J. K., and S. Tung (ibid. “Cost Manipulation Incentives under Cost Reimbursement: Pension Costs for Defense Contracts,” 691–711.

For details, refer to Shimizu, H., and S. Kudo (2011): “How Well Does knowledge Travel? The Transition from Energy to Commercial Application of Laser Diode Fabrication Technology,” Business and Economic History On-Line, 9.

Dupuis, R. D., and M. R. Krames (2008): “History, Development, and Applications of High-Brightness Visible Light-Emitting Diodes,” Journal of Lightwave Technology, 26, 1154–1171.

For Holonyak and its laboratory graduates, see Appendix 1.

Interview [28].

Interview [28].

Dupuis, R. D., and D. P. Dapkus (1977): “Room-Temperature Operation of Ga_(1-X)Al_xas/GaAs Double-Heterostructure Lasers Grown by Metalorganic Chemical Vapor Deposition,” Applied Physics Letters, 31, 466–468.

Interview [28]. Tirman (1984) also points out that the Department of Defense was also favorable towards diverting technology to the private sector. Tirman, J. (1984): The Militarization of High Technology. Cambridge, Mass.: Ballinger Pub. Co.

Collins illustrates the importance of implicit knowledge in R&D. Collins, H. M. (1999): “The Tea Set: Tacit Knowledge and Scientific Networks,” in The Science Studies Reader, ed. by M. Biagioli. New York: Routledge, 95–109, Collins, H. M., and R. G. Harrison (1975): “Building a Tea Laser: The Caprices of Communication,” Social Studies of Science, 5, 441–450. Regarding formal knowledge and implicit knowledge in new product development of a firm, see Nonaka, I., and H. Takeuchi (1995): The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation. New York: Oxford University Press.

To see list of projects that had received investment from SBIR and STTR, visit https://​www.​sbir.​gov/​

Chesbrough, H. W. (1999): “The Organizational Impact of Technological Change: A Comparative Theory of National Institutional Factors,” Industrial & Corporate Change, 8, 447–485.

Cole (1979) analyzed the fluidity of Yokohama and Detroit and demonstrated that in Yokohama, the percentage of workers who never changed job since their first employment opportunity increased after postwar to 76.5% between 1966 and 1970. In Detroit, that ratio was 36.8% from 1966 to 1970, with more than 60% of workers experiencing a job change. Cole, R. E. (1979): Work, Mobility, and Participation: A Comparative Study of American and Japanese Industry. Berkeley: University of California Press.

Shapira, P., and International Research Group on R&D Management. (1995): The R&D Workers: Managing Innovation in Britain, Germany, Japan, and the United States. Westport, Conn.: Quorum Books.

Sato, H. (1995): “Corporate Careers of R&D Personnel,” in The R&D Workers: Managing Innovation in Britain, Germany, Japan, and the United States, ed. by P. Shapira, and International Research Group on R&D Management. Westport, Conn.: Quorum Books, 45–58.

Sakakibara, K. (1995): R&D Management of Japanese Firm (Nihon Kigyo no Kenkyu Kaihatsu Manejimento). Tokyo: Chikura Shobo.

The IPC codes provided by the Japan Patent Office for laser diode technology are Japanese File Index (FI) = H01S5/00, H01S3/094, H01S3/091, H01S3/096, H01S3/103, H01S3/133, H01S3/18, H01S3/04, H01S3/08, and H01S3/23. The equivalent US Codes (USC) are 372/43$, 372/44$, 372/45$, 372/46$, 372/49$, 372/50$, and 372/75. The International Patent Classification (IPC) codes are H01S5/$, H01S3/018, and H01S3/019. $ indicates truncation of the subclasses. This study uses the USC and IPC codes for identifying patents on laser diodes granted by the USPTO.

Hirsch, J. E. (2005): “An Index to Quantify an Individual’s Scientific Research Output,” Proceedings of the National Academy of Science of the United States of America, 102, 16,569–16,572.

Aoki, M. (1988): “The Ranking Hierarchy of the J-Firms as Incentive Scheme,” in Information, Incentives, and Bargaining in the Japanese Economy, ed. by M. Aoki. Cambridge; New York: Cambridge University Press, 49–98, Itoh, H. (1994): “Japanese Human Resource Management from the Viewpoint of Incentive Theory,” in The Japanese Firm: The Sources of Competitive Strength, ed. by M. Aoki, and R. P. Dore. Oxford: Oxford University Press, 233–264.

The citation frequency disclosed here is as of the end of March 2007.

For example, see Aoki, M. (1988): “The Ranking Hierarchy of the J-Firms as Incentive Scheme,” in Information, Incentives, and Bargaining in the Japanese Economy, ed. by M. Aoki. Cambridge; New York: Cambridge University Press, 49–98, Dore, R.P. (2000): Stock Market Capitalism: Welfare Capitalism: Japan and Germany Versus the Anglo-Saxons, Oxford University Press, Oxford, UK; New York.

Bygrave, W. D., and J. A. Timmons (1992): Venture Capital at the Crossroads. Boston, Mass.: Harvard Business School Press, ibid., Florida, R., and M. Kenney (1988): “Venture Capital and High Technology Entrepreneurship,” Journal of Business Venturing, 3, 301–319, Gompers, P. A. (1994): “The Rise and Fall of Venture Capital,” Business and Economic History, 23, 1–26, ibid., Gompers, P. A., A. Kovner, D. S. Scharfstein, and J. Lerner (2010): “Performance Persistence in Entreprenuership and Venture Capital,” Journal of Financial Economics, 96, 18–32, ibid., Kaplan, J. (1995): Startup: A Silicon Valley Adventure. Boston: Houghton Mifflin, Kenney, M. (2000): Understanding Silicon Valley: The Anatomy of an Entrepreneurial Region. Stanford, Calif: Stanford University Press, Saxenian, A. (1994): Regional Advantage: Culture and Competition in Silicon Valley and Route 128. Cambridge, Mass.; London: Harvard University Press.

Aoki, M., and R. P. Dore (1994): The Japanese Firm: The Sources of Competitive Strength. Oxford, UK; New York: Oxford University Press, Itami, H. (1994): “The “Human-Capital-Ism” of the Japanese Firm as an Integrated System,” in Business Enterprise in Japan: Views of Leading Japanese Economists, ed. by K. Imai, R. Komiya, R. P. Dore, and D. H. Whittaker. Cambridge, Massachusetts: MIT Press, 73–88, Itoh, H. (1994): “Japanese Human Resource Management from the Viewpoint of Incentive Theory,” in The Japanese Firm: The Sources of Competitive Strength, ed. by M. Aoki, and R. P. Dore. Oxford: Oxford University Press, 233–264.

Jeng, L. A., and P. C. Wells (2000): “The Determinants of Venture Capital Funding: Evidence across Countries,” Journal of Corporate Finance, 6, 241–289.

Bozkaya, A., and W. R. Kerr (2014): “Labor Regulations and European Venture Capital,” Journal of Economics and Management Strategy, 23, 776–810.

Da Rin, M., G. Nicodano, and A. Sembenelli (2006): “Public Policy and the Creation of Active Venture Capital Markets,” Journal of Public Economics, 90, 1699–1723.

Clinton, B., A. Gore, and United States. President (1993–2001: Clinton) (1993): Technology for America’s Economic Growth: A New Direction to Build Economic Strength. Washington, DC: President of the U.S.: For sale by the U.S. G.P.O., Supt. of Docs.

Campbell-Kelly, M., and W. Aspray (1996): Computer: A History of the Information Machine. New York: Basic Books., p. 283.

Executive Order 13011 Federal Information Technology, 17, July 1996.

For surface emitting lasers, see Appendix 2.

Gill, J. M. (2000): “Lasers: A 40-Years Perspective,” IEEE Journal on Selected Topics in Quantum Electronics, 6, 1111–1115., p. 1114.

Forrest, S. R., L. A. Coldren, S. C. Esener, D. B. Keck, F. J. Leonberger, G. R. Saxonhouse, and P. W. Whumate (1996): “JTEC Panel on Optoelectronics in Japan and the United States Final Report,” Baltimore, Maryland: Japanese Technology Evaluation Center/International Technology Research Institute., p. xvii.

“Fujitsu Quantum Devices Co., Ltd. Starts Business After Being Restructured”, ‘Fujitsu Quantum Device Co., Ltd. – Press Release’, October 1, 1997.

“Fujitsu and Sumitomo Electric Will Integrate Compound Semiconductor Business at End of Next April”, ‘Nikkan Kogyo Shimbun’, December 26, 2003.

“Mitsubishi Electric Withdrew from Red Laser – Deferred the Commercialization of ‘Violet-Blue’ As Well”, ‘Nikkan Kogyo Shimbun’, December 10, 2009.

“Sony Restricted Semiconductor Capital Investment for Next Fiscal Year to 1 billion U.S. dollar (100 billion yen)”, ‘Nikkan Kogyo Shimbun’, November 8, 2007.

“Toshiba Closed Post-Process Factory in Shizuoka – Terminated Sale of Laser Diode”, “Nikkan Kogyo Shimbun”, January 12, 2010.

“Philips Withdrew from Semiconductor & Cut 4000 Workers”, ‘Nihon Keizai Shimbun’, September 5, 1990.

“Philips Transferred Light-Related Business to U.S. Firm – Even Invested in that Firm”, ‘Nikkei Sangyo Shimbun’, April 23, 1998.

“NEC Developed Two Kinds of Low-Priced Visible Light Consumer Laser Diode, Selling for Less Than 100 U.S. dollar (10,000 yen) a Unit Starting in March”, ‘Nikkei Sangyo Shimbun’, January 22, 1982.

“Fujitsu, Low-Price Offensive via DAD Visible Light Laser Diode – Sample Shipment to Start in February”, ‘Nikkei Sangyo Shimbun’, January 27, 1982.

“Sanyo Establishes Mass Production Technology for Visible Light Laser Diode – Monthly Volume of 10,000 Units in Summer”, ‘Nikkei Sangyo Shimbun’, May 14, 1982.

“Sony Outsources Laser Diode”, ‘Nikkei Sangyo Shimbun’, November 14, 1984.

“Rohm, the World’s First Practical Application of MBE – Enters Laser Diode”, ‘Nikkei Sangyo Shimbun’, November 29, 1984.

It was said that Haruo Tanaka had decided to implement MBE. Interview [163].

“Hitachi Makes Comeback with CD Laser Diode – Aims for 100,000 Units Next Year”, ‘Nikkei Sangyo Shimbun’, April 17, 1985.

“Laser Diode Price Plunge Due to Intensified Competition”, ‘Nikkei Sangyo Shimbun’, February 1, 1989.

“Laser Diode for CD Player Drops to 1.85–1.9 U.S. dollar (185–190 yen) a Unit”, ‘Nikkei Sangyo Shimbun’, August 8, 1990. “Laser Diode Market Drops, Demand Back to Where it Used to be, and Inventory in Surplus”, ‘Nikkei Sangyo Shimbun’, May 2, 1992.

If a journal/book does not provide a title in English, the title is translated into English and the original title in Japanese is in the bracket.