Bioentrepreneurship in Japan: Institutional transformation and the growth of bioventures

Journal of Commercial Biotechnology

Volumn 11, Issue 1, 2004, Pages 9-37

  Lynskey, Michael J ^a  

^a ST JOHN S COLLEGE   (United Kingdom)

Author keywords

Biotechnology; Entrepreneurship; Institutional change; Japan; Venture firms

Indexed keywords

INTELLECTUAL PROPERTY; RESEARCH;

BIOVENTURES; DEREGULATIONS; LABOR MARKETS;

BIOTECHNOLOGY;

BIOTECHNOLOGICAL PROCEDURES; BIOTECHNOLOGICAL PRODUCTION; BIOTECHNOLOGY; COMMERCIAL PHENOMENA; DEREGULATION; INTERVIEW; JAPAN; LAW; MARKET; PATENT; RESEARCH; REVIEW; UNIVERSITY;

EID: 3242780700     PISSN: 14628732     EISSN: None     Source Type: Journal    
DOI: 10.1057/palgrave.jcb.3040098     Document Type: Review

References (47)

1. Lynskey, M. J. (2001), 'Technological distance, spatial distance and sources of knowledge: Japanese "new entrants" in "new" biotechnology', in Burgelman, R. and Chesbrough, H., Eds, 'Comparative Studies of Technological Evolution', Elsevier Press, Amsterdam and Oxford, chapter 5, pp. 127-205.
2. National Institute of Advanced Industrial Science and Technology, Tokyo. The Japanese market for biotechnology is expected to expand to ¥25trn (US$208bn) by 2010, according to 'Basic Policy Towards the Creation of Biotechnology Industry', Ministry of Economy, Trade and Industry (METI), Tokyo.
3. The worldwide pharmaceutical market was worth US$400.6bn in 2002. The Japanese pharmaceutical market was valued at US$46.9bn in 2002. Retail pharmaceutical sales in the 12 months to February 2003 indicated that the USA had sales of US$149.2bn and Japan, the second largest market, had sales of US$48bn. Sources: IMS Health Pharmaceutical World Review 2003; IMS Health Global Services 2003.
4. See Thomas, S. M., Davies, A. R. W., Birtwistle, N. J., Crowther, S. M. and Burke, J. F. (1996), 'Ownership of the human genome', Nature, 4th April, pp. 387-388.
5. Science and Technology Agency (1997), 'White Paper on Science and Technology', Science and Technology Agency, Tokyo.
6. Source: Japan Patent Office (JPO). According to the Ministry of Economy, Trade and Industry (METI) in Japan, patent applications filed by universities in 1999 were 5,179 for the USA, and 374 for Japan.
7. Yonekura, S. and Lynskey, M. J. (2000), 'Why Japan needs start-ups', J. Japanese Trade Ind., Vol. 19(4), pp. 10-13.
8. Reynolds, P. D., Camp, S. M., Bygrave, W. D., Autio, E. and Hay, M. (2001), 'Global Entrepreneurship Monitor (GEM) 2001 Executive Report', Kaufman Center for Entrepreneurial Leadership.
9. OECD (2001), 'Science, Technology and Industry Scoreboard', Organisation for Economic Co-operation and Development, Paris.
10. Baio benchā (Bioventure) is a term used rather loosely in Japan to describe any biotechnology start-up firm, irrespective of the sources of funding. This is somewhat different from the American or European notion of a biotechnology-based venture-backed start-up firm, which implies firms that obtain most of their capital from independent private sources rather than parent companies or the government, and such capital is in the form of equity risk investments rather than loans. It is also by no means clear if all the bioventures in Japan hold technology seeds with actual commercial potential.
11. See, for example, Kong, S.-K. (2001), 'The competitiveness of biotechnology in Japan', Int. J. Biotechnol., Vol. 3(1/2), pp. 184-198.
12. Reiss, T. (2001), 'Success factors for biotechnology: Lessons from Japan, Germany and Great Britain', Int. J. Biotechnol., Vol. 3(1/2), pp. 134-156.
13. Japan Bioindustry Association (JBA) (1998) 'Daigaku nado no kenkyũseika wo waga kuni no baioindasutorĩ no shinkõ in yakudaterutameni' ('The use of research results at universities and other institutes for the promotion of the bioindustry in Japan' (in Japanese), Japan Bioindustry association (JBA), Tokyo.
14. The JBA Study Committee for Intellectual Property Rights and members of the JBA Board on Biology/Biotechnology selected the 51 companies from a list of JBA member companies.
15. Of the 39 companies, 22 reported having a total of 292 collaborative links with foreign universities over the five-year period, 79 per cent of which were with US universities, 16 per cent with European universities and 5 per cent with universities elsewhere.
16. In Japanese these laws have the following titles: Daigaku nado ni okeru gijutsu ni kansuru kenkyũseika no minkan jigyõ sha e no iten no sokushin ni kansuru hõritsu (1998); Sangyõ katsuryoku saisei tokubetsu sochi hõ (1999); Sangyõ gijutsu ni kansuru kenkyũ kaihatsu taisei no seibi nado ni kansuru hõritsu (2000).
17. Source: Technology and Research Directorate, Japan External Trade Organisation (JETRO). In March 2001, there was 36 university staff working part-time in licensee companies, 24 working as TLO staff and eight as managers in companies. See: Sangyo Kiban Seibi Kikin (Industrial Structure Improvement Fund) (2001) 'Heisei 12 nendo TLO no genjou to kadai ni kansuru chousa houkokusho' (TLO survey results for year 2000), Sangyo Kiban Seibi Kikin, Tokyo, pp. 41-43.
18. The numbers of patent applications by the top three Japanese universities were 44 for Tokai University, 27 for Nagoya University and 20 for Ritsumeikan University (based on the number of unexamined patent application publications in 2000), while the numbers for the three top US universities were 633 for the University of California, 372 for the Massachusetts Institute of Technology and 234 for Stanford University (based on the number of fiscal 1998 US applications). Sources: AUTM Licensing Survey: Fiscal Year 1998 (1999), Association of University Technology Managers, Northbrook, IL; Japan Patent Office Annual Report 2001 (2002), Japan Patent Office, Tokyo.
19. Technology transfers in 2000: 213 in Japan, 3,606 in the USA. This is partly due to the fact that TLOs are a recent phenomenon in Japan, the first one having been approved on 4th December, 1998.
20. Prior to the Bayh-Dole Act, inventions and discoveries made in American universities, teaching hospitals, national laboratories and non-profit institutions belonged strictly to the federal government. Nobody could exploit such research without protracted negotiations with the federal agency concerned. Of the 28,000 patents that the US government owned in 1980, fewer than 5 per cent had been licensed to industry. Although taxpayers were paying for 60 per cent of all academic research, they were getting hardly anything in return. The Bayh-Dole Act of 1980 (together with amendments in 1984 and augmentation in 1986) transferred ownership of an invention or discovery from the government agency that had helped to pay for it to the academic institution that had undertaken the actual research. It also ensured that the researchers involved were rewarded. As a consequence, since 1980 US universities have seen a tenfold increase in the patents they generate, spun off more than 2,200 firms to exploit research done in their laboratories, created 260,000 jobs in the process, and now contribute US$40bn annually to the US economy.
21. Japan has a mixture of national, local and private universities. With the exception of a few prestigious private universities, the leading research universities in Japan are national universities. In 2000, there were 649 universities in Japan, comprising 99 national universities, 72 local universities and 478 private universities. As is the case in national universities, most transfers in private universities are informal with no reporting of inventions or licensing agreements.
22. For example, see Barnett, R. (2003), 'Beyond All Reason: Living with Ideology in the University', Open University Press, Maidenhead.
23. The administrative fee (comprising the request for examination and the filing application) in Japan to file a single patent is at least ¥105,300 (about US$870). In addition, it usually costs from ¥200,000 to ¥300,000 per case to hire a patent agent, Moreover, owners of the patent rights must pay an annual fee to maintain their IP rights. In the first to third years, this annual sum is ¥ 13,000 plus ¥1,100 per claim; in the fourth to sixth years, this annual sum is ¥20,300 plus ¥1,600 per claim; in the seventh to ninth years, this annual sum is ¥40,600 plus ¥3,200 per claim; and in the tenth to 25th years, this annual sum is ¥81,200 plus ¥ 6,400 per claim.
24. Conversely, the Japanese patent system has encouraged private companies to file as many patents as possible, since they can be used to publicise their R&D activities. There has also been a strong incentive for individual employees in the private sector to generate as many patents as possible because they may earn financial rewards and promotion by doing so. In fact, it has been claimed that the Japanese patent system appears to aim more at sharing technology than protecting it. See Spero, D. M. (1990), 'Patent protection or piracy - a CEO views Japan', Harvard Business Rev., Vol. 68(5), pp. 58-67.
25. Helfand, M. T. (1992), 'How valid are U.S. criticisms of the Japanese patent system?', Hastings Commun. Entertainment Law J., Vol. 15(1), pp. 123-164.
26. Lynskey, M. J. (1999), 'The transfer of resources and competencies for developing technological capabilities - the case of Fujitsu-ICL', Technol. Anal. Strategic Manage., Vol. 11 (3), pp. 317-336.
27. See Audretsch, D. B. and Stephan, P. E. (1996), 'Company - scientist locational links: The case of biotechnology', Amer. Econ. Rev., Vol. 86(3), pp. 641-652.
28. Zucker, L. G. and Darby, M. R, (1999), 'Star-scientist linkages to firms in APEC and European countries: Indicators of regional institutional differences affecting competitive advantage', Int. J. Biotechnol., Vol. 1 (1), pp. 119-131.
29. See: Swanson, R. A. (1983), 'Policies to stimulate growth: the view from a new industry', in 'The Race for the New Frontier: International Competition in Advanced Technology: Decisions for America', Panel on Advanced Technology Competition, Office of International Affairs, National Research Council, National Academy Press, New York.
30. Ziman, J. (1984), 'A Introduction to Science Studies: The Philosophical and Social Aspects of Technology', Cambridge University Press, Cambridge.
31. Lynskey, M. J. and Yonekura, S. (2001), 'Softbank: An internet keiretsu and its leveraging of information asymmetries', Europ. Manage. J., Vol, 19 (1), pp. 1-15.
32. Lynskey, M. J. and Yonekura, S. (2003), 'Nothing ventured, nothing gained: Sustaining entrepreneurship in Japan', in Atwater, M.-J. and Fujimatsu, I., Eds, 'Entrepreneurship in Asia: Playbook for Prosperity (Proceedings of the Entrepreneurship in Asia: Expert Workshop, 8-10 July, 2002)', The Mansfield Center for Pacific Affairs, Washington, DC.
33. Hamlin, K. (2000), 'Opening Japan's capital markets', Institut. Investor, Vol. 34(6), pp. 67-72. Nasdaq Japan was renamed Hercules on 16th December, 2002.
34. The Nikkei Weekly (Japan Econ. J.), 19th August, 2003, p. 19.
35. Kenney, M. (1986), 'Biotechnology: The University-Industry Complex', Yale University Press, New Haven and London.
36. NEDO is a semi-governmental organisation under the Ministry of Economy, Trade and Industry (METI). The Development Bank of Japan provides long-term financing and other policy-based schemes to qualifying projects.
37. Cheng, M. M. and Kallenberg, A. L. (1996), 'Labor market structures in Japan: An analysis of organizational and occupational mobility patterns', Social Forces, Vol. 74(4), pp. 1235-1260.
38. See 'Nikkei Bio96', Nikkei Business Publications, Tokyo; 'Japan Bioindustry Association (JBA) Member Company Directory 1996', Japan Bioindustry Association, Tokyo.
39. 'Baio benchã toshi netsu' ('Bioventure investment fever') (in Japanese), Nihon Keizai Shimbun, 25th September, 2001, p. 17.
40. See Ernst and Young (1998), 'European Life Sciences Report 1998', Ernst and Young, London; Persidis, A. (2001), 'Strategies of biotechnology firms towards new platform technologies', Int. J. Biotechnol., Vol. 3(1/2), pp. 23-32.
41. The Japan Bioindustry Association (JBA) Member Company Directory of 1998 lists 148 member companies. However, the majority of these are classified as large companies. In Japan, SMEs in manufacturing constitute those firms with a capitalisation of less than ¥300m and fewer than 300 workers, while those in the service sector comprise firms with a capitalisation of less than ¥50m and fewer than 100 workers. According to this definition, the JBA's membership in 1998 of 148 companies comprised only six SMEs, of which one was a research institute of Mitsubishi Chemical (a large company) and one was the Japanese subsidiary of Novo Nordisk, the large Danish pharmaceutical company.
42. The Helix Research Institute is a joint public-private enterprise established by the Japan Key Technology Centre and ten private companies, to develop effective technologies for identifying new biologically important genes and evaluating their function. It has been successful in developing large cDNA clone libraries, which are distributed to companies for full sequencing and functional analysis. The author conducted interviews at HRI on 4th June, 1999, and 19th January, 2000.
43. One interviewee said that VC funding at the time for a bioventure in Japan was typically less than US$1m.
44. More details on this survey and its results are available in the following papers: Lynskey, M. J. (2003), 'A profile of biotechnology and information technology venture firms in Japan: Firm-level and managerial characteristics', Int. J. Biotechnol., Vol. 5(2), pp. 105-124.
45. Lynskey, M. J. (2004), 'Determinants of innovative activity in Japanese technology-based start-up firms', Int. Small Business J. Vol. 22(2), pp. 159-196.
46. As an example of such government ambitions, the so-called Hiranuma Plan (named after a former Minister of Economy, Trade and Industry, Takeo Hiranuma) was announced in 2001, and aimed to create '1,000 venture firms originating in universities' within three years.
47. Lynskey, M. J. (2002), 'Introduction', in Lynskey, M. J. and Yonekura, S., Eds, 'Entrepreneurship and Organization: The Role of the Entrepreneur in Organizational Innovation', Oxford University Press, Oxford, pp. 1-57.