Trading in the shares of Internet-related venture businesses is booming on the Japanese stock market. The media are full of reports on information technology and Internet-based e-commerce. Computer and telecommunications technologies are bringing revolutionary changes to society, but Japan and the United States have radically different ways of developing those technologies.

In the U.S., trading in high-tech shares continues to boom, but e-commerce is slowing down. Share prices of e-commerce companies for consumers have dropped 30 to 40 percent from their highs. Contrary to initial expectations, those companies have so far failed to produce high profits.

The stock price of the online bookstore Amazon.com has fallen 40 percent from its high. Some investors have given up on e-commerce stocks. U.S. stock prices are said to be inflated, but that is not entirely true; individual shares are bound to fall if the companies fail to produce profits. This merely indicates the soundness of the U.S. stock market.

Attracting increasing attention on the U.S. market are the traditional high-tech manufacturers of telecommunications equipment (which form the basis of the Internet infrastructure) and large-scale integrations for telecommunications, optical fibers and other components.

In Japan, however, the shares of a handful of Internet-related companies are fetching sky-high prices on the stock market. Some small companies have an abnormally high market value of outstanding shares, although little is known about their business operations. They could betray investor confidence and end up as swindlers.com.

Some U.S. Internet-based companies also offer little information about their main business activities — investment or noninvestment. However, there are strict legal restrictions on the operations of U.S. investment companies, and stock analysts tend to keep a critical eye on them. Most companies try to make profits in noninvestment business.

Nurturing good venture businesses requires more than raising capital on the stock market. They must have technological expertise as the basis of their operations.

Some venture companies grow on their own, but many U.S. venture businesses that have developed into large companies through the successful marketing of their products had their roots in government-funded basic research at universities. Many venture businesses, thanks to technology transfers from universities and research institutes, have higher technologies than big companies. They derive their strength from basic research.

Japan and the U.S. have different approaches to the development of technologies. The U.S., backed by clearly defined strategies, promotes the development of basic technologies, encourages commercial applications of technologies, provides development funds, work out policies for the popularization of technologies and establish relevant legal and tax systems in a comprehensive way. If a problem develops, the entire project is quickly revised.

U.S. basic research is funded by the Defense Advanced Research Project Agency and the National Science Foundation. The Internet, developed with the help of DARPA and NSF, has grown into a giant network. Sun Microsystems, Cisco Systems and a few other leading U.S. high-tech companies are offshoots of DARPA-funded research.

In its early years, the Clinton administration proposed the creation of a high-speed “information superhighway” to improve national education, and this encouraged private investment in the Internet. The new telecommunications act of 1996 removed barriers in telecommunications and broadcasting, contributing to the popularization of the high-speed and low-cost Internet. This step-by-step approach has culminated in the U.S. Internet boom.

To expand e-commerce, the symbol of information technology, much more work is required.

E-commerce sites should be tightly protected against hackers who try to steal important information. In the U.S., as in Japan, the theft of credit-card data is rampant. Security is the foundation of e-commerce, but there is no fail-safe protection against theft of data. Constant efforts to prevent theft are required. The U.S. has yet to offer complete Internet security, but Japanese Internet-related companies lag far behind in the protection they offer.

Protection of individual privacy on the Internet has raised serious concern in the U.S., even involving President Bill Clinton. In addition, even tighter security is essential regarding payment on the Internet, and identification systems for participants in online transactions must be established. What is required is better infrastructure for Internet service.

Investors tend to lose all their investments on venture businesses that get into financial trouble. If the boom in stock trading on the Internet fizzles out, venture businesses with a potential for listing could permanently lose their chances for raising capital.

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