This paper has applied these ideas to the post-war experience of Japan. In 1955, it estimates that total factor productivity in Japan was about 60 per cent of the US level, but that by 1980 it had reached a level equal to that of the USA. As the technological gap narrowed, particularly after 1973, Japan began to devote substantial sums to R&D. While Japan may previously have undertaken research in order to adapt foreign technologies, much of this informal research would not be captured by the R&D data. It is only when formal R&D facilities begin to be developed that the R&D data begin to capture the full R&D effort of Japan, and this is the stage at which genuinely innovative research begins to occur.