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5 Indust~y-University Cooperation Although in financial terms Japanese industry's support for overall national research and development is roughly similar to that of the Defense Department in the United States, industry does not play a major role in direct support for university research in either country (see Table 5-1~. The recent trend toward increased university-industry cooperation is not a new phenomenon in either country. In both the United States and Japan there was strong cooperation between industry and universities before World War II. For various reasons outlined below, both nations saw a decline after the war in university-industry cooperation. Again, for reasons unique to each nation's perception of its own weaknesses, this cooperation has begun to rise again in recent years. In the postwar United States, industrial support for university research was supplanted by the federal government. Increased federal attention to the importance of science after the success of the Manhattan Project, the "shock" of Sputnik, and the unusual "contract" negotiated between the government and the nation's scientists led to strong government support for basic scientific research in American universities. The split between basic and applied research responsibilities, combined with academic mistrust of the stability of research support by business, widened the rift between industry and universities. Likewise, in postwar Japan, there emerged a strong antibusiness sen- timent on university campuses, in part because many businesses were asso- ciated with the war effort. In addition, industry research and development activities were strengthened after the war and industry stopped depend- ing on universities for scientific expertise. These factors, combined with 17

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18 TABLE 5-1 Research and Development (R&D) Funded by Industry, 1986 Percentage of National R&D Funded by Industry Percentage of University R&D Funded by Industry United States 48.4 74.7 Japan 6.2 2.6 SOURCES: Science and Technology Bureau, Science and Technology Agency, Indicators of Science and Technology, 1987, 6-7; National Science Foundation, Science and Engineering Indicators--1987, 243; National Science Foundation, National Patterns of Science and Technology Resources: 1987, 39; National Science Foundation, The Science and Technology Resources of Japan: A Comparison with the United States, 1988. Monbusho rules prohibiting national university professors (who are consid- ered government employees) from receiving funds from industry, created distance between industry and academe. Although fear of encroachment on academic freedom probably con- tinues in some sectors of the academic communities of both nations, and although industry continues to complain about academe's insensitivity to industrial needs, it is clear that in both nations industry and universities (with governmental encouragement) are experimenting with new ways of cooperation. Rising international competition and a recognition that in some fields basic research can lead quickly to applications have convinced some companies of the benefits of investment in basic research. At the same time, the increasing costs of conducting scientific research and federal budget restrictions have led universities to seek new sources of funds. U.S. industry funding for university research has increased in recent years. Industry funding at the Massachusetts Institute of Technology (MIT), for example, has risen 20 percent a year since 1976 and now amounts to about 15 percent of the university's on-campus research expenditures.) Overall industry funding for university research rose from 3.3 percent to over 6 percent during the decade beginning In 1976.2 Japanese industry funding of U.S. university research has also attracted considerable attention. According to NSF, In 1982 Japanese Industry spent in and/or contributed to foreign universities mice as much money as it did i"Changing Relationship Seen in New Corporate-University Ties," Nature 335 (September 1988), 106. This share is significantly reduced if funding for research, much of which is supported by the government, at Lincoln Laboratory is included. 2 National Science Foundation, National Pattems of Science and Technology Resources: 1987, 39.

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19 In domestic ones (34 billion yen versus 17 billion yen).3 According to a re- cent survey conducted by the U.S. Government Accounting Office (GAO), more than one-third of the top 150 universities in the United States (based on research spending) received funds from Japan in 1986. Japanese fund- ~ng accounted for 13 percent of these universities' total foreign funding.4 Business Week estimated that Japanese research contracts with U.S. uni- versities amounted to $30 million in 19~. Some universities also received considerable Japanese industry sponsorship in the form of gifts. MIT, which has 19 Japanese-endowed chairs, has attracted particular media attention.5 Although Japanese industry also supports Japanese university research and development indirectly, these trends in Japanese funding reflect the high quality of research in U.S. universities. The U.S. government has encouraged university-industry cooperation to take better advantage of basic research being conducted in the nation's university laboratories to bridge the gap between the basic research being done in university laboratories and the applications required by industry. NSF, for example, has an ongoing program in which it provides seed money to university research projects with the expectation that within five years they will be supported by industry. There are about 40 such cooperative ventures under way, about 10 of which have passed the five-year "success" mark. A newer development has been NSFs Engineering Research Centers (ERC). According to a recent GAO report, it is still too early to evaluate the overall effects of the ERC approach; industry continues to lament a lack of influence on the research agenda and direct research collaboration Is limited, but over half of the Industrial participants Intend to continue their participation.6 In addition, the 1986 Ax Reform Act introduced a 20 percent tax credit for corporations which contract for basic research with . . . universities. In the United States, start-up venture capital companies often bridge the gap between the basic research of universities and the commercialization of technology. This is especially true in newer fields, such as biotechnology. Always under financial pressure, however, many of these companies do not survive and are forced to sell their technology. In Japan, where venture capital companies are less common, Industry has become a ready purchaser of U.S. high technology start-up companies. 3National Science Foundation, Tokyo Report Memorandum, No. 69, 25 March 1985, 2. 4U.S. Government Accounting Office, R&D Funding Foreign Sponsorship of US. Universay Re- search (March 1988),15, 25. 5"0n the Campus, Fat Endowments and Growing Clout," Business Week (11 July 1988), 70; updated information provided by MIT by telephone. 6 U.S. Government Accounting Once, Engineering Research Centers: NSF Program Management and Industry Sponsorship (August 1988~.

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20 The Japanese government is also encouraging university-industry coop- eration, but a central theme in Japanese policy statements is the intention to boost basic research. The 1982 Special Commission on Administrative Reform report called for stronger links among the educational and indus- trial sectors. Cooperation has also been stimulated through government research programs, which are often headed by university professors and carried out in industrial laboratories. One example is the Exploratory Re- search for Advanced Technology (ERATO) program, sponsored by STN Researchers in this rather modest but much-publicized program are drawn from universities, industry, and government, as well as foreign countries. The creation of Tsukuba Science City was another governmental attempt to bring industry and universities closer together, as was the establishment of the Research Development Corporation of Japan (JRD C). In addition, Monbusho has begun to relax its restrictions on industrial support for national universities and has even created some programs to encourage such support. Although there is disagreement about the degree to which the old restrictions actually hindered university-industry cooper- ation, there is no doubt that such cooperation has been made somewhat easier just by virtue of the fact that it is now "blessed" by the government. Those who argue that Monbusho's changes are primarily cosmetic point to examples of past indirect support of university research by indus- t~y. Industry has often, for example, loaned or made equipment available at low prices to universities or allowed the use of its own facilities by university researchers. It has also been popular for companies to contribute small sums to professors working in areas of interest (although their interest may have been more in the professor's recommendations of students for post- graduate employment than in the actual research). In addition, according to NSF, national university professors have always been able to work for industry under the auspices of a nonprofit agency such as the Industrial Research Institute, "founded as a means to allow professors to do work for industry or for government agencies other than Monbusho."7 Finally, Monbusho restrictions applied primarily to national universities; private universities have always been able to write their own rules on university- industry cooperation, and public university professors often give courses to local businessmen under the sponsorship of prefectural research institutes funded by MITI. On the other hand, those who consider Monbusho's changes to be a major advance point to traditional restrictions on national university professor~restrictions that prevented them, as civil servants, from accept- ing the type of contract research that is common in the United States. It 7National Science Foundation, To}yo Report Memorandum, No. 69, 25 March 1988, 1.

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21 is argued that significant research cooperation through the type of indi- rect channels mentioned above has only been an option for the most well known professors in the best universities. The current contract research system in Japan allows national university researchers to carry out research with funds from external sources. In 1982 national universities received 2.4 billion yen to conduct 1,324 research projects on contracts. Although 78 percent of the funds came from government or public research institutes, a large number of researchers came from industry 694, compared to only 67 from the government.8 In addition, Monbusho has created a set of rules governing four programs under which industry can support national university research: 9 1. The contribution reception or donation system, whereby ~n- dustry funds a professor who incurs no obligations to the com- pany. The professor manages the funds the same way he man- ages government funds. Beginning in 1987, private organizations were permitted to donate entire institutes or chairs to national universities for a two to five year renewable period. The project reception-or contract research-system, whereby a professor and company agree to a research theme. Research is carried out by the university, funded by industry. By 1985, there were 1,700 total contract research projects amounting to 3.5 billion yen received by universities. The research and fund reception-or contract researcher sys- tem, which allows the exchange of both funds and researchers. The university and industry develop a cooperative research project on a common theme and industry sends funds and re- searchers to the university. Projects undertaken under this sys- tem may be supported by the government when it deems the project particularly important. In 1985 there were 842 contract researchers in Japanese universities, 85 percent of whom came from industry. The cooperative research center system. Once a project is for- mally accepted by a joint university-industry center, it can receive funds from the government for equipment. In the first two years of the Joint Research Program, Monbusho spent 265 million yen and industry spent 1.15 billion yen on 216 projects. According ~M. Nishio, "New Movement in University Industry Cooperation" (Tolyo: Ministry of Educa- tion, Science, and Culture, 1983),10. 9The following information has been compiled from several sources, including: Kazuaki Iwata, Manufac~nngEngneering University-Indust~y Coordination, July 1988; National Science Foun- dation, Tokyo Report Memorandum, No. 158, 8 July 1988; Ministry of Science, Education, and Culture, Research Cooperation Between Universities and Ind~soy.

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22 to Monbusho, there were 396 such projects in the period from April 1987 to April 1988.1 Monbusho also offers assistance in presenting research results and parts of its grants-in-aid program have been revamped to encourage university research that is more useful to industry (more on this below). NSF has presented a useful classification of Monbusho's program, looking at the options by source of funding as follows: Industry and university share the costs. In most cases industry provides more cash, while the university provides facilities and equipment. Industry fools the entire bill. The university makes facilities and equipment available to visiting industry researchers. Industry pays the university a set amount (360,000 yen in 1985) per researcher per year for the use of laboratory facilities at the university. An important aspect of Monbusho's program is that it has made an attempt to address one of the stickiest problems in university-industry co- operation (in both countries) that of patent protection. Many companies in both nations have been reluctant to support research that might lead to profitable patents if they cannot be guaranteed the rights to the patents that result from the research. Monbusho's program allows industry to re- ceive priority on patents resulting from joint research for up to seven years. Under Monbusho's joint research program, if joint university-industry re- search results in a patentable innovation, the university and company may apply jointly for the patent and negotiate a period for industry priority (not to exceed seven years). As of July 1988, 61 such patents had resulted from this program. Nevertheless the ministry has also argued that con- tract research is not joint research and that patents resulting from contract research should belong to the government. The JRDC has approached the patent issue differently, probably be- cause its goals are different from Monbusho's. Established in 1961, JRDC's programs have been aimed more at efforts to exploit government-owned patents than at promoting new research. JRDC selects and supports com- panies to develop high-risk technology based in part on university research that might not otherwise be exploited. If the development is successful, the company is required to repay JRDC; if it is not, the company is under no obligation. Even in the successful cases, however, the company is not given ~ "Japanese Links," New Scientist (4 August 1988), 28. i 1 National Science Foundation, Tolyo Report Memorandum, No. 69, 25 March 1985. i2National Science Foundation, Tokyo Report Memorandum, No. 158, 8 July 1988, 18.

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23 the patent but is instead permitted to license it from JRDC. Half of the royalty goes to the owner of the technology; the owner may be a university or a government research institute.l3 The patent protection issue is but one manifestation of industry's tendency to seek a "return on investment." This tendency has continued to create a ceiling on the degree to which industry is willing to contribute to university research in the United States and Japan. According to STA's 1983 white paper, in fact, Japanese industry has probably contributed as much as can be expected to basic research in Japanese universities, given the "return on investment" consideration.l4 The "return on investment" question reflects a broader issue con- fronting both nations' attempts to improve university-industry relations- that of conflicting expectations. In both the United States and Japan, universities and industry seek cooperative research for different reasons. Universities are less concerned than industry about the applicability of the research for which they seek industry support. They also prefer to maintain the openness of their laboratories, whereas industry is becoming increasingly concerned about outside access to the university research it supports. There is an additional constraint on Japanese university-industry co- operation. The lack of mobility induced by the lifetime tenure system in Japanese universities has created a situation in which there is little crossing of sectoral boundaries. Some Americans have argued that the Japanese have overcome this potential weakness with their plethora of information exchange organizations. By 1985, for example, the Japan Society for the Promotion of Science (JSPS) had formed 36 committees bringing industry and universities together to exchange information about venous fields.~5 Another example is the Research Information Exchange Center, created in 1982 at the Tokyo Institute of Technology to promote integrated re- search between university researchers and those outside, promote contract research, and exchange information (in response to industry demands) through conferences and seminars. In addition there are a variety of com- mittees organized by academic societies. They can be broken down into the following basic categories: . Technical committees, for example, Japan Society of Precision Engineering's committees on Computer-Aided DesignICompu- ter-Aided Manufacturing, Automated Assembly System, and In- tegrated Manufacturing System. ~- Science and Technology Agengy, Research Development Corporation of Japan, 1986. National Science Foundation, Tolyo Report Memorandum, No. 69, 25 March 1985, 3. National Science Foundation, Tolyo Report Memorandum, No. 69, 25 March 1985, 10.

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24 . . Subcommittees organized for special subjects, mainly for tech- nological information exchange. Cooperative committees between industries and universities, usu- ally paid for by industry. These committees, also primarily for technological information exchange, select new subjects to be studied each year. Research coordination committees, in which university and in- dustry researchers exchange technological information about re- search work on specified subjects; for example, the Japan Society of Mechanical Engineering's committee on manufacturing engi- ncering has existed for 15 years. Nevertheless, according to former JSPS Director General Sogo Oka- mura, these exchanges do not always work the way they should because industrial competitors are often hesitant to speak freely in front of each other about what may become profitable technological developments. In both nations, in spite of the common-sense argument that cooperative research can save money in the long run, the quest for profits may discour- age cooperative efforts. According to Iwata, despite the growing number of university-industry cooperation agreements and the new rules by Mon- busho, the greatest sticking point remains what to do when research results are ready to be published and patents applied for. Iwata suggests that these problems be worked out on a case-by-case basis.~7 Finally, as noted above, the Japanese government has tried to en- courage university-industry cooperation as a way of supporting more basic research. In fact, however, Monbusho seems to be encouraging university research that is more responsive to industrial needs. For example, Mon- busho has created a category of research under the grants-in-aid program for "experimental (or developmental) research," and since 1983, has in- creased the number of industrial research leaders on the committees within Monbusho's Science Council that examine applications for special research grants. In addition, grant proposals are still required to include "expected results," and there is considerable rigidity in the acceptable uses for grant funds. In theory it Is the oft~ritic~zed general funds that allow the most flexibility, since theoretically university heads can distribute them within the university as they see fit. The practice of using formulas to distribute the funds, however, limits the effectiveness of this flexibility. i6 National Science Foundation, Tokyo Report Memorandum, No. 69, 25 March 1985, 10. i7Kazuaki Iwata, Manufacturing Engineering: Universi~-Ind~soy Coordination, presented at the second Japan-U.S. conference on manufacturing research, July 11-14, 1988. IBM. Nishio, "New Movement in Univemity-IndustIy Cooperation" (Tokyo: Ministry of Science, Education, and Culture, 1983), ~7.

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25 In keeping with its principle that the primary role of universities is education, Monbusho has stipulated that all joint projects be initiated by the university, in order to ensure that the research being pursued comple- ments the university's primary function. According to Professor Gen Ohiwa of ~yohashi University of Technology, however, Monbusho's university- industry cooperation programs are not encouraging basic research, although they are educationally beneficial insofar as they allow students to see useful applications of their research.~9 i9National Science Foundation, Tolyo Report Memorandum, No. 69, 25 March 1985, 5-6.