Growing R&D Collaboration of Japanese Firms and Policy Implications for Reforming the National Innovation System1

Abstract

Japan's innovation system is often characterized as one dominated by in-house research and development (R&D) by large firms, but recently, more and more firms are involved in R&D collaborations due to the vigorous international innovation competitions and the increasing complexity of R&D. This study examines the role of small and medium sized enterprises (SMEs) in this change, by performing quantitative analyses using RIETI's R&D External Collaboration Survey. First, it is found that SMEs have gained high R&D productivity through university industry collaborations (UICs). Absorptive capacity theory suggests large firms with internal R&D resources are good at UIC activities as well. However a growing trend of UICs is found in small firms or new technology-based firms (NTBFs), which focus on focused R&D such as specific product development projects. Furthermore, these types of small firms play an important role as partners of large firms' R&D collaborations. For large enterprises that are increasingly selecting and focusing on areas of in-house R&D, there is a great incentive to collaborate with NTBFs with unique technologies. In this sense, NTBFs play a central role in changing Japan's national innovation system from an in-house system to a network based one. Policy implications for accelerating this change are also discussed.