New Challenges for Japanese Cluster Policy - Beyond proximity and trust -

1. OECD Outreach Workshop on Smart Specialization Program (April 3-5 2013, Gwangju, Korea) New Challenges for Japanese Cluster Policy- Beyond proximity and trust - Prof. Dr. Ichiro Sakata Todai Policy Alternatives Research Institute Faculty of Engineering The University of Tokyo

2. Abstract Networks within an organization and also among organization are expected to work as conduits of resources and knowledge for innovation. Previous studies have shown that dense networks are closely related with innovation performance. Tight relationships in a close unit group foment trust among actors and therefore promote collaborations, and diverse connections with the others can open an opportunity for breakthrough. Thus, Japanese policy program on regional cluster is characterized by its emphasis on networks and networking as compared to traditional strategies of industrial policy. ‘Small-world’ structure of regional network is the target of public intervention. However, no single region or even country will possess all knowledge and skills required for dynamic innovation in the 21st century. Technology collaboration between leading regions or countries is important to promptly and efficiently address the global challenges such as climate change, aging and food security. Globalization has become a crucial issue of Japanese cluster policy. We will discuss this matter based on several cases such as Hamamatsu auto and photonics cluster and identify the role of governments and universities.

3. Brief History of Japanese Innovation Policy I: 1950’s~60’s II: 70’s~80’s III: 00’s~ Organization Technology Fundamentals 90’s~ The Lost Decade 1950’s Foundation of Organization ・Agency of Industrial Science andTechnology 　・Science and Technology Agency 1970’s Mega National Project 　 ・Super LSI 　 ・Sunshine 　 ・Moonlight Late 1990’s Reconstruction of Innovation System 　・Science and Technology Basic Plans ・Bayh-Dole Act ・TLO 1980’s Basic research shift ・ JAPAN as NO.1 　　 →criticism against free rider on basic science 　・Shift of national research institutes to basic science 　・Boom of central research institute 1960’s： Establishment of Institution ・Act of Research Association ・National Project System Early 2000’s ・government reorganization ・Regionalcluster policy 2006～ Innovation Strategy 　　・New Economic Growth Strategy 　　・Innovation 25

4. Transition of regional policy 1960 Pacific Industrial Belt Plan 1962 National Comprehensive Development Plan 1962 Law for Development of New Industrial Cities 1972 Relocation Promotion Law Industrial Park/District Technopolis Corporate Cities 1983 Technopolis Law Law on Activation of Specific Regional agglomeration Industrial Cluster Innovation Cluster 1998 Regional Platform 2001 Industrial regional Cluster Plan 2002 Innovation Cluster Plan Infrastructure to knowledge and network

5. Changes in the focus of regional policy

6. Cluster Projects in Japan In Japan, national projects for forming regional clusters have been developed since 2001. Now local governments lead cluster policy. Innovation Cluster Project Industrial Cluster Project R&D projects, academic-industry collaboration, incubation, networking efforts, setting buffer institutions and modern IT/Web infrastructure are included in the cluster policy.

7. Proximity does matter for Innovation While firms can access factors of production across the globe, local knowledge and capabilities, including proximity to research and education institutions continue to matter for innovation. (Source) Ministerial report on the OECD innovation strategy, May 2010.

8. Global innovation network and region Regional Cluster Hub of network knowledge circulation Dense collaboration Severe competition

9. Comparison of Four Networks ①Hamamatsu: Auto, Photonics ②Fukuoka: Medical Device ③Okinawa：Food and Tourism ④Aomori：Food I. Sakata et al. Four regional clusters and ‘small-world’ network, Hitotsubashi Business Review 53(3)(2005)

10. Yamaha Auto Yamaha Suzuki Honda Hamamatsu Photonics Local dense network Case : Network structure in Hamamatsu Global network Effective division of labor, dense collaboration, severe competition in the region (source) Y. Kajikawa, J. Mori and I. Sakata "Identifying and bridging the network in a regional cluster" Technological Forecasting and Social Change 79(2012) 252-262

11. Outside links in Hamamatsu (%) Sales outside Photonics Yamaha Other sample (%) Inputs from outside (Source )K. Matsushima, I. Sakata et al. “Design for revitalizing regions” 2013

12. Major Factors to Develop Network (1)Trust, (2)Proximity, (3)Industrial Categories (Source) J. Mori, Y. Kajikawa, H. Kashima and I. Sakata "Machine learning approach for finding business partners and building reciprocal relationships" Expert Systems with Applications 39(2012) 10402-10407

13. Policy suggestions from our experience • Network structure is different across regions or industries in Japan. • Specialization and globalization depends not only on the nature of industry • such as economy of scale and scope but also on policy and corporate strategy. • It is possible to improve the regional capability and openness by policy • intervention. • Even though transactions tend to be more global, trust and proximity are the • significant factors to decide network structure. • Policy intervention may be necessary to change the structure. • Communities tend to be segmentedby industrial categories and keiretsu • (existing relationships). • Bridging efforts are essential to develop innovative regions. It is also • necessary to provide special support for SMEs or start ups whichare • suffering from lack of trust and networking resources.

14. Next stage of our regional policy Next Stage ?

15. New innovation model • Climate Change • Health / Aging Society • Food Security • Poverty Global challenges Accelerating tech Progress (ex. Academic paper of PV) Identify policies, frameworks and governance mechanisms that can accelerate scientific and technological progress and diffuse innovation as widely as possible. (Source)2009 Interim Report on the OECD Innovation Strategy

16. Research Network Diagram (Wind Power) England and Scandinavian Countries lead Close relationship in Asia Well Balanced structure

17. Research Network Diagram (Solar Cell) Germany leads ・Strong ties between US / EU Many countries included (Source) I. Sakata, H. Sasaki, H. Nakamura and Y. Kajikawa "Maps of international research collaboration in clean energy" Journal of Energy and Power Engineering vol.7

18. New challenges • No single region or even country will possess all knowledge and skills required for dynamic innovation in the 21st century. • Technology collaboration between leading regions or countries is important to promptly and efficiently address the global challenges such as climate change, aging and food security. Globalization as well as specialization has become a crucial issue of Japanese cluster policy. • Universities and research institutions can lead globalization and wider collaboration based on their expanded networks.

19. Appendix: Web system for finding new partners • Approach Graphic User Interface Co-research Actor identification Co-work Information extraction Plausible link Existing link Users Link identification, Similarity measurement, Machine Learning “SMEET” Sakata & Mori Lab. The University of Tokyo