During the past thirty years, Japan has developed global preeminence in many technologies used for both military and commercial applications, without making significant investments dedicated to the military economy. The United States, by contrast, has pursued guns and butter simultaneously by directing public expenditures toward military goals. As a result, its defense establishment became the largest single source of R&D funding in the world. Despite this massive effort directed toward military ends, the relative strength of the U.S. technical base has declined. The author, in a forthcoming book, examines how Japan’s concept of national security developed to encompass technological strength and how its institutions support that concept. This excerpt looks in detail at the pathways along which technology is diffused within and across Japanese industries. Excerpted primarily from chapter 8 of “Rich Nation, Strong Army”: National Security and the Technological Transformation of Japan, copyright (c) 1994 by Cornell University. Used by permission of the publisher, Cornell University Press.