While the Japanese economy is finally beginning to brighten up, fierce competition among Japanese companies remains intact. International competition has been intensifying with the rapid progress of economic globalization and the development of technical innovation, as seen in the ongoing information technology (IT) revolution. Japanese companies must demonstrate a stronger-than-ever innovative ability to cut open a new technology frontier now that their counterparts in other East Asian economies - particularly those in South Korea, Taiwan and China - are fast catching up from behind. To increase the speed of research and development (R&D) while maintaining a high quality of it, Japanese companies are enhancing their collaboration with external organizations.
This column attempts to shed light on the current state of Japanese companies' R&D strategies in the era of mega competition, using the results of the "Survey on R&D Collaborations with External Organizations" conducted by RIETI.
Development and diversification of R&D collaborations with external organizations
The RIETI Survey on R&D Collaborations with External Organizations was conducted over companies engaged in some sort of R&D activities, selected based on the list of patent applicants. Of the companies surveyed, more than 70% were found to have some sort of collaboration with an external partner. A collaboration partner may be a major company, a small or medium-sized enterprise, a venture business, or a university. Many of the surveyed companies said that the degree of collaboration with all of their outside partners has deepened over the past five years and that they expect this trend to continue in the coming years. As to reasons for promoting collaboration with outside parties, many companies pointed to "responding to intensifying R&D competition" and "improving cost efficiency of R&D" in the case of intercorporate collaboration, and "improving the quality of basic research" and "accessing a specific R&D achievement of the collaboration partner" in the case of collaboration with a university or a national research institute (ie industry-academia collaboration). As to the timing of commercialization of R&D results, more than 80% of the respondent companies expect the lead time to be either "within one year" or "two to three years" in case of intercorporate collaboration.
In contrast, nearly half the respondents said they would allow "five years or more" in lead time before commercialization with regard to industry-academia collaboration. As such, companies are responding to various R&D needs through collaborations of diverse combinations. The general tendency is that companies focus on areas "closer to commercialization" in their in-house R&D activities and venture on "R&D in new areas or those outside the core business" through collaboration with outside organizations. In particular, industry-academia collaboration typically works on areas such as "cutting-edge technologies" and "basic research."
Strategic R&D investment with an eye on market
Underlying these R&D strategies is the growing propensity of Japanese companies to focus on "R&D that incorporate market needs" and their recognition of the need to "shorten lead time" before commercialization. As innovation competition intensifies, companies are increasingly focusing on R&D activities in areas closer to an "exit" or commercialization, while reducing investment in R&D activities in areas remote from commercialization. This, however, does not mean that they are abandoning basic research altogether to concentrate on applications and development of close-to-commercialization technologies. In order to develop innovative products necessary to survive in the era of mega competition, original R&D based on new technology seeds is indispensable. Research themes in such areas cannot be commercialized in only a year or two and need to be tackled with a long-term perspective.
To quicken the "speed" of R&D without reducing the "width" and "depth," it is necessary to actively bring in technology seeds from outside. This necessity is serving as a driving force accelerating Japanese companies' moves to seek R&D tie-ups with outside partners. In order to work their way toward commercialization, an exit to the market for their R&D activities, companies must draw up a "technology roadmap" that specifies the exit as well as elements for development and the methods necessary to reach there. With regard to semiconductor technologies, for instance, the International Technology Roadmap for Semiconductors, an international private-sector consortium, has been regularly publishing technology roadmaps while some individual companies are drawing up more detailed roadmaps to define their strategic positioning (see note 1). To win out in innovation competition, companies need to clearly define their core competence technologies first, and then, proactively bring in complementary technologies from outside sources.
Toward creating a network-oriented innovation system
It is becoming increasingly difficult for Japanese companies to maintain their competitiveness by relying solely on "in-house" R&D activities and they are accelerating moves to seek a broad range of R&D collaborations with external organizations. To improve the innovation performance of the whole country, the government needs to establish institutional infrastructure to accelerate the ongoing shift to such a network-oriented innovation system. The survey conducted by RIETI has found that many companies are concerned about the "possibility that a problem may arise concerning intellectual property rights" in proceeding on R&D tie-ups with external organizations. Meanwhile, many companies said that they will be seeking more licenses from companies and universities overseas in the future. This highlights the growing need to strengthen efforts to establish efficient mechanism for handling international patent disputes. It is important to establish sound international rules that maintain a good balance between incentives for inventors and the spillover benefits derived from technology disclosures (see note 2).
Reform of national universities and research institutes has enabled these organizations to proactively seek alliances with private-sector companies, thus, enhancing industry-academia collaboration. However, what private-sector companies expect from universities and national research institutes are very original research achievements that may lead to breakthrough innovation. Therefore, what is important for universities and national research institutes is to design an incentive mechanism that facilitates unique research activities, rather than that encouraging superficial objectives such as the number of patents and joint projects with private-sector companies. Lastly, it should be noted that technology based start-up companies play an important role in a network-oriented innovation system (see note 3). The government should implement polices to encourage spin-out businesses from major companies and universities, while creating a favorable environment for venture businesses, for instance, by facilitating the supply of risk money.
