Where did it all go wrong? - Japan (for Short Course - Challenges in Science, Technology and Innovation Policy)

1. Where did it all go wrong?
- Science, Technology and Innovation
Policy in JAPAN
2015/11/20 – STIP Course
Yasushi HARA
(National Graduate Institute of Policy Studies -
SciREX Center)
2015/11/20 1

2. Questions and Answers
1. How complex is the policy mix and the associated
organisational/institutional structure?
2. Are there examples of conscious design or policy mix thinking, or
attempts at achieving balance or promoting coherence?
3. Can you identify any tensions and trade-offs in the policy mix? e.g.
…between different rationales and goals?
…between different levels of governance?
…over time?
4. What evaluation and co-ordination mechanisms are in place? How
appropriate are they?
5. How could the mix realistically be improved?
2015/11/20 2

3. Q1. How complex is the policy mix and the
associated organisational/institutional structure?
• A1.
• We Japanese are in the complexity and totally mess.
• Highly Depend on our national innovation system and its
path-dependency.
• See (Odagiri and Goto 1996),(Chesbrough 1999) and (Lazonick
2007)
• Vertically Segmented Government System
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4. Labor
Banking
System
Firm
Government
Before 1930s 1937-40 1941-45 1945 – 1980s
「Before WWII」
“incentive-
based system”
Excluding profit
incentive
system
“Govern-guided
innovation system”
「WWII」 「After WWII」
Wartime
Structure
Life Time Employment
(S-Curve)
Main Bank
Co-financing
Vertically Segmented
Institute a convoy system
DemocratizationviaGHQ
Based on
light-industry
movement restriction of labors,
「labor mobilization plan (1939
Mobilize
Money Flow
High liquidity, High
Wage Volatility
More than
2,000
(free
competition)
Direct Finance
via trade market
Military firm law (1943)
inducing control associations
Form”k
eiretsu”
system
Heavy indust
ry (military use)
Stable recruitment system, in-
house R&D
=> Strategic Complementarity
Encouraging saving instead
of consume (increasing
investment value
(fixed-rate system)
「mobilize Supplying System 」
Trade governing system (1937)
In-Direct Finance, Cross-share holding,
formalize industry group guided by
government
Neo-Classical
Market System
to maximize
profits
Japan’s National Innovation System; from historical perspective
(Odagiri and Goto, 1996)
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5. Business Model in (OLD) US and JAPAN
(Lazonick, 2007)
• Hierarchical
Segmentation between
Females/Temporary
Employees and Regular
Male Operatives
• Aim to generate
“Generalist” with Job-
rotate in several
functions, one
firm/keiretsu.
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6. The Organization Impact of Technological Change in United States and Japan
United States Japan
Pacific Rim Countries; Singapore, Malaysia,
Thailand and Philipines.
VC Market formulations; VC Market formulations;
Technical Labor Market; Technical Labor Market;
Buyer-Supplier Relations; Buyer-Supplier Relations;
life time employment, S-curve wage (年功),
immobility of workforces, shuko, tenseki, job
turning among the "keiretsu" firms.
high turnover rate, mobility within the
cluster, stock option plan, lack of retirement
plans, focusing on same technologies.
the scale of VC is immediaty small, funded by
the debt, the backupground of investor in
accounting or taxation., no "exit" options.
stock market is open for young companies,
funded by pension, university and foundation
endowments, have "exit" options.
independent relations with no loyalty, licensing
system, not lock-in to typical supplier, incentives
to take risks to advance technology.
cross shareholdings, reduce the customer's
engineering investment, affliate with rival
companies, disinsentives to take new technology.
Offshore
Production
strategies ; "first-mover advantage" strategies ; "follower, catch up and
overtake"
2015/11/20 6
(Source; Chesbrough 1999)

7. Public Funding Scheme in Japan [in old-school]
Minister of Education,
Culture, Sports, Science
and Technology
[MEXT]
The Minister of Economy,
Trade and Industry
METI
Academia Industry
Japan
Science&Tech.
Agency[JST]
Japan Society for
The Promotion
of Science[JSPS]
KAKEN CREST RISTEX SAKIGAKE
Low mobility rate/less open innovation
Innovation Network
Corporation of Japan
Verticallysegmented
Basic research Applied research/Mission-oriented
Verticallysegmented
Government
Funding Agency
Recipient
Cabinet Office, Goverment of Japan (CAO)
2015/11/20 7
New Energy and
Industrial
Technology
Development
Organization[NEDO]

8. NIS Problems in JAPAN
• Vertically Segmented Governance System
• No coordination between academia and industry
• Less Open Innovation
• Less mission-oriented funding scheme
2015/11/20 8

9. Q2 and Q4. What evaluation and co-ordination
mechanisms are in place? How appropriate are they?
• Evaluation mechanism
• Under development
• Try to count up the numbers (# of papers, # of startups etc…)
• Coordination Mechanism
• Under development
• Less communication between academics and policymakers
• Formalizing “Science for Science Policy” Initiative in Japan (called SciREX)
• Aim to connect policy makers + scientists
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10. Science for Science Policy (SciREX) in JAPAN
 Our Mission
• Contribute to the realization of evidence-based policy
To make effective science, technology, and innovation policy, we develop new methodologies and summarize the evidence
pertaining to science, technology, and innovation policy.
• Promote co-evolution of policy formation and policy research
To resolve issues related to science, technology, and innovation, we bridge between the worlds of policy formation and policy
research.
• Provide an arena for discussion of science, technology, and innovation policy
To understand policy issues from diversified perspectives, we provide an arena where policymakers, researchers, and other
involved stakeholders can constructively interact with each other.
• Multi-disciplinary
• Economics + Sociology + Political Science
• Our Activities
• Research
• Workshop
• Implementation Activities
2015/11/20 10

11. Relations among Central Hubs, Functions for Various Science of STI Policy Activities
vi) Post-assessments,
Explanations, prospects
Menu
creation
STI science of
policy research
Deployment, extension
of results/findings
Research
results/findings
integration
Fundamental research, human
resource development
Policy advice
Area-specific
study issues
Provision of
methodology
Provision,
enhancement of
mission DB
Personnel provision,
joint research
Close contact, personnel collaboration MEXT
Related
ministries
Joint research, etc.
Universities, etc.
forum for
constant
dialogues
Area-specific
study issues
Area-specific
study issues
Related
fields
Development of science
and technology for
society (JST-RISTEX)
SciREX Center
Mission-oriented
research
(NISTEP)
Development of data/
information infrastructure
(NISTEP)
STI
policymaking
system
Society,government,administration
Issues
Issues
11
Academic conferences,
research seminer, etc.
Policy
making
Discovery,
identification
of societal
issues
2015/11/20 11

12. Q3. Can you identify any tensions and trade-
offs in the policy mix?
• Trade-offs for STI policy
• Regulation and Innovation
• Innovation enhanced-policy is mainly focused on R&D direct investment. Less
perspective on policy change which avoid any restrictions to resist entrepreneurial
activities.
• Less Coordination between ministries and corresponding policies
• MEXT : focus on education, university and research
• METI : focus on industry
• No centralized governance system for innovation
• CSTI (Council for Science, Technology and Innovation) formed.
2015/11/20 12

13. Q5. How could the mix realistically be
improved?
• A5. it would still take time pessimistically. But attempted to improve
by substituting the scheme and governance structure.
• Some “innovative” case for newly-formed funding scheme.
• AMED Fund (from 2015)
• GHIT Fund (from 2014)
2015/11/20 13

14. New Energy and
Industrial
Technology
Development
Organization[NEDO]
Public Funding Scheme in Japan
[emerging scheme]
Minister of Education,
Culture, Sports, Science
and Technology
[MEXT]
The Minister of Economy,
Trade and Industry
METI
Academia Industry
Japan
Science&Tech.
Agency[JST]
Japan Society for
The Promotion
of Science[JSPS]
KAKEN CREST RISTEX SAKIGAKE
Innovation Network
Corporation of Japan
(Still)Verticallysegmented
Verticallysegmented
Cabinet Office, Goverment of Japan (CAO)
Global Health
Innovative Technology
(GHID) Fund
Ministry of
Foreign
Affairs of
Japan
Ministry of
Health, Labour
and Welfare
2015/11/20 14
Council for Science, Technology and Innovation.[CSTI]
AMED
Fund

15. 1. AMED[Japan Agency for Medical Research
and Development] Fund (from 2015)
• “Based on the Plan for Promotion of
Medical Research and Development
prescribed by the government of Japan,
AMED promotes integrated R&D in the
field of medicine, from basic research to
clinical trials, focusing on nine
interrelated areas including
regenerative medicine and oncology. ”
• Ministers in charge
• The Prime Minister
• The Minister of Education, Culture, Sports,
Science and Technology
• The Minister of Health, Labour and
Welfare
• The Minister of Economy, Trade and
Industry
2015/11/20 15

16. 2. GHIT Fund
Ministry of
Foreign
Affairs of
Japan
Ministry of
Health, Labour
and Welfare
United Nations
Development
Programme
Global Health
Innovative
Technology
Fund
Bill & Melinda
Gates
Foundation;
B&MGF
Pharmaceutical
Firms in Japan
collaboration
Research Institute
Bio Startups
Pharmaceutical Firms in JAPAN
Funding
• Encouraging drug development.
• Collaboration between public, private
and civil sector
• “The GHIT Fund is a groundbreaking
funding response to the failure of free-
market mechanisms to facilitate R&D
of drugs, vaccines, diagnostics and
other products needed by the poorest
of the poor in developing nations.”
• “Japan and the GHIT Fund are poised
to exercise vigorous leadership in the
research, development and
commercialization of these products.”
http://www.mofa.go.jp/mofaj/gaiko/oda/shiryo/hakusyo/13_hakusho_pdf/pdfs/13_k01.pdf
https://www.ghitfund.org/motivation/motivation4/en
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17. Limitation and Current Issues
• No “Demand-Side” Innovation perspective
• No “Globalization” perspective
• Poor publically-fund R&D level (about 20 percentage)
• Role of University in the context of National Innovation System.
• Global ”G”-type University vs Local “L”-Type University
2015/11/20 17

18. References
• National Innovation System
Chesbrough, HW (1999) The organizational impact of technological change: a
comparative theory of national institutional factors, Industrial and Corporate Change, 8
(3), pp.447-485.
Odagiri, H. and Goto, T. (1996) Technology and Industrial Development in Japan:
Building Capabilities by Learning, Innovation and Public Policy, Oxford University Press.
William Lazonick (2007), Varieties of Capitalism and Innovative Enterprise, in Lars
Mjøset, Tommy H. Clausen (ed.) Capitalisms Compared (Comparative Social Research,
Volume 24) Emerald Group Publishing Limited, pp.21 - 69
• Science for Science Policy (SciREX) in JAPAN
• SciREX Centre : http://scirex.grips.ac.jp/center/en/
• New Funding Scheme
• AMED : http://www.amed.go.jp/en/
• GHIT : https://www.ghitfund.org/en
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19. ARIGATO GOZAIMASHITA.
Facebook: yasushi.hara
twitter : @harayasushi
email: ya-hara@grips.ac.jp
2015/11/20 19