Encouraging Greater Government-Academia Collaboration

YASUDA Takehiko
Faculty Fellow, RIETI

1. Industry-academia collaboration making steady progress

The importance of collaboration among industry, academia and government has been a topic of discussion as early as the 1960s. However, up until the 1980s, such three-way collaboration was viewed in a dubious light, and it was only in the 1990s that collaboration between industry and academia began to win public acceptance.

As of July 1, 2004 a total of 41 institutions were either authorized or accredited as technology licensing organizations (TLOs) under the Law for Promoting University-Industry Technology Transfer, popularly known as the TLO Law. And the number of university-based startup companies totaled 531 as of the end of fiscal 2002, steadily approaching the goal of 1,000 such companies set by the Ministry of Economy, Trade and Industry that same year.

Of course problems remain, such as the lack of know-how concerning industry-academia collaboration and a paucity of information about TLOs. Judging from recent developments such as the conversion of national universities into incorporated administrative agencies (IAAs) in April 2004, moves to promote industry-academia collaboration will likely continue.

2. Differences between Japan and other countries in government-academia collaboration

As discussed above, industry-academia collaboration is steadily making progress in Japan. On the other hand , it is hard to say that collaboration between government and academia is making any progress, particularly, in the field of economic policy planning.

Economics is a science meant to resolve various socioeconomic problems. Its primary "customer" should therefore be the central and local governments that design legal systems and implement economic policies. Naturally, there should be a substantial relationship between the economic studies carried out at universities and the economic policies formulated and implemented by the government. In this regard, however, collaboration between the two sides is hardly making progress.

As an example, I will focus on economic analysis of small and medium enterprises (SMEs), a field in which I specialize. In the United States, the Small Business Administration (SBA) commissions universities to conduct empirical studies of issues closely related to policy matters. The end product includes a range of research that is quite interesting from a policy-making standpoint: for instance, SMEs' share of the total innovation generated by the U.S. economy, and a survey on the impact of bankruptcy on individual small business managers' lives and their ability to reenter business. Much of this research is accessible from the SBA website.

Among the diverse themes of SBA-commissioned research is evaluation of individual government policies ranging from the portability of medical insurance and its relationship to labor mobility and business startups, to the impact of tax reform on the business start-up rate, to the impact on pharmaceutical industry of stricter examination of "me-too" drugs under the revised Federal Food, Drug, and Cosmetic Act.

Research activities in Britain on SMEs were not very robust in the 1970s, but the situation began to change in 1984 when with the Economic and Social Research Council (ESRC), a leading agency for funding social science studies, launched a major research program on SME policy at the initiative of the Thatcher government. The program is composed of 13 research projects undertaken to "turn Britain into an entrepreneurial society," which was a key policy agenda at that time. Apart from the ESRC, Barclays Bank PLC, the European Commission (EC), the British Department of Employment (currently, the Department of Trade and Investment), and Local Development Committees participate in the program, presenting many different views on policy issues.

The Enterprise Allowance Scheme (EAS) is a leading example of Britain's business startup promotion policy and assisted in the formation of as many as 100,000 new businesses annually at its peak. The scheme was created in line with the basic concept proposed by Professor David Storey of the University of Warwick's Centre for Small & Medium-sized Enterprises.

As in the U.S., policy evaluation is an important theme of empirical economic studies in Britain. In addition to the EAS, many other schemes, including the loan guarantee scheme, the guidance and advisory system and science parks, have been subjected to strict policy evaluation through such empirical studies.

In contrast, collaboration between academia and policy-makers is less active in Japan. To take yet another example from my field of study - although I am embarrassed to do so because I feel as if I am exposing my own shortcomings - the largest challenges we face in terms of SME policy are: (1) how to promote business startups and assure the smooth exit and re-entry of companies; and (2) how to facilitate the flow of funds required for business operations. There has been relatively little academic research on the question of why the number of business startups has been low in Japan while in the U.S. and Europe, many studies have been conducted on the availability of financing for various types of companies (e.g, based on their size, their relationship with banks and their financial condition). There is thus a major disconnect between government policies in Japan and the empirical studies that should serve as their framework.

3. Reasons behind the lack of progress in government-academia collaboration

What accounts for the huge gap between Japan on the one hand and the U.S. and Europe on the other? Let us first take a look at problems coming from the side of academia. As mentioned above, members of the academic community tend to keep their distance from the government so as to maintain their independence and avoid the impression of "collusion." In addition, Japan has far fewer economists than does the U.S. or Europe. The American Economic Association, for example, boasts a membership of some 20,000. The Japanese Economic Association (JEA), a leading academic society of Japanese economists, has a membership of only around 3,000, while the Japan Society of Political Economy (JSPE) has 1,000 members. And only some these economists are engaged in empirical economic studies, a field directly linked to policy-making.

The smaller number of economists in Japan directly affects the scope of economic research undertaken. With respect to studies on the relationship between the size of companies and their business performance, the U.S. has a large number of scholars taking different approaches, ranging from long-term studies of the relationship between the size of companies and their research and development (R&D) activities, to studies focusing on the relationship between the age of companies and their growth. In Japan, we cannot expect to see research activities specialized to such an extent. But it is exactly this kind of highly specialized research that is most useful in policy-making. Thus, much of the research done by Japanese economists, which is unable to meet highly specialized needs, is of little interest to policy-makers.

The smaller number of economic researchers in Japan is not completely explained by Japanese scholars' alleged dislike of empirical studies. In order to generate empirical studies, there must be an adequate supply of economic data and statistics. On this score as well, there is a gulf between Japan and the U.S. in both in the depth of and accessibility to information. It is fairly easy to obtain microeconomic data for academic use in the U.S. In Japan, however, researchers must go through time-consuming procedures to get permission to use such data, and their requests may still be denied in the end.

According to the Heckscher-Ohlin theorem, a country that is abundant in certain resources will export goods that use such resources as inputs, whereas it will import goods for which resources are scarce. This theorem applies in the field of economic analysis as well. In Japan, theoretical economic research,where one's brain is the sole required resource, has become prevalent, while the number of researchers engaged in empirical studies - which should play a key role in policy research - has declined. Conversely, if statistical information becomes more accessible, more young researchers will pursue empirical studies rather than theoretical ones, whereby a foundation can be finally be laid for effective collaboration with policy-makers.

As exemplified by the implementation of the Personal Information Protection Law, there has been a growing tendency to keep records and information closed to the public. However, efforts to protect privacy can be compatible with more expansive use of statistical data for research purposes by taking appropriate measures: for instance, deleting the names of companies from surveys and disclosing sampling data taken from complete data sets. This would lead to more effective use of the enormous amount of data collected by the government and enhance collaboration with academia.

4. What is needed to promote effective government-academia collaboration?

In the foregoing discussion, I have tried to shed light on the reality of government-academia collaboration in Japan. Through this, certain policy directions for more effective government management of economic statistics emerge, which underscores the importance of such management. To further facilitate government-academia partnerships, the following points need to be considered.

Goals for government-academia collaboration must be clarified. Researchers, by their nature, conduct studies in accordance with their interests. But they cannot necessarily pursue such interests exclusively in the case of government-academia collaboration. From the outset, such projects must have clear goals (but not, of course, predetermined outcomes). In this sense, some sort of framework may be required in undertaking joint studies.

Universities are repositories of a society's most advanced knowledge. At one time government agencies and ministries turned to private-sector think tanks for their analytical capabilities, but universities have the capacity to engage in broader and more sophisticated analysis. As national universities are transformed into IAAs, the revitalization of this sector has become imperative. At the same time, it is extremely important for the future of Japan that universities, through government-academia collaboration, play a key role in planning government economic policy.

October 12, 2004

October 12, 2004