Revitalization of the Japanese economy beyond the "lost decade" requires a common vision for the future shared by the industry, academia and government. A new system of academia-industry collaboration designed for this purpose should provide people highly competent in cutting-edge technologies, system design, R&D management and mar-keting. Such a collaboration should be based on the global competitive strength of either party. The interaction between them must have positive effects on the education and R&D activities of universities.

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Japan has not acquired real competitive edge in spite of an immense R&D spending, which is at the highest level with respect to GDP among industrialized economies. Among several reasons for which the once leader of the world economy fell behind the U. S. and some other countries after the late 1990's, the most important is the absence of technology market. Statistics reveal that the Japanese industry has very limited interaction with academic circles, and that government subsidies to the R&D in the private sector is scarce, particularly in the cutting-edge fields such as information technology and biotechnology. These circumstances prevent many promising technologies developed by individual enterprises from being appreciated and used by right parties who really need them. However, recent increase in ventures originating from universities is expected to mark a first step to desirable changes.

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In spite of remarkable successes of the European science and technology in certain fields, technology gap between Europe and the United States persists, particularly in leading-edge fields such as biotechnology, nanotechnology and communication technology. Statistics also show weakness of the European high-tech industries. European Commission proposed in 2000 to establish European Research Area (ERA), an integrated research community at the EU level designed for enhancing European sci-tech activities. Principal features of ERA are : networking of leading researchers, mutual accessibility of national R&D programs, enhancing the mobility of researchers, and promoting companies' R&D investments. The E17.5 billion sixth Framework Program (FP6) has a character clearly distinguished from the preceding FPs in that it is intended for helping implementation of ERA. For this purpose, three subsidizing tools were devised : Networks of Excellence (NoE) to form virtual research centers for prominent specialists, Integrated Projects (IP) i. e. strategic grants for larger projects, and the existing Article 169 of the Rome Treaty that enables participation of foreign researchers to national programs.

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China has been drastically reforming its science and technology policy since a decision of the Communist Party in 1985 : a national research fund with a competitive grant system was created, regulations on R&D and technology transfer institutions were lifted, and personnel policy in universities and public research institutes were rendered more flexible. A "Torch Program" launched by the government in 1988 prompted the rapid growth of the Chinese high-tech industry. The "High-Tech Parks" and "Incubators" established in the framework of the program have resulted in more than 20,000 firms employing more than 2 million workers, with a total sales of over 900 billion yuan and a total export of more than $18 million. Networking of R&D organizations is a target of the "Knowledge Innovation Project" launched by the China Academy in 1998. Returnees from the West are playing a very important role in these new trends. It is reported that more than 7,000 Chinese who had been working abroad returned to their native country in the last year. Some Western companies and research organizations have been creating local centers in China. Japan will find lessons to learn from these developments for its own reform in the innovation system.

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Only few developing countries have succeeded to adapt themselves to industrialization and penetration of information/communication technology in the past several years. As a result, gaps between countries in industrialization and economic growth are still increasing. Analysis of data relevant to the performance in industrial development shows that only a limited number of countries has achieved domestic innovation in combination with introduction of foreign technologies ; many developing countries lack their own high-tech capabilities, and supplies labor-intensive products only. Foreign investment cannot trigger a sound growth without prospects of autonomous developments, along with training and education systems for that purpose. Most of the lower-ranked countries have failed to implement any effective policy in this regard. The competitive industrial performance index (CIP) ranking of countries has shown little changes in the past 13 years (1985-98), except that some middle-ranked countries (China, Costa Rica, Malaysia, Mexico, the Philippines, Thailand) have rapidly improved their positions, owing to their participation to the global market activities through multinational enterprises.

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Based on our survey regarding R&D in the Tohoku region, we have established hypothetical models to describe the cooperative study situation with respect to the distribution of researchers in R&D institutes. Research processes are classified as basic, applied and developmental research, and research institutes are categorized into university, public and private sectors. Conclusive explanations are introduced in terms of the goodness of fit of hypothetical models which suggest a concrete execution method for cooperative research.

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An ultimate objective of this study is not only to depict the reality of academic society in Japan, possibly embracing some sort of ambiguous degradation in its stable and established environment, but also to propose a certain strategy to avoid this, overcome this and build a better preferable future. Particularly, in this paper, focussing on how different efficiency observed in different types of organizing process for research activity in universities, a numerical model based on the Complexity Theory was established. The result of a numerical experiment deemed to be very interesting and marvelous, implying that a well-organized group that may be a lectureship group, Japanese typical system, viciously regarded as but-of date, is very appropriate to encourage research activity.

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The virtuous cycle between technology and economic development can be attributed to innovation supported by vigorous R&D investment. The Japanese management system has encompassed the system of "Invisible investment" which controls younger workers' wages keeping lower than the level of the marginal productivity and appropriates this difference toward an investment in the future, and this investment has played not a few role to stimulate the uncertainty investment including R&D investment. While Japan's "Invisible investment" system has similarity with the Stock Option System as both depends on the employee's own contribution, it is unique sophistication system as manager of the firm has a sole authority to decide the objective investment. However, under a new paradigm in the 1990s, corresponding to the bursting bubble economy along with low or negative economic growth and an aging trends, the firm lost the incentive to R&D investment brought by the foregoing system. A recent trend in decreasing R&D investment is considered due to these foregoing mentioned. Based on the calculations of "Invisible investment" and the position of R&D investment in the cost of capital in Japan's manufacturing industry, this paper attempts to demonstrate this hypothetical view focusing on the comparison between the performance of Japanese economy before 1990s and after 1990s. Intensive analysis demonstrated that the system of "Invisible investment" has stimulated the growth of the firm through the following mechanism : "Wage restraint of young age→retained profit increase→investment increase→Growth of the firm→Comparatively high wages at middle and advanced age." However, as recent paradigm change including low or negative economic growth and an aging trends emerges, it is clear that the firm lost the incentive to the R&D expenditure brought by the foregoing system, and it becomes important to construct a system which enable to shift from an increase in investment to an increase in system efficiency in the future.

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This paper provides the conceptual mapping of service innovation to derive implications for service innovation indicators. A OECD's framework of service innovation, based on the Oslo manual, is extended to include non-technological organizational innovation. The focus of this paper is to put on use of IT in service innovation, since IT often plays an indispensable role, as is seen in on-line reservation system, home banking system, POS system etc. In addition to surveying the methodology of innovation indicators, based on the cost side information on innovation, such as R&D and IT investment, the possibility of developing new indicators, taking into account demand side factors, such as consumer surplus associated with service innovation, is investigated.

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