Japanese Innovation Systems, Facts and Problems:
Implications for Eastern European Countries
8th International Conference on Technology Policy and Innovation
July 7, 2005University of Lodz
Risaburo NezuFujitsu Research Institute
1
How is Japan ranked by the IMD?
• Overall performance 21-23-27-25-23-21• GDP 2• Patents granted 1• Total R&D personnel 3• Securing patents abroad 3• Total R&D expenditure ($) 2
- ratio of GDP 6• Number of scientific articles 2
Source: World Competitiveness Yearbook 2005
2
High Tech Trade Balance (export/import)
0
1
2
3
4
5
6
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03
JapanUSAGermanyFranceUK
Note: High tech goods are medical products, medical equipment, office equipment, computers, electronics, precision instruments, and aircraft and space technology.
Source: NISTEP
3
Productivity in Major Countries
-2
-1
0
1
2
3
4
5
6
7
8
9
78/87 88 89 90 91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004
Year
Productivity
JPN
USA
Germany
Australia
United Kingdom
SWEDEN
Korea
Source: OECD Economic Outlook
4
Number of Patents Granted in the US (2004)
859Seiko Epson (JPN)181,534Hitachi (JPN)8
803AMD(US)201,342Toshiba (JPN)10826NEC (JPN)191,348Sony (JPN)9
907Bosch (Germany)171,604Intel (US)7915TI (US)161,605Samsung (Korea)6917Renesas Technology (JPN)151,761Micron Technology (US)5
978GE (US)141,780Hewlett-Packard (US)4
1,030Fuji Photo Film (JPN)131,813Canon(JPN)3
1,224Phillips (Holland)121,965Matsushita(JPN)2
1,320Fujitsu (JPN)113,277IBM (US)1
NoCompanyRankNoCompanyRank
Source: Dempa Shimbun June 28, 2005
5
International Comparison of R&D Spending
1862641261675Total research personnel(000)
42.1%31.5%28.6%20.2%Government
(0.59%)(2.3%)(2.5%)(2.6%)(3.1%)Ratio of GDP
1.132.660.3284.6124.19
Total R&D (billion $)
38.660.182.5294127.7Population(million $)
21017602403110044295GDP(billion $)
PolandFranceGermanyUSJapan
Source: IMD World Competitiveness Yearbook
6
Japan ranks 11th
Investment in KnowledgeSweden
USFinland
KoreaCanada
SwitzerlandDenmark
OECDGermany
NetherlandsJapan
FranceBelgium
UKAustralia
EUAustriaNorway
Czech RepublicIreland
HungarySpain
SlovakiaItaly
PortugalPolandMexicoGreece
R&DSoftwareHigher education
Source: OECD
7
Japanese Problems
--Sharp decline of competitiveness--Results of basic research do not lead to new
products (weak science link)--While businesses aggressively invest in R&D,
government spends less than other countries--Insufficient infrastructure for intellectual
knowledge
Though Japan invests a lot in R&D, the investmentsdo not produce results. Why ?
8
Three Policy Challenges1. How to improve competitiveness in the
global marketIndustrializing Asian countries, Increasing speed and shortening life cycles
2. How to meet society’s new demandsAging population, Environment, Safety
3. How to reinvigorate ailing local economiesDislocation of local economies, Decreasing public works
9
Key Policy Measures1. Introduce more competitive mechanisms into the
national innovation system 2. Reform national universities 3. Foster collaborations between universities, public
laboratories, and industry4. Strengthen the protection of intellectual property5. Open innovation 6. Increase the mobility of researchers7. Ensure public funds and prioritization through
competitive funding 8. Strengthen technology management (MOT)
10
The Four Principles of Japan’s IP Strategy1. Creation of IP
UniversityCompany
2. Protection of IPEfficient and effective examination of patent applications by JPOCreation of a patent courtStringent measures against fakes and counterfeitsInternational harmonization of IP rulesProtection of trade/business secrets
3. Active use of IPTechnology transfers from universities and national labsTechnology Licensing/Transfer Office (TLO/TTO )Evaluation of IP and encouragement of its utilization
4. Strengthening of the human resource baseEducation of expertsConsciousness of the general public about IP
11
Reform of National Universities
1. Less government control and more freedom to develop their own curriculum and research plans
2. Introduction of a management structure similar to that of private businesses
3. Rigorous assessment of performance by independent outsiders
4. Greater emphasis on professional education at the post graduate level
5. More competition amongst universities6. Greater freedom to work with business
12
Number of Patents Applications by Universities
1993
109
2015
63
2373
74
2734
76
3644
149
4140
243
4877
374
5623
577
1141 1335
0
1000
2000
3000
4000
5000
6000
93 94 95 96 97 98 99 '00 '01 '02
US Japan
Source: Patent Office (Japan :calendar year)
AUTM (US: Fiscal year)
13
University-Industry Collaborations
1997- Easing of restrictions on national university researchers who work off campus.
1998- Law on technology transfers from the university (TLO).
1999- Japanese Dayh-Dole Law ( Universities can hold the IPR’s of government funded research. )
2000- Further easing of restriction on faculty who work in the private sector
14
Science Linkage by Country
0
0.5
1
1.5
2
2.5
3
3.5
1991 91 93 94 95 96 97 98 99 2000 1 2 3
USAJPNGermanyFranceUK
Source: NISTEP
15
Science Linkage by Sector in the US
0
5
10
15
20
25
30
1991 92 93 94 95 96 97 98 99 2000 1 2
agriculturemedicinenon organic chemicalorganic chemicalbiochemistrycomputingsemiconductor
Source: NISTEP
16
Number of Collaborations Between National Universities and Companies in Japan
Number of implementing private institutions
Number of implementing universities
Number of contracts
FY
Num
ber
of im
plem
entin
g un
iver
sitie
s and
pri
vate
inst
itutio
ns
Source: NISTEP
17
Partnerships by the Japanese national universities
Source: MEXT
0102030405060708090
2000 2001 2002 2003 2004
Joint R&DR&D Contracts
(Billion yen)
18
From Closed Innovation to Open Innovation: A paradigm shift (1)
1. Large Japanese companies have long believed that they could establish and maintain technology leadership by controlling the whole innovation process. (Not Invented Here (NIH) Syndrome)
2. Throughout the 1990s, a new method of innovation became dominant in information technology and bio-technology. Companies began to concentrate their resources on their strongest technology and rely on external resources for the rest. This development was supported by the advent of specialized venture businesses.
3. The Bayh-Dole Act of 1980 allowed private companies to use research conducted by universities and national laboratories for commercial purposes, and thereby helped to revive the industrial competitiveness of the US. This became the model for other countries, who have begun strengthening university-industry collaboration.
19
From Closed Innovation to Open Innovation: A paradigm shift (2)
4. In the past few years, this movement has hit Japan and other Asian countries. The large central research departments of private companies have become outmoded. Many large companies have reduced their spending on R&D and have began using external knowledge.
5. The following changes are required for U-I collaborations to succeed:
- an open and free flow of information about technologies and research activities,
- high mobility of scientists and engineers,- adequate protection of IP,- and a risk-taking capital market.
Many developing countries lack such an environment.
20
University orResearchInstitute
52%
Entreprise16%
VentureCompany
32%
Entreprise86%
Venture Company
2%
University or Research Institute
12%
(Note2) 1971 – August, 1998 (publication year) Japanese applicants’ patent published by JPO
(Note1) 1971 – 1998 (grant year) U.S. applicants’ patent granted by USPTO
The number of companies and employees in the biotechnology field U.S. Europe Japan
Large Enterprises 800 540 260 Venture Companies 1,300 700 60
Employees 150,000 28,000 30,000
Universities and venture companies account for more than 80 % of the patents filed in the US; in Japan, their roles are much smaller
Genetic Engineering Patents Filed: The US & Japan
Source: Japanese Patent Office
21
Allocation Changes in the Research Budget of the US government (1990-99)
Source:NSF, SRS, Survey of Federal Funds for Research and Development
Science & Engineering Indicators, 2002
-4-3-2-10123456
Life
Sci
ence
s
Com
pute
rSc
ienc
es
Oth
er S
cien
ces
not e
lsew
here
clas
sifie
d
Soci
alS
cien
ces
Psyc
holo
gy
Mat
hem
atic
s
Env
iron
men
tal
Sci
ence
s
Eng
inee
ring
Phys
ical
Sci
ence
s
(%)
22
R&D Allocation in the Japanese Government Budget
Source: METI, “An Innovation Oriented Science and Technology Policy.” February, 2005
020
0040
00
6000
8000
1000
012
000
1400
016
000
1800
020
000
2200
0
2001
2002
2003
2004 Life ScienceInformation TechnologyEnvironmentNano, MaterialEnergyManufacturingSocial InfrastructureSpace, OceanNuclear
100 million yen
FY
23
Corporate Attitudes Toward Japanese Universities and National Laboratories
8.3%
13.7%
4.9%
10.7%
3.9%
19.6%
21.0%
27.7%
30.5%
38.8%
0% 10% 20% 30% 40% 50%"Japanese labs are better" "Foreign labs are better"
Keen to obtain IPR
Information is available and they are easy to contact
Research level is high
Fast in producing results
Highly aware of importance of protecting IPRs and low
risk of information leak
Source: MEXT
24
Number of University Spawned Ventures in Japan
0
200
400
600
800
1000
1200
1979 89 95 96 97 98 99 2000 1 2 3 4FY
Source: METI
25
Problems Faced by University Spawned Ventures in Japan
1. Securing and nurturing skilled experts2. Finding clients and marketable products3. Securing adequate financing4. Developing the necessary technology5. Finding space for office and laboratories6. Handling relations with universities
26
Japanese Company Support for University Research
0
200
400
600
800
1000
1200
1400
1600
1800
1990 91 92 93 94 95 96 97 98 99 2000 1 2
for Japanese universities
for foreign research organization
FY
100 million yen
Source: Ministry of Internal Affairs and Communications
27
Japanese Company Support for Japanese University Research
384
452492
558 564531
577 564604 594 619
675
0
100
200
300
400
500
600
700
89 90 91 92 93 94 95 96 97 98 99 0
Ratio of business funding to total university research funds:JPN 2.4% US 7.6% Germany 11.3%
Source: Ministry of Internal Affairs and Communications , MEXT
28
Patent Applications by Japanese Universities
0100200300400500600700800900
1000
1997 98 99 2000 1 2 3
Source: NISTEP
29
Major Trends in the R&D of Japanese Companies
Source: METI
1.3
16.1
40.6
32.9
57.4
0.0 20.0 40.0 60.0
Other changes
Active outsourcing of R&D to othercompanies and universities
Actively pursuing joint R&D with othercompanies and universities
More emphasis on company strategy
Shift of emphasis to a shorter time horizon
(%)
(N=155)
30
Competitive R&D Funding
• Government R&D funding should not be tied to any project; it should be distributed based upon the merits of individual proposals through an open and competitive process. There should be no sanctuary.
• In 2004, about 10 % of the government R&D funding was distributed through a competitive process. This percentage is expected rise.
31
Management of Technology (MOT)1. Japan devotes a large amount of resources, both financial and human, to
R&D and produces a growing number of patents that are filed throughout the world.
2. But, such R&D is not leading to the better performance of Japanese companies or the Japanese economy in general.
3. “Death Valley” is preventing basic knowledge from developing into commercial technology.
4. This is due to weak management of technology (MOT)5. In the US, MOT is already taught at 160 universities and twelve
thousand students graduate with this major every year. In addition, all MBA programs include courses on MOT.
6. In 2003, 16 Japanese universities ran degree programs (most of them at the post-graduate level) on MOT with a total of 670 students enrolled. While the number of programs is on the rise, their quality needs to be improved.
32
Entrepreneurial Spirit
Source: Fortune, February 9, 2004
33
Venture Capitals InvestmentRelative to GDP
0
0.1
0.2
0.3
0.4
0.5
U.S
.Ic
elan
dO
EC
DC
anad
aN
ethe
rlan
dsU
.K.
Swed
enK
orea
Bel
gium
Finl
and
EU
Ger
man
yN
orw
ayFr
ance
Irel
and
Spai
nA
ustr
alia
Switz
erla
ndPo
land
Den
mar
kIt
aly
Cze
chN
ew Z
eala
ndPo
rtug
alG
reec
eH
unga
ryA
ustr
iaJa
pan
Slov
akia
expansion stage
early stage
%
Note: average for period between 1998 and 2001
Source: Development Bank of Japan, Chosa No.67, August 2004
34
Percentage of International Scientific Papers
05
101520253035404550
1986 88 90 92 94 96 98 2000 2
JapanUSAGermanyFrance
Source: NISTEP
35
Ratio of R&D Devoted to the Manufacturing Sector
79.281.0UK
85.792.3France
91.396.1Germany
64.981.1USA
86.3%93.5%Japan
20001990
36
Total Primary Energy Supply Per Unit of GDPTons of oil (or equivalent) needed to produce one thousand 1995 US dollars. GDP
calculated using PPP.
0.240.250.250.260.260.260.27United States
0.310.330.340.340.340.340.37Slovak Republic
0.240.240.250.250.270.290.32Poland
0.160.170.170.170.180.170.17Japan
0.210.210.220.220.230.250.26Hungary
0.180.180.180.180.180.190.20Germany
0.310.300.300.310.300.320.33Czech Republic
2003200220012000199919981997
Source: OECD Factbook 2005
37
Lessons From the Japanese Experience1. Spending money on R&D does not always lead to good results. Sound
management of national innovation systems needs to be in place.2. The ivory tower mentality should be erased. Barriers separating
university, industry, and national laboratories must be removed. The flow of ideas, people, and money should not be inhibited.
3. Open innovation systems must be in place. External knowledge should be fully exploited.
4. Allocation of research fund should be flexible and subject to periodic reviews. It should be distributed based on the merit of proposals and performance.
5. . Effective protection of IPR is key.6. Universities should have clear policies in pursuing collaboration with
businesses in order to avoid conflict of interest.7. Where appropriate, let the market force to decide the direction of R&D.
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