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Policy Research Domains: 2009 (Major Policy Research Domains)

II. Promoting Innovation and Strengthening International Competitiveness

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Continuous innovation is vital to strengthening the international competitiveness of Japanese companies. However, the effects of innovation and policies that promote it are extremely difficult to measure. Therefore, in undertaking research in this field, it is necessary to have an analytical framework, both theoretical and empirical, that clarifies the correlations between innovations at corporate and industry levels and total factor productivity (TFP). RIETI will evaluate and analyze conditions surrounding Japanese industry and specific industrial and technological policies to produce findings the government can utilize in formulating policies to promote innovation.

1. The Structural Characteristics of Research and Development by Japanese Companies, and Issues for the Future

Project Leader

NAGAOKA Sadao, Faculty Fellow

Overview

This project aims to conduct an in-depth empirical analysis of the innovation process in Japan as well as implement policy-oriented research to shed light on policy issues aimed at improving innovation performance. We will utilize data from the inventor surveys conducted in 2007 and 2008 (the follow-up survey) in this research project as well as patent data and the other related statistics such as the Basic Survey on Japanese Business Structure and Activities. Our main tasks will include: (1) name-matching the inventors, who responded to our surveys, to the inventions attributable to them, so we may begin analyzing the careers of inventors in Japan; (2) holding the RIETI international workshop, "Science for Innovation" with a view to analyzing the linkage between science and industrial innovation, including human capital development; and (3) promoting international collaborative research as well as research exchanges between the U.S. and Japan and Europe and Japan, including the publication of the comparative statistical tables of the inventor surveys in Japan and the U.S.

Major Research Results

RIETI Discussion Papers

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2. Organizational and Strategic Challenges for R&D Internationalization of Japanese Firms: A managerial approach

Project Leader

ASAKAWA Kazuhiro, Faculty Fellow

Overview

Recent changes in trends in R&D internationalization underscore the limited explanatory powers of existing "conventional theories." It can be said that a tectonic shift is occurring in global R&D systems encompassing both the advanced and developing regions of the world (Asakawa and Som 2008). With this issue in mind, this project seeks to identify new trends in R&D internationalization using the latest data available from questionnaire surveys conducted in the R&D headquarters of Japanese firms and their overseas R&D centers. In particular, the project aims to analyze current conditions and issues related to organizational and strategic aspects. Our re-examination of "conventional theories" indicates the need for a new analytical framework that corresponds to existing conditions. The micro-level analysis of firms and their overseas R&D centers developed by this project and the macrodata developed by the OECD and other organizations are expected to be complementary to each other.

Major Research Results

RIETI Discussion Papers

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4. Productivity of Industries and Firms and Japanese Economic Growth (Formerly known as Japan's Productivity and Economic Growth: International comparison and analysis of determinants of productivity growth)

Project Leader

FUKAO Kyoji, Faculty Fellow

Overview

For the Japanese economy to retain its vitality under conditions of decreasing population and the aging of society, it will be essential to achieve economic growth based on accelerated productivity growth. With this challenge in mind, this project, as a rule, annually updates the Japan Industrial Productivity Database (JIP), a basic source of data for analyzing Japan's economic growth and changes in its industrial structure, and analyzes the trends in TFP on a detailed industrial level with their determinants. In addition, by participating in "EU KLEMS," a joint international project on productivity in the European Union (EU), we compare Japan's industrial structure and productivity growth by industry with that of other industrialized countries, including the United States, the EU member countries and South Korea. Finally, we analyze the impact of the globalization of firms and their accumulation of intangible assets on their productivity. This is done using the JIP Micro Database, which covers most Japanese firms including those in the non-manufacturing sector, and microdata from government statistics.

Major Research Results

RIETI Discussion Papers

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6. An Empirical Analysis on the Increasing Complexity of Artifacts, Design Processes and Product Architectures

Project Leader

FUJIMOTO Takahiro, Faculty Fellow

Overview

Today, with advanced technologies for digitization and modularization, product designs under loose constraints will immediately be commoditized. Japan's design sector should, for its own survival, collectively and continuously address challenging design issues to take a leading position in the world's design field. In Japan, organizational strengths for integrated manufacturing are unevenly distributed for historical reasons. One way to correct this would be to face the challenges and continue to work on artifacts that have rigid functional requirements and constraints, namely products and processes incorporating complex integral architecture. In order to do this, it would be necessary to amalgamate different approaches to support the design of management, control and other systems in a complementary manner, which means providing full support for frontline designers. Japan's industry, government and academia must be united in delivering this support.

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7. Investigation and Research on Innovation Processes in Semiconductor Industries - Case Study and Analysis of Electron Microscopy, Resist and Packaging Technologies

Project Leader

CHUMA Hiroyuki, Faculty Fellow

Overview

Through joint research conducted with the scientists and engineers of manufacturers of semiconductor devices and electron microscopes, this project examines, from an economics and business perspective, the historical background that gave rise to significant inventions and innovations and reasons why these inventions and innovations emerged primarily from venture-capital laboratories in Germany and the United Kingdom (and not from Japan, which is reputed as the most advanced in electron microscope)

Major Research Results

RIETI Discussion Papers

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8. Empirical Research into Software Innovation

Project Leader

TANAKA Tatsuo, Faculty Fellow

Sub-Leader

SUZUKI Jun, Faculty Fellow

Overview

Japan's competitiveness in the software industry is perceived as being weak. In the software industry as a whole there is an overwhelming import surplus, while exports are less than 10% of the value of imports. Among high-value-added high-tech industries it is rare to find any in which Japanese competitiveness is so overwhelmingly lacking. Additionally, this fact may have a negative impact on innovation in business processes that use information technology (IT). Why is this? Why has such a disparity in competitiveness arisen? Is it possible to devise policy remedies that will enhance competitiveness? The objective of our research is to empirically study various hypotheses that may answer these questions, and in so doing to identify the current state of software innovation in Japan, and to seek policies to enhance the competitiveness of software industries and promote business innovation through the use of software.

Major Research Results

RIETI Discussion Papers

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9. Study on Intangible Assets in Japan

Project Leader

MIYAGAWA Tsutomu, Faculty Fellow

Overview

This research project on intangible assets in Japan began in 2007 and to date we have estimated aggregate intangible investments in Japan and conducted an interview survey on management practices in Japanese firms. Based on the aforementioned research, we will focus on the following five studies in 2009 and 2010: (1) effects of human resource management on firm performance; (2) determinants of excellent management practices at firm level; (3) determinants and effects of organizational reforms; (4) effects of intangible assets on capital formation and R&D investment; and (5) financial side of investment in intangible assets. If our application for further scientific research funds from the Ministry of Education, Culture, Sports, Science and Technology is approved, we will extend our interview survey to other Asian and European firms.

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10. Research on Productivity Growth in Service Sector

Project Leader

Hyeog Ug KWON, Faculty Fellow

Overview

The purpose of this project is to grasp productivity trends in the service sectors and then to inform the government on the best way to boost productivity in these sectors, which have seen poor productivity relative to the U.S. and EU.
Specifically, we construct a productivity database at firm level using microdata from government statistics and identify features and problems in Japan's service sectors compared with the manufacturing and construction sectors. In addition, we undertake concrete empirical analysis regarding the effect of ICT, human capital, new entrants and deregulation policies on productivity in the service sectors and provide specific policy implications based on our empirical findings.

Major Research Results

RIETI Discussion Papers

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11. Construction of Eco-system for the Creation, Growth and Agglomeration of New Technology-based Firms (NTBFs)

Project Leader

NISHIZAWA Akio, Faculty Fellow

Overview

How can product innovation based on university research be achieved? The global trend is to adopt policies to facilitate the creation of many "New Technology-based Firms" (NTBFs), and to generate hi-tech industries in the geographic vicinities of universities through growth and agglomeration of these NTBFs. However, in Japan, this approach has not yet yielded successful results. Indeed, a pioneering project referred to as the "Sapporo Valley" is said to be losing its growth momentum. Against this backdrop, this project addresses the following two questions about Japan: Why has the model for the establishment of hi-tech industries based on innovation generated through the process of NTBF creation, growth and agglomeration failed to function even in the areas with prominent research universities? What factors are obstructing the process of NTBF creation, growth and agglomeration? The purpose of this research project is to analyze these questions from both empirical and theoretical perspectives, and to formulate benchmarks for the building of eco-systems in the regions.

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12. Differentiated Services and Productivity: Productivity analysis based on the monopoly competition model

Project Leader

KATO Atsuyuki, Fellow

Overview

The theme of this project is the "analysis of the productivity of firms providing differentiated services." Productivity research based on firm - and business establishment-level data normally uses sales (or value-added computed from sales as the output and an industry-level deflator.) This is because product-level data on production volumes and prices is hardly obtainable due to statistical limitations. These limitations are particularly restricting in service industries because of the difficulty in quantitatively defining production volumes. Moreover, the impact of product (service) diversification on the estimation of productivity is ignored. Furthermore, because estimated productivity fluctuation includes markups and demand shocks (changes in consumer preferences, etc. on the firm level), such estimates may not correspond with productivity fluctuations in the strict sense. In light of these problems, this project focuses on the following objectives:

  • (1) Productivity estimation by using a model that explicitly incorporates product (service) differentiation under the actual limitations on the usage of price and volume data for individual products (services).
  • (2) The results obtained will be compared with results from prior research (on economies of scale, productivity dynamics, etc.), and the effects of corporate characteristics and strategies and industrial policies will be analyzed.

Major Research Results

RIETI Discussion Papers

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13. Micro Econometric Analysis of Performance in the Service Industry

Project Leader

KONISHI Yoko, Fellow

Overview

As a first step in analyzing service industries, this project has set the beauty industry?specifically hairdressing salons?as the targeted area of analysis due to their relatively simple production structure. Almost all businesses in Japan's hairdressing industry are under individual management. Nationwide, there are more than 200,000 hairdressing salons in operation. Until the late 1990s, the industry adhered to standardized operating days, hours and charges that were effectively maintained through union activities and laws. Much of this has changed in recent years due to the abolition of laws, reduction in unionization and the emergence of charismatic hairdressers. As a result, the industry has experienced severe price wars and the difference between salons and available services continues to grow. To understand productivity in service industries, it is necessary to define the equivalent of the production function in a manufacturing industry. A model for this purpose must be sensitive to changes in demand; it must be restricted by "floor area, number of employees and business hours;" and it must also allow for an upper limit on supply volume. This project involves collecting extremely detailed information regarding finance, customers, and labor from six hairdressing salons to be used in investigating the structures of supply and demand in the beauty industry.

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14. Evaluation of Corporate Tax

Project Leader

NIREI Makoto, Faculty Fellow

Overview

The corporate sector is the major source of economic growth and employment, and the taxation on its various activities calls for a careful and systematic evaluation of such policy intervention. To provide such an evaluation scheme, this project builds a numerical dynamic general equilibrium model tailored for Japanese policy environments, and aims to provide some estimates that characterize the impacts of taxation on corporate activities. Our goal is to contribute to the public discussion on the upcoming reform of tax credit schemes and the corporate tax rate.

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15. Exploring New Economic Indicators based on Multi-Tiered Network Analysis Indicators

Project Leader

TAMADA Schumpeter, Faculty Fellow

Overview

We investigate various kinds of interactions among firms in order to understand mechanisms creating innovations. Concretely, we will take the following approaches in this study.

  • (1) We analyze networks that include one million Japanese firms as nodes and four relationships defined by joint-patent applications, stock-sharings, transactions and director-interlockings.
  • (2) We calculate statistics based on topologies of the networks and discuss how the statistics are related to economical statistics.
  • (3) We re-define new nodes that are sets of firms and analyze the new networks. This enables us to understand what kinds of boundaries among firms are suitable for dividing firms from the view point of network topologies.

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16. Review and Future Issues of Intellectual Property Strategy

Project Leader

KUGAI Takashi, Senior Fellow

Overview

Alarmed by the prolonged economic stagnation in the 1990s and the decline in the international competitiveness of Japanese industry, the Japanese government developed an intellectual property strategy at the initiative of the Prime Minister's Office in 2002. All ministries and agencies have since been pursuing the strategy. An intensive range of initiatives were adopted to facilitate the creation, protection and utilization of intellectual property. These initiatives include: the establishment of the Intellectual Property High Court; JPO's program for accelerating patent examinations; actions for collaboration between the industrial and academic sectors, such as the establishment of intellectual property offices at national universities; efforts to combat counterfeit goods and piracy; steps for promotion of patent distribution; legislation to protect new plant varieties and local brands; and a series of amendments to the Copyright Act to expand the content industry market. This study reviews the progress of the major action taken under the Intellectual Property Strategy at a time when four to five years have passed since these first measures were instituted. It also investigates new policy issues concerning intellectual property that are emerging amid subsequent changes in the economic environment, such as intensifying economic globalization, advances in technological innovations, and the rapid worldwide expansion of business using the Internet.

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*These project titles are provisional. They are translated from their original Japanese titles and are subject to change.