Action 54. Scientific and Technological Innovation—Create a Virtuous Cycle with a National Strategy and Through Cooperation between Industry, Government, and Academia

It is widely known that all the innovations that have emerged in the U.S., such as the Internet and GPS, have come out of government projects, particularly long-term, strategic, high-risk/high-return military projects. If Japan, an island country that lacks resources, is to remain one of the world’s top nations, the national government will need to have a solid strategy for establishing the country as a science and technology powerhouse and serve as the driving force for innovation.
 
1. Articulate a “Select-and-Focus”-Based Science and Technology Strategy
Innovations such as the Internet and GPS have delivered new value to society. In fact, few people would object to the statement that they have actually altered the very fabric of society. Both these innovations arose from the commercialization by the private sector of long-term, strategic R&D projects run by DARPA (Defense Advanced Research Projects Agency). The case of the U.S. shows that the role of the national government is to fly the flag for R&D from a long-term perspective, draw a roadmap, and invest in R&D on an ongoing basis. The private sector will then turn the results of this R&D into businesses, transform society, and produce innovations that generate value for promoting growth. In Japan, too, the government must more clearly articulate its targets and formulate a clear, “select-and-focus”-driven strategy.
 
2 Strengthen the Control-Tower Functions of the Council for Science, Technology and Innovation and have the Minister of Defense Take Part
Da Vinci, the most practical surgical robot in the world, also came out of a project run by the U.S. Department of Defense. In Japan, too, the functions of the Council for Science, Technology and Innovation need to be further strengthened to enable to operate as a control tower for national science and technology R&D. The Ministry of Defense also needs to be made a member of the Council, with knowhow and manpower from the Ministry of Defense’s technology research headquarters actively put to use in national science and technology strategy.
 
3. Enlarge the R&D Budget and Allocate Funding to the Private Sector, Particularly Startups
In Japan only a tiny portion of the national budget goes to the private sector. Almost all of Japan’s budget for science and technology is allocated to public-sector organizations such as universities and independent administrative corporations, with just 4.3%, or around 141 billion yen per year, going to private-sector companies. These are tiny figures. In the U.S., meanwhile, over 30% of the government’s R&D budget, or approximately 4 trillion yen per year is allocated to companies. Government funds are channeled through core universities such as Stanford to startups, which use them to develop new technologies. This leads to a virtuous cycle in which large corporations buy up new technologies from startups and turn them into viable businesses. Another problem in Japan is that government-led projects are small and cover extremely narrow fields. The government should expand the budget for science and technology to the greatest extent possible, narrow down the fields it invests in through a “select-and-focus” approach, and the size of each project should be increased.
 
In addition, a structure also needs to be created for allowing budgets to be smoothly invested in the private sector, particularly startups. As the case of Silicon Valley in the U.S., the “innovator’s dilemma” means that the cutting-edge technology that leads to radical innovations is more likely to emerge from startups than large companies.
 
4. Strengthen International Standardization and Intellectual Property Strategy
Many readers will remember how Sony’s FeliCa technology, which is used in JR East’s Suica cards, for example, lost out to standards from Royal Philips Electronics of the Netherlands and Motorola of the U.S. in the battle to establish an international standard for non-contact IC cards. Government, industry, and academia should work together from the initial R&D phase with an eye on international standardization and intellectual property strategy.

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