21ST CENTURY INNOVATION SYSTEMS FOR JAPAN AND THE UNITED STATES
Lessons from a Decade of Change
Report of a Symposium
Sadao Nagaoka, Masayuki Kondo, Kenneth Flamm, and Charles Wessner, Editors
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NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance.
This study was supported by: Contract/Grant No. SB1341-03-C-0032 between the National Academy of Sciences and the U.S. Department of Commerce; Contract/Grant No. OFED-381989 between the National Academy of Sciences and Sandia National Laboratories; OFED-858931 between the National Academy of Sciences and Sandia National Laboratories; and Contract/Grant No. NAVY-N00014-05-G-0288, DO #2, between the National Academy of Sciences and the Office of Naval Research. This material is based upon work also supported by the Defense Advanced Research Projects Agency Defense Sciences Office, DARPA Order No. K885/00, Program Title: Materials Research and Development Studies, Issued by DARPA/CMD under Contract #MDA972-01-D-0001. Additional funding was provided by Intel Corporation, International Business Machines, the Palo Alto Research Center, and Google. The project was also supported by NISTEP (National Institute of Science and Technology Policy) and IIR (Institute of Innovation Research) of Hitotsubashi University of Japan. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project.
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Committee on Comparative Innovation Policy: Best Practice for the 21st Century*
William J. Spencer (NAE), Chair (through August 2007) Chairman Emeritus, retired
Kenneth S. Flamm, Vice Chair Dean Rusk Chair in International Affairs
Lyndon B. Johnson School of Public Affairs University of Texas at Austin and STEP Board
Alice H. Amsden Professor of Political Economy
Massachusetts Institute of Technology
Gail H. Cassell (IOM) Vice President,
Scientific Affairs and
Distinguished Lilly Research Scholar for Infectious Diseases
Eli Lilly and Company
Carl J. Dahlman Henry R. Luce Associate Professor
Edmund A. Walsh School of Foreign Service Georgetown University
Alan Wm. Wolff, Chair (August 2007-present) Partner
Dewey & LeBoeuf LLP and STEP Board
Mary L. Good (NAE), Vice Chair Donaghey University Professor Dean,
Donaghey College of Engineering and Information Technology University of Arkansas at Little Rock and STEP Board
Bronwyn Hall Professor of Economics
University of California at Berkeley
Mark B. Myers Senior Vice President, retired
Charles W. Wessner Study Director
McAlister T. Clabaugh Program Associate (through July 2006)
David E. Dierksheide Program Officer
Sujai J. Shivakumar Senior Program Officer
Adam Gertz Program Associate
Jeffrey C. McCullough Program Associate (through August 2008)
For the National Research Council (NRC), this project was overseen by the Board on Science, Technology and Economic Policy (STEP), a standing board of the NRC established by the National Academies of Sciences and Engineering and the Institute of Medicine in 1991. The mandate of the STEP Board is to integrate understanding of scientific, technological, and economic elements in the formulation of national policies to promote the economic well-being of the United States. A distinctive characteristic of STEP’s approach is its frequent interactions with public and private-sector decision makers. STEP bridges the disciplines of business management, engineering, economics, and the social sciences to bring diverse expertise to bear on pressing public policy questions. The members of the STEP Board* and the NRC staff are listed below:
Lawrence H. Summers (NAS), Chair
Charles W. Eliot Professor
Kennedy School of Government
Lewis W. Coleman
President & CFO
Kenneth S. Flamm
Dean Rusk Chair in International Affairs
Lyndon B. Johnson School of Public Affairs
University of Texas at Austin
Alan M. Garber (IOM)
Henry J. Kaiser, Jr. Professor
Professor of Medicine
Director, Center for Health Policy
Director, Center for Primary Care and Outcomes Research
Ralph E. Gomory (NAS/NAE)
Stern School of Business
New York University
& President Emeritus
Alfred P. Sloan Foundation
Edward E. Penhoet (IOM), Vice-Chair
Mary L. Good (NAE)
Donaghey University Professor
Dean, Donaghey College of Engineering and Information Technology
University of Arkansas at Little Rock
Amory Houghton, Jr.
Former Member of Congress
David T. Morgenthaler
Joseph P. Newhouse (IOM)
John D. MacArthur Professor of Health Policy and Management
Harvard Medical School
U.S. Venture Partners
William J. Raduchel
Opera Software ASA
Jack W. Schuler
Alan Wm. Wolff
Dewey & LeBoeuf LLP
Stephen A. Merrill
McAlister T. Clabaugh
(through July 2006)
David E. Dierksheide
Charles W. Wessner
Jeffrey C. McCullough
(through August 2008)
Sujai J. Shivakumar
Senior Program Officer
INTRODUCTION: The Chrysanthemum Meets the Eagle—The Co-evolution of Innovation Policies in Japan and the United States
Technology Policies in Japan: 1990 to the Present
Public-Private Linkage in Biomedical Research in Japan: Lessons of the 1990s
Recognizing that a capacity to innovate and commercialize new high-technology products is increasingly a key for the economic growth in the case of tighter environmental and resource constraints, governments around the world have taken active steps to strengthen their national innovation systems. These steps underscore the belief of these governments that the rising costs and risks associated with new potentially high-payoff technologies, their spillover or externality-generating effects and the growing global competition, require national R&D programs to support the innovations by new and existing high-technology firms within their borders.
Innovation can be defined as the transformation of an idea into a marketable product or service, a new or improved manufacturing or distribution process, or even a new method of providing a social service. This transformation involves an adaptive network of institutions that encompass a variety of informal and formal rules and procedures—a national innovation ecosystem—that shape how individuals and corporate entities create knowledge and collaborate to bring new products and services to market. If competitiveness can be defined as the ability to gain market share by adding value better than others in the globalized economic environment, the ability of these actors to collaborate successfully within a given innovation ecosystem gains significance.1 Recognizing this, policymakers around the world are supporting a variety of initiatives to reinforce their national innovation ecosystems as a way of improving their national competitiveness.
In the United States, the proliferation of national initiatives to support innovation highlights the need for better understanding by U.S. policymakers of the objectives, structure, operation, funding levels, and trends characterizing some of the major programs around the world. These programs and associated policy measures are of great relevance to the United States both for their potential impact on U.S. competitiveness and for the lessons they may hold for U.S. programs.
With these objectives in mind, the National Research Council’s Board on Science, Technology, and Economic Policy (STEP) has embarked on a study of selected foreign innovation programs in comparison with major U.S. programs. As such, the premise of this study is not to consider the possibility of a pure laissez-faire approach to fostering innovation, but rather to recognize the importance of targeted government promotional policies relative to innovation.2 The analysis, carried out under the direction of an ad hoc Committee, is to include a review of the goals, concept, structure, operation, funding levels, and evaluation of foreign programs designed to advance the innovation capacity of national economies and enhance their international competitiveness.3
In Japan, there have been significant new developments in Japanese innovation policies since the 1990s. They include the enactment of the Science and Technology Basic Law in 1995 to promote science and technology in a more systematic and coherent way, a significant increase for funding in the science and technology budget, coupled with major institutional reforms in national universities and research laboratories, measures to strengthen industry and academic science partnerships, including the enactment of the Japanese version of the Bayh-Dole Act, and a significant strengthening of intellectual property rights protection. The most important reason for these changes was the recognition of policy makers that Japan needed to strengthen its innovation capability, as an engine of economic growth, given that the catch-up phase of Japanese economic growth was over. The policy priority on innovation increased as the stagnation in Japan’s economy extended over almost a decade.
THE CONTEXT OF THIS REPORT
In the United States, since 1991 the STEP Board has undertaken a program of activities to improve policy makers’ understanding of the interconnections among science, technology, and economic policy and their importance to the American economy and its international competitive position. The Board’s interest in comparative innovation policies derives directly from its mandate.
This mandate has previously been reflected in STEP’s widely cited volume, U.S. Industry in 2000, which assesses the determinants of competitive performance in a wide range of manufacturing and service industries, including those relating to information technology.4 The Board also undertook a major study, chaired by Gordon Moore of Intel, on how government-industry partnerships can support the growth and commercialization of productivity enhancing technologies.5 Reflecting a growing recognition of the importance of the surge in productivity since 1995, the Board also launched a multifaceted assessment, exploring the sources of growth, measurement challenges, and the policy framework required to sustain the New Economy.6
The current study on Comparative Innovation Policy builds on STEP’s experience to develop an international comparative analysis focused on U.S. and foreign innovation programs. The analysis will include a review of the goals, concept, structure, operation, funding levels, and evaluation of foreign programs similar to major U.S. programs. Among other initiatives, this study will convene senior officials and academic analysts engaged in the operation and evaluation of these programs overseas to gain a first-hand understanding of the goals, challenges, and accomplishments of these programs.
In Japan, the research on the innovation process and policy has become very important in the midst of increasing government commitment to the innovation policy. In particular, after reviewing several research proposals made by various institutions, the government asked the National Institute of Science and Technology Policy (NISTEP), the Ministry of Education, Culture, Sports, Science and Technology, to conduct a comprehensive review to see the effects of the First and Second Science and Technology Basic Plans in 2003. NISTEP spent two years to conduct this review. The staff of NISTEP, cooperating with outside think tanks,
analyzed how public funds were spent, how science and technology systems, such as funding channels, were changed, what outputs, such as research papers and patents, were created, what were the outcomes and impacts of the two Plans in regions and the society, etc. In conducting this exercise, NISTEP employed international comparisons against the United States and European Union countries. The other research institutions, such as Research Institute of Economy, Trade and Industry and the Institute of Innovation Research of Hitotsubashi University, have also undertaken a number of innovation related studies, including that on the research consortium and on the interaction between innovation and intellectual property rights.
Based on the activities mentioned above both in Japan and the United States, in January 2006, a major international symposium on “21st Century Innovation Systems for the United States and Japan: Lessons from a Decade of Change” was organized by NISTEP and STEP and was held in Tokyo in cooperation with the Institute of Innovation Research of Hitotsubashi University.7 The Symposium was opened by two distinguished addresses. Rep. Donald A. Manzullo, Chairman of Committee on Small Business, U.S. House of Representatives, made a speech titled “Challenges in the U.S. Innovation System.” Professor Taizo Yakushiji, a Member of the Council for Science and Technology Policy, made an address titled “Evolution and Challenges to the Innovation Systems in Japan—Innovation by Emulation.” This Symposium reviewed government programs and initiatives to support the development of small- and medium-sized enterprises, government-university-industry collaboration and consortia, and the impact of the intellectual property regime on innovation. While the symposium could not cover every issue in this complex and changing area, every effort was taken to ensure that the issues selected were significant for the two innovation models being discussed. This book brings together the papers presented at the conference and provides a historical context of the issues discussed at the symposium.
We are grateful for the participation and the contributions of the Defense Advanced Research Projects Agency, the National Institute of Standards and Technology, the Office of Naval Research, Sandia National Laboratories, the National Institute of Science and Technology Policy, and the Institute of Innovation Research of Hitotsubashi University.
We are grateful for the members of the Planning Committee in Japan, chaired by Masayuki Kondo and including Sadao Nagaoka, Akira Goto (Professor, Research Center for Advanced Science and Technology, University of Tokyo), Hiroyuki Tomizawa, and Masaru Yarime (both of whom are the Senior Research Fellows at the Second Theory-oriented Group, NISTEP) for organizing and imple-
The symposium agenda and planning committee can be found in Appendix A. Unless noted. Unless noted otherwise, all affiliations listed in this volume are as of January 2006.
menting the conference. We are also thankful for the support of the staff of the NISTEP and of the Institute of Innovation Research of Hitotsubashi University for their key role in organizing the conference.
This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies’ Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for quality and objectivity. The review comments and draft manuscript remain confidential to protect the integrity of the process.
We wish to thank the following individuals for their review of this report: Arthur Alexander, Georgetown University; William Bonvillian, Massachusetts Institute of Technology; Randall Goodall, SEMATECH; Thomas Howell, Dewey & LeBoeuf LLP; and Nicholas Vonortas, The George Washington University.
Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the content of the report, nor did they see the final draft before its release. Responsibility for the final content of this report rests entirely with the author(s) and the institution.