Hitachi: Management Practices for Innovation in Global Industrial Research

Global collaborative research is now the well-recognized, common and definite necessity among high-technology industries world-wide, because of the following reasons. First of all, the rapidly changing advanced technologies require all participants to be constantly prepared to be competitive at the front-end of such new technologies. High-technology industries must always face the serious issue of continuous huge investment in R&D in the very competitive technology area, in order to survive and especially in order to extend and strengthen their business in the future. This is, however, becoming quite harsh for many industrial companies, who are experiencing great pressure after the breakdown of the bubble economy. In the case of Hitachi, approximately US$ 4.1 billion (consolidated figure; assuming US$ 1 = 124 Yen,) were invested in R&D during the fiscal year 1996 while the sales were US$ 68.7 billion. R&D was about 6% of consolidated sales of Hitachi Limited. However, in this period, profit percentage was much less than the R&D percentage. In 2005 and 2006, around 4.5% of consolidated sales were invested in R&D within the Hitachi Group. In the future, since competition will be more severe and advancement in technologies will become faster, it is possible that investment in R&D will become more important for the survival of industrial companies, even though their profit rate may remain small like today.