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CHOICE OF INDEPENDENT R&D AND OPEN INNOVATION ...

CHOICE OF INDEPENDENT R&D AND OPEN INNOVATION ...

CHOICE OF INDEPENDENT R&D AND OPEN INNOVATION

International Conference On Applied Economics – ICOAE 2010 669 CHOICE OF INDEPENDENT R&D AND OPEN INNOVATION: EMPIRICAL ANALYSIS BASED ON QUESTIONNAIRE DATA FOR FIRMS HIROMI SAITO 1 Abstract Recently, it is believed that trend in R&D has changed from independent R&D to introducing outsources. However, it is not explained based on evidence. Therefore, we show R&D patterns based on questionnaire data for firms in Japan. In addition, we empirically examine the difference between firms adopting independent R&D and those actively introducing external research outcomes, in order to explain the relationship between independent R&D and introduction from the outside. Our data was obtained thorough internet monitor survey when we delegated original questionnaire to an investigation firm. Those surveyed were 20455 firms which consisted of firms in all country and all industries. We got responses from 10731 firms of them (response rate 52.5%). We found that the relation between the R&D in-house and the introduction of external research outcomes is not substitute but complement. Also, larger firms tended to perform more R&D in-house as a whole. JEL codes: L17, L24, M29 Key Words: Open innovation, R&D, questionnaire data 1 Introduction In recent times, firms‘ R&D strategies are believed to have changed from an independent approach to one that introduces external research outcomes or links with outside partners. While internal R&D is said to be ―closed innovation,‖ ―open innovation‖ refers to the organic connection of ideas inside and outside of firms and the creation of values (Chesbrough: 2003, 2006). Introducing external research outcomes in R&D by establishing links with the outside is an example of open innovation. Certain factors influence the decision to adopt ―open‖ R&D, for example, requests for speed in R&D in order to compete globally and reduce product cycles and the impossibility to address requests with one‘s own technology. Therefore, firms tend to focus on their core competencies, that is, concentrate management resources on beneficial business fields and avoid huge R&D investment and any risks associated with development. Although it has been said that NIH (not invented here) syndrome is the general practice in Japan, recent research indicates that linkages with outside R&D are now increasing in the country (Research Institute of Economy, Trade and Industry (below, RIETI), 2003, 2004; Small and Medium Enterprise Agency, 2008; Okamuro, 2006). However, since the respondents in any surveys have also been restricted by firm size or industry, research cannot comprehensively observe the extent of external linkages in Japan. Although there have been many studies on open innovation, many of them are treated as case studies. The few empirical studies that do exist tend to study the effects of linkage with the outside or the introduction of external research outcomes (Motohashi:2005, Okamuro:2007, Matthias and Gassmann: 2009). In addition, there have not been many empirical studies on an entry in R&D—which firms have adopted independent R&D or introduced external research outcomes. In addition, there are also a few empirical studies about the relationship between independent R&D and introducing external research outcomes, that is, whether they are substitute or complement. Therefore, in this paper, we empirically explain which Japanese firms have actually introduced external research outcomes based on a comprehensive survey that is not restricted by field of industry or firm size. Further, we study the difference between firms adopting independent R&D and those actively introducing external research outcomes, in order to explain the relationship between independent R&D and introduction from the outside. 2 Previous studies RIETI (2003) studied the actual status of linkage with the outside in Japanese firms. Their survey covered 7442 research-based firms that met several conditions. Firm size was limited to those with more than 50 employees and possessing over 30 million yen in capital; the firms belonged to manufacturing, wholesale, retail, or service industries. The respondents were 802 firms (collection rate of 10.8%). RIETI (2003) indicates that while 21.7% of them had some form of external link, 73.3% of firms that conduct R&D had external links. Their partners are universities (38.7%), big firms (37.7%), and so on. RIETI (2004) also conducted a similar survey. It covered 5000 research-based firms that had applied for more than three patents in 2001. The respondents were 557 firms (collection rate of 11.5%). The results indicate that 71.4% of the respondents had external links R&D. The rate of outside linkage had also increased in any firm size level, comparing with 5 years ago. Additionally, there is a particular indication that the larger the firm size, the higher the rate of external linkage becomes as a whole. On the other hand, the rate of external linkage is high in small and large firms, but it is low in medium firms. Many firms cited ―response to stiff competition in R&D,‖ ―streamlining costs,‖ and ―improvement in basic research capacity‖ as reasons that firms encourage external linkage in R&D. However, we should note that these surveys have certain sampling restrictions. RIETI (2003) only surveyed firms of a certain size, and the sample had more biases towards manufacturing, which made up 86.5% of the sample. We need a more comprehensive survey to capture actual status of firms. RIETI (2004) also restricted their survey to firms that applied for more than three patents in a certain year. It did not matter that the firms surveyed were restricted to research-based firms; however, this created a bias because there might have been firms that did not apply for patents only in that year. 1 National Graduate Institute for Policy Studies, hiromi_saito@grips.ac.jp 7-22-1 Roppongi, Minato-ku Tokyo 106-8677, Japan, Tel/Fax: +81-3- 6439-6328

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