Large-Scale Public-private Partnerships in Japan and the U.S.

Mariko SakakibaraAssociate Professor

Anderson Graduate School of ManagementUniversity of California, Los Angeles

Overview

• Government-Sponsored R&D consortia

• Potential benefits• When do we need them• Summary of the past studies

– Formation– Performance evaluation– Project execution

• Lessons

Government-Sponsored R&D Consortia• Japanese R&D consortia - imitated and

emulated – SEMATECH– Alvey, ESPRIT, EURECA in Europe

• Current policy issue– National Cooperative Research and

Production Act of 1993– Advanced Technology Program by

Commerce Dept. since 1990• Public policy concern

– OECD, ATP

What stimulates innovation? (Firm, Industry)

• Technological opportunity• Expected demand size• Appropriability conditions

Potential Benefits of R&D Consortia• Cost sharing

– Economies of scale• Skill sharing

– Learning• Cooperation -- Correct market failure

and underinvestment in R&D– Spence (1984) as a means to

internalize externalities– Katz (1986) examined relationship

between R&D cooperation and product market competition

R&D Consortia in Japan: Why Important?

• Limited researcher mobility– R&D consortia as a means of

information exchange• M&As are rare

– Limits quick acquisitions of research capabilities

• Weak university research• Internal diversification

Formation of R&D Consortia (Japan)• Skill-sharing motive dominates

cost-sharing motive (Sakakibara, SMJ 1997)

• Relationship between “origin” industries and “destination” industries (Sakakibara, RP 2001)– Analogous to the motives for

diversification

Effect on R&D Spending (Japan)

• Key concept: diversity (Sakakibara SMJ 1997, JIE 2001)

• Skill-sharing R&D consortia are associated with the increase of R&D spending by participants

• Cost-sharing R&D consortia are associated with the decrease of R&D spending by participants

Problem of Performance Evaluation • Sample selection problem

– Certain consortia perform better, or– Only good firms participate in certain

consortia

• Common problem of past research to measure the impact of public technology programs (Klette, Moen and Griliches, 2000)

How to Deal with the Selection Problem• Need to utilize multiple dimensions of

the data– Firm– Consortium– Time

• Participants and non-participants• Same firm, before and after participation• Same firm participate in different

consortia

Performance Evaluation (Japan)

• Impact on research productivity of participating firms

• Note many levels to evaluate performance (project, participants)

• Overall impact is positive but small – From econometric analysis (Branstetter

and Sakakibara, JIE 1998)– From survey results (Sakakibara, RP

1997)

Performance Evaluation (Japan)

• Branstetter and Sakakibara (AER 2002) find:

• Spillover potential, measured as technological proximity among member firms, has a positive effect

• Product market competition, measured as product market proximity of member firms, has a negative effect

• Basic technology -- positive effect

R&D Consortia in the U.S.

• Sakakibara and Branstetter (MDE 2003) find:

• Consortia have a positive and persistent impact on the ex-post research productivity of participating firms

• Consortia outcomes and their characteristics– Positive: potential knowledge spillovers

• Larger firms with higher R&D budgets tend to benefit more from participation

• These findings are consistent with that obtained from the Japanese consortia

R&D Consortia in the U.S. (cont.)• Dyer, Powell, Sakakibara and Wang

(2007) compares alliance formation factors and alliance execution factors

• Performance measured as – patent generation– financial contribution– qualitative success

• Alliance execution factors explain performance better than alliance formation factors

Lessons

• Large-scale PPP is only one of many means to promote innovation

• Need to consider available alternatives• Skill-sharing, knowledge spillover

potential important• R&D consortia with close competitors

or cost-sharing motive are not effective

• Good execution is important to facilitate knowledge transfer