Changing National Innovation System of Japan?

From Large Firms to Network System

Kazuyuki Motohashi
University of Tokyo & RIETI http://www.mo.rcast.u-tokyo.ac.jp/

Outline of Presentation
What is National Innovation System? Characterizing Japanese System Growing external collaboration of R&D and econometric analysis Policy implications for network innovation model

National Innovation System?

IT infrastructure (internet etc.) Labor market institutions IPR policy

KNOWLEDGE GENERATION AND DIFFUSION High Education Sector (universities, etc.) Non-profit Research Institutions

Firms innovative capability and networks

Product market competition Innovation country performance

Financial Market condition

Business Expenditure of R&D in Japan

Toyota 6% Matsushita 5% Sony 5% Honda 4% Rest of firms 44% Nissan 3% Hitachi 3% Toshiba 3% NEC 3% Other top 30 firms 19% Cannon 2% NTT 3%

Japans national innovation system

Changes in Large Firm Dominated System?: Possible Factors

Intense innovation competition: globalization and catching up of Korea, Taiwan and China Necessity of innovation speed in order to appropriate rents from R&D Importance of scientific knowledge for industrial innovation: particularly the case for biopharmaceuticals Institutional changes in science sector: PRIs and national university reforms
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RIETIs Survey on R&D Collaboration

Firm level survey on external R&D collaboration: business to business networks and university and industry linkages Data for 2003, 556 samples Survey items
Recent trend of external R&D collaboration and IPR licensing Factors behind R&D collaboration decision Managing the boundary of firm in R&D, internal R&D vs outsourcing

Detail results are found as the following site

http://www.rieti.go.jp/jp/projects/innovation-system/H15.html
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Japanese system is changing?

From RIETI survey
Collaboration with Large firms
0% 20 or under 21-100 101-300 301-1000 1001-2000 2001 or over 10% 12.2 13.0 20% 11.6 5.6 24.4 38.8 46.0 68.1 6.1 2.3 12.8 4.3 30% 40% 50% 60% 70% 80% 90% 5 years ago Present(increased)

Collaboration with small firms

0% 20 or under 21-100 101-300 301-1000 1001-2000 2001 or over 10% 14.9 11.0 16.5 25.2 22.0 20% 4.2 5.7 4.1 10.3 13.3 51.4 5.2 30% 40% 50% 60% 70% 80% 90% 20 or under 21-100 101-300 301-1000 1001-2000 2001 or over 0% 10% 23.0 21.0 27.6

Collaboratio with universities

20% 30% 10.4 15.3 14.4 46.6 54.0 81.9 9.5 20.5 1.0 40% 50% 60% 70% 80% 90%

5 years ago Present(increased)

5 years ago Present(increased)

Large firms

Universities

Small firms

5.5 5.9 3.0 1.5

Factors behind R&D outsoucing

PRIs

Easy to access counterpart information Important for technology standard Success in past collaboration projects Upgrading technology leve of counterparts Shortage of R&D fund by own Policy push for industry-science linkage Needs to access to basic science Cost reduction of R&D

11.0 9.7

Reasons why increasing R&D collaboration

29.9

16.9

10.1

29.9

29.4

41.2

36.7

38.1

60.3

48.6

27.2

24.8 24.5

55.1

41.8

21.3

14.9

2.9 2.2

8.3

6.4 5.9

6.7 6.4 4.4 3.7

8.2 5.5 2.9 2.0

Upgrade own basic technologycapability Respond to intense R&D competition

67.9

59.6

70%

60%

50%

51.4 48.5

40%

30%

20%

10%

0%

Management of firms boundary in R&D

80% 70% 60% 50% 40% 30% 20%
16.2 51.2 47.6 37.7 32.9 30.3 29.3 28.4 20.5 16.9 13.5 5.9 5.9 9.3 7.9 8.3 6.7 5.5 10.6 7.1 4.9 5.9 3.3 2.3 2.2 2.2 20.2 18.7 47.0 46.5 32.4 32.2 31.3 52.8 72.0 64.1

Own R&D With large firms With small firms With university

10% 0%

Product Development project

New R&D subject

R&D related to core technology

R&D needing speed

Technology frontier project

Core technology

Basic science

Cost reduction project

Learning technology

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Motivation and underlining hypotheses for econometric analysis

Factors behing external R&D collaboration
Intense innovation competition? Increasing complexity of innovation and the role of scientific knowledge Selection and concentration of R&D projects, but it needs wider technological scope

UICs impacts on research and production productivity: greater impact for small firms
Less Not-Invented-Here Syndrome Focusing on more concrete project (short term benefit) and greater pressure for commercialization
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Collaboration and R&D strategy

Shorter development lead time Focusing R&D theme Reduce R&D cost Reduce R&D staffs Explore new technology seeds more R&D for application and development project
Improving basic technology capability

large firms SME LF ++

SME and startups SME LF --

Universities SME LF ++ ++ + ++ ++ ++

+++

-++ ++ +

Market needs for R&D Commercialization of tech seeds

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Research Productivity by Firm Age

all (2) lrd 0.260 (7.19)** lemp 0.246 (5.41)** cord -0.056 (0.45) univ1 0.355 (3.05)** lage -2.402 (4.81)** lage2 0.360 (4.86)** Constant -1.683 2.302 (7.10)** (2.57)* Industry Dummies yes yes Observations 450 438 R-squared 0.62 0.64 Absolute value of t statistics in parentheses * significant at 5%; ** significant at 1% all (1) 0.276 (7.81)** 0.250 (6.08)** -0.030 (0.23) 0.377 (3.21)** -1950 (4) 0.434 (5.61)** 0.397 (3.72)** -0.131 (0.53) 0.203 (0.95) 1951-70 (5) 0.183 (3.05)** 0.315 (3.30)** 0.146 (0.67) -0.077 (0.33) 1971(6) 0.109 (2.29)* 0.131 (2.84)** -0.169 (1.06) 0.348 (2.09)*

-4.257 (8.51)** yes 168 0.77

-1.188 (2.83)** yes 134 0.55

0.439 (1.30) yes 136 0.49

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Implications for J-NIS

Commercialization of new product Commercialization of new product

Systemic barriers

Large firm Product development Research Lab.

Close to the market

SMEs Start-ups

Scope of UIC

Scope of UIC

Scientific knowledge and fundamental science at universities and PRIs

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Synthesis and policy implications

Growing trend of R&D external collaboration Reflecting firms R&D strategy for innovation speed and wider technological scope Research productivity is higher for young and small firms as compared to old and large firms The role of SMEs and start-ups for Japans NIS reform toward network type system SMEs and start-ups: facilitates systems transformation. In addition, it may be beneficial for large firms to have strong high-tech startups Policies for facilitating network type NIS system are important, such as IPR, labor mobility, VC finance
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