Imagine that on a day when the weather forecast says that it will be clear, you are the only one who for some reason knows that there will be a heavy downpour in the afternoon. This is a business opportunity for you. You can make a profit by preparing a large amount of rain gear to sell to people without umbrellas.
Business opportunities exist where information asymmetry persists. The reality that information is unevenly distributed hinders the optimum allocation of resources. This imbalance also presents an opportunity. Information asymmetry is likely to occur with discontinuous environmental change, such as macroeconomic environment fluctuations, government policy shifts, and strategic pivots by competitors. This is why companies strive to gather information to detect such changes as soon as possible.
The duration of information asymmetry depends on the cost of accessing necessary information. If access is easy, the asymmetry is unlikely to last. As long as business opportunities generate profits, entrepreneurs will continue to enter the market. High numbers of participants in a particular market indicate that the market is promising. However, the more entrepreneurs pursue the same business opportunity, the less profits they can each earn, leading to the eventual demise of the business opportunity.
While it is important to quickly capture externally generated information asymmetry and turn it into a business opportunity, the speed of information diffusion is so fast now that such asymmetries disappear quickly. Moreover, externally generated changes do not necessarily lead to innovation. In the rain gear example, despite it being a business opportunity, it cannot be called innovation because it lacks novelty. Simply identifying externally generated changes and adjusting supply and demand is not sufficiently productive to maintain high profitability.
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Research and development (R&D) plays an important role here. R&D refers to organizational efforts to generate new knowledge. Internally generated changes create information asymmetry. Moreover, such changes always include novelty. R&D can therefore be considered a source of new business opportunities.
With the rise in popularity of open innovation, some argue that internal R&D is unnecessary as long as they engage in cooperation with external partners. However, if a company’s internal R&D level is low, they likely lack absorptive capacity (the ability to absorb external technologies while correctly evaluating and utilizing them). When a company with insufficient absorptive capacity tries to absorb external knowledge, it often ends up introducing technologies that have already been fully evaluated externally (technologies with low information asymmetry), while paying high costs to do so.
When R&D is taken as a source of business opportunities, it is essential to rebuild the relationship between R&D outcomes and corporate strategies.
It is often assumed that R&D outcomes represent the implementation of new products, services, or production processes. However, implementation is only a small part of such outcomes. The most important achievements are manifested in the development of effective corporate strategies. The more knowledge a company can generate internally, the more effectively it can incorporate such knowledge into its corporate strategies. If a company has weak R&D capabilities, it may be forced to develop its strategies based on information that its competitors also possess. Naturally, such companies would have difficulties in identifying business opportunities, and its strategies will inevitably merely follow others.
Traditionally, the mainstream approach has been top-down, in which R&D is only defined in line with previously developed management strategy. The idea was that without defining a business direction, R&D targets could not be set. However, this approach tends to lead to business strategies based on already circulating information, making it difficult to pursue new business opportunities.
Essentially, corporate strategy and R&D should be interactive. In knowledge-intensive industries, some companies have begun to develop business strategies based on new knowledge generated through R&D. In other words, R&D is now leading corporate strategy.
Of course, no given company is alone in that it is undertaking R&D. Companies around the world are racing to generate new knowledge. That’s why it is so important to understand what kinds of knowledge is being generated externally and to maintain an understanding of cutting-edge knowledge.
As access to information has become faster today, publicly available information is shared in the blink of an eye. It is already too late if you only access new knowledge after it is published as a paper or patent. As the use of artificial intelligence expands, the source of information asymmetry will shift upstream.
Specifically, the sources exist where R&D projects have just started or are under planning. It is necessary to enter the community where new knowledge is being generated and obtain information in the conceptual stage of new projects.
In this regard, networks of academic societies and communities of leading researchers are essential. Truly new information that has not been widely circulated only exists in such networks. In domains where companies are able to compete at the forefront of research, such upstream networks also exist within the company. Having sources of information asymmetry within the company provides an overwhelming advantage in creating new business opportunities.
However, in a world where R&D competition occurs around the entire world, companies cannot always maintain their leading edge. This is why it is important for them to have access to information before it becomes a paper or patent. Personnel with doctoral training is invaluable in this regard. If a company has low internal R&D capabilities, it cannot join cutting-edge circles and will end up developing their products on outdated information.
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The figure shows the degree to which highly skilled research personnel (doctoral degree holders) are utilized in industries in Japan and the United States, and the intensity of research personnel (researchers’ percentage share of total employees) in representative industries. As the industry classification in Japan is slightly different from that in the United States, caution is needed when comparing Japanese and U.S. data. The vertical scale shows the utilization of highly skilled research personnel, while the horizontal scale indicates the intensity of research personnel.
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Although the intensity of research personnel in Japan is not so different from that in the United States, there is a stark difference in the utilization of highly skilled research personnel. Doctoral degree holders’ average share of total researchers for all industries in the United States is 9.1% against 4.3% in Japan.
The gap has apparently affected the quality of R&D. Although Japan ranks third in the world in terms of total corporate R&D investment, their growth rate is slower than in other countries. A decline in research capabilities of Japanese companies is also evident. In Japan during the 1980s, the share of corporations among the top 10% of normalized papers (papers with high citation counts) exceeded 10%, but this began to decline in the mid-1990s, and fell to less than 5% in the 2020s.
Patents generated by Japanese companies also show weaker linkages with science. According to the latest statistics by the National Institute of Science and Technology Policy at the Ministry of Education, Culture, Sports, Science and Technology, the percentage of science-linked patent families (a patent family is a group of applications based on a single invention filed in multiple countries or regions) in Japan is only 6.9%, ranking 24th in the world. Although it is important to note that Japanese patents’ science linkage may be underestimated due to the nature of the database, I have no choice but to conclude that science linkage in Japan is low.
Recently, some Japanese companies have gradually begin reevaluating and expanding their respective central research laboratories or institutes. Some companies place newly created knowledge at the core of their business operations. R&D that only responds to the needs of existing business divisions cannot be expected to achieve significant returns. It is important to redefine R&D as an activity that generates information asymmetry and develops more effective business strategies, rather than as a department that develops new products or production processes.
>> Original text in Japanese
* Translated by RIETI.
January 7, 2026 Nihon Keizai Shimbun
