1. Introduction

1.1 Bi-polarization of Technopreneurial Trajectory

Japan incorporates an explicit function in technology substitution for scarce resources which enabled rapid economic growth in the 1960s.

This was followed by technology substitution for energy in the 1970s leading to the world's highest energy efficiency and high-tech.miracles in the 1980s.

However, it reacted to non-elastic against paradigm shift to an information society.

New recovery in the early 2000s can be attributed to the fusion of indigenous strength in MT ("East") and the cumulative learning of digital economy ("West").

Figure 1: Japan's Development Trajectory (1960-2007)

Electrical Machinery

Japan's leading electrical machinery firms demonstrate bi-polarization in their technopreneurial trajectories.

Virtuous cycle in Group A between OIS and MPT, while vicious in Group B

Figure 2: Technoprenurial Positions of 19 Electrical Machinery Firms (2001-2004)

Chemical Industry

Similar bi-polarization can be observed also in leading chemical industry firms.

Contrast can be attributed to effective utilization of external resources or NIH syndrome.

Figure 3: Technopreneurial Positions of 30 Chemical Industry Firms (2001-2004)

1.2 R&D Profitability

Electrical Machinery

Bi-polarization of technopreneurial trajectory results in the contrast of R&D profitability among high-technology firms.

Canon maintains conspicuously high OIS while its R/S is reasonable level leading it conspicuous R&D profitability.

Figure 4: OIS, RS and OIR in Japan's 10 Leading Electric Machinery Firms (1980-2005)

Chemical Industry

Similar to Canon, Shin-Etsu Chemical maintains conspicuously high OIS while its R/S is reasonable level which leads to Shin-Etsu's conspicuous R&D profitability.

Figure 5: OIS, RS and OIR in Japan's 16 Leading Chemical Industry Firms (1990-2005)

Transport Equipment

Similar to Canon and Shin-Etsu, Toyota also maintains conspicuously high OIS while its R/S is reasonable level leading Toyota's conspicuous R&D profitability.

Figure 6: OIS, RS and OIR in Japan's 10 Leading Transport Equipment Firms (2006)

Conspicuous R&D profitability in Canon, Shin-Etsu and Toyota.

1.3 Global Technopreneurial Strategy in High Profitable Firms

Figure 7: Global Technolopreneurial Strategy in High R&D Profitable Firms

2. New Stream of Innovation

2.1 Five Dimensions of New Stream

Self-propagating Functionality Development through Innofusion

In mobile driven innovation, new functionality emerged in a self-propagating way in a process of diffusion, not at development stage, as from talk to see, see & talk, take a picture, pay and watch.

Figure 8: Self-propagating Dynamism in Functionality Development of Japan's Mobile Phones

Integration of Production Function and Diffusion Function

As paradigm shifts to an information society, spot where innovation takes place shifts from production site to diffusion process leading to the significance of production diffusion integration: innofusion function.

Figure 9: Integration of Production and Diffusion Functions

Utilization of External Resources for Production

MPF constructs a self-propagation between high-performance, high-information density and involvement of broad stockholders.

Table 1
Comparison of IPO Performance in Japan's 577 IPO Firms (2003-2005)

Figure 10: Self propagating Mechanism by External Resources Utilization

Shift to Service-oriented Manufacturing

1. Increasing significance of FD in innofusion process accelerates customers' demand of variety of goods which necessitates filling-up of information discrepancy.
2. Under such circumstances, the role of information carriers, initiated by retail firms (imitator), typically EEMRs (electric and electronic mega retail firms) has became crucial leading to substituting for the role of manufacturing firms (innovator).
3. This constructs a self-propagating development by involving customers similar to an open innovation leading to service-oriented manufacturing.

Figure 11: EEMR's Role as Information Carrier Inducing Customers' Involvement to Service-oriented Manufacturing

Shift to Open Innovation

Shifting from innovator (p) to imitator (q) in the diffusion process induces higher FD as was demonstrated by the shift from Web 1.0 to Web 2.0.

Figure 12: Trend in the co.jp Domains by the Bi-Bass Model (May 1993-Dec 2020) (May 1993-Jun 2006: actual, and Jul 2006-Dec 2020: extended estimates by the model using May 1993-Jun 2006 data)

Figure 13: Trends in Functionality Development of Web 1.0 and Web 2.0

2.2 Institutional Change in the Innovation Model

Five Dimensions of New Stream

5 dimensions of new stream stimulate synergy of FD, innofusion, external resources utilization and coopetition leading to new innovation generation model.

Figure 14: Five Dimensions of New Stream

Strategic Options for Sustainable OIS Increase

This new innovation generation model explicitly provides strategic options for sustainable OIS increase.

Figure 15: Options for Sustainable OIS Increase

3. Functionality Development

3.1 Functionality Development in a Diffusion Process

Functionality Development Concept

Table 2: Functionality Development Concept

Prolongation Effort to Functionality Development

Table 3: Logistic Growth Model & Bass Model

Prolongation Effort to Functionality Development

Prolongation effort to functionality development can be depicted by the diffusion model.

Figure 16: Obsolescence and Prolongation Effort to FD

3.2 Emergence of Functionality Development in a Diffusion Trajectory

Timing of Functionality Development Emergence

Figure 17: Level and Timing of Inflection in Diffusion Trajectory

Governing Factor of Functionality Development

Figure 18: Acceleration of FD Emergence Depending on Assimilation Capacity

Level of Functionality Development Depending on Assimilation Capacity

Since level of gross technology stock T increases in a cascading way depending on assimilation capacity z, and timing of FD emergence is accelerated as T increases, level of FD can be classified as decreasing FD, constant FD and sustainable FD depending on assimilation capacity.

Figure 19: Comparison of Growth Trajectory between Simple and Multi Logistic Growth

3.3 Sustainable Functionality Development

Timing of the Functionality Development

Figure 20: Timing of the Emergence of Functionality Development

Requirement for Earlier Functionality Development Emergence

Table 4: Requirement for Earlier Functionality Development Emergence

Boundary Satisfying Functionality Development Emergence

Figure 21: Areas Satisfying Earlier FD Emergence

3.4 Requirement for Sustainable Functionality Development

Follower Substitutes for Leader

Table 5: Follower Substitutes for Leader

Strategy for Substitution

Table 6: Concept of Imitator Substitutes for Innovator

4. Functionality Development through Knowledge Transfer

4.1 Canon's Innovation Option

Technological Diversification Strategy: Intra-firm Technology Spillover

Canon depends on technological diversification strategy which maximizes the effect of intra-firm technology spillover such as camera to copying machine, printers and digital camera.

Figure 22: Canon's Technological Diversification Paths

Co-evolutionary Trajectory between Printers and PCs - Coopetition

As a consequent of such technological diversification strategy, Canon constructed co-evolutionary trajectory between printers and PCs. Called coopetition: cooperation with competitor.

Figure 23: Co-evolutionary Trajectory between Canon Printers and PCs (1976-1998)

4.2 Shift from Web 1.0 to Web 2.0

Shifting from innovator (p) to imitator (q) in the diffusion process induces higher FD as was demonstrated by the shift from Web 1.0 to Web 2.0.

Figure 24: Trend in the co.jp Domains by the Bi-Bass Model (May 1993-Dec 2020) (May 1993-Jun 2006: actual, and Jul 2006-Dec 2020: extended estimates by the model using May 1993-Jun 2006 data)

Figure 25: Trends in Functionality Development of Web 1.0 and Web 2.0

4.3 Sustainable Functionality Development Condition

Figure 26: Sustainable Functionality Development Condition

4.4 Knowledge Transfer in Open Innovation: Co-evolutionary Domestication

Development Step of Co-evolutionary Domestication

Figure 27: Development Step of Canon's Co-evolutionary Domestication

Co-evolutionary Domestication Dynamism

Thus, Canon has constructed a comprehensive co-evolutionary domestication dynamism consists of:

1. Market stimulation by providing attractive innovation,
2. Inducement of self-propagating FD in the market,
3. IVF leveraging vendors innovation,
4. Domestication by TFL and inducement through coopetition, and
5. Intra-firm technology spillover

Figure 28: Scheme of Canon's Co-evolutionary Domestication

Suggestion to New Business Model

Canon's fusing option provides insight to new business model. It can be compared to Google's business model, while Hitachi's model can be compared to that of Microsoft.

Figure 29: New Business Model: Comparison between Microsoft vs Google and Hitachi vs Canon

Suggestive Structure by R&D Profitable Firms

Unique structures in firms with a conspicuous accomplishment such as Canon, Shin-Etsu and Toyota can be identified as fusion between the "East" and the "West" through global co-evolution based on their global technopreneurial strategies.

Figure 30: Global Co-evolution Scheme

Inducing Co-evolution Domestication

Noteworthy is that Canon has constructed a comprehensive system leading to co-evolutionary domestication of the fusing fruits from not only its rival firms but also the market in which customers and rival firms are conducting co-evolutionary fight. All can be attributed to Japan's indigenous institutional systems.

Figure 31: Dynamism Inducing Co-evolutionary Domestication

5. Conclusion

1. Co-evolutionary dynamism between innovation and institutional systems is essential for an innovation driven economy.
2. Japan indigenously incorporates an explicit function inducing co-evolutionary dynamism.
3. Although its dynamism shifted to the opposite in the 1990s, a swell of reactivation emerged in the early 2000s.
4. This can be attributed to hybrid management fusing the "East" (indigenous strength) and the "West" (lessons from an IT driven new economy).
5. Noteworthy success in such management can be seen typically in Canon, Shin-Etsu Chemical and Toyota through global co-evolution.
6. This strategy corresponds to new stream of innovation which depends on functionality development in the diffusion process.
7. Given the declining nature of functionality development, sustainability of this function has become crucial to a firm's competitiveness, which necessitates an earlier emergence of functionality development.
8. An earlier emergence of functionality development depends on knowledge transfer by means of follower substitution for leader which also enhances the functionality development level.
9. This substitution corresponds to the dynamism induced by open innovation.
10. Consequently, functionality development through knowledge transfer should be considered decisive to a firm's competitiveness in an open innovation environment.

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