Virtuous cycle between R&D, functionality development and assimilation capacity for competitive strategy in Japan's high-technology industry

Under an unexpected long-lasting economic stagnation, R&D activities in Japan's leading industries have been stagnating leading to destruction of Japan's ambitious virtuous cycle between technology and economic growth. Considering that Japan is undergoing a paradigm shift from an industrial society to an information society that emerged in the 1990s structural sources of such economic stagnation can be attributed to qualitative heterogeneous nature of such paradigm shift. Provided that new functionality development, the globalization of the economy and consequent global technology spillovers increase as an information society emerges, R&D activities, functionality development and assimilation capacity for effective utilization of spillover technology construct a subtle dynamic structure essential for the firms' competitive strategy and decision-making policy. This article, in order to reconstruct competitive strategy for Japan's high-technology industry by shifting a vicious cycle to a virtuous cycle between R&D, functionality development and assimilation capacity, analyzes the dynamism regarding the impacts of functionality development on assimilated spillover technology leading to gross technology stock with significant contribution of sales and R&D intensity. Keywords; Functionality development; Versatality; Competitive strategy; Self-propagating structure; Japan's high-technology industry