The Organization of Biotechnology Science and Its Commercialization in Japan

The biotechnology revolution is of particular interest both for the sociology of science and for industrial organization. Indeed, the closeness of progress in the basic science to applications in industry makes it impossible to understand the development of the industry without understanding the progress of the science and linkages between the two domains. In the U.S., Zucker, Darby, and Brewer (1994) demonstrates that where and when “star” scientists at the research frontier (and, in later years, their collaborators) were actively publishing were important determinants of where and when new biotechnology enterprises (NBEs) were founded.In ongoing work extending the analysis to Japan, it is seen that while the structure of science related to the new biotechnologies is broadly similar between the United States and Japan, the organization of the biotechnology industry in the two countries is quite dissimilar. In the U.S., at least 68 percent of NBEs were new biotechnology firms (NBFs) started for this purpose while 98 percent of Japanese biotech firms in our data base were subunits of existing firms. This paper reports the results of field work in Japan which was undertaken to develop understanding of the differences underlying these structural differences and to generate hypotheses for future empirical work on the development of the biotechndogy science and industry in Japan. The individuals interviewed included biotech scientists, industry executives, government officials, and officers of intermediating organizations. Our respondents identified three major factors which interact to deter the formation of NBFs: (a) the closed nature of the Japanese system of higher education and non-competitive research funding, (b) incompleteness of the capital markets: aspecially the lack of a national venture capital industry capable of financing new firms and the related absence of initial public offerings prior to a firm’s achieving substantial profitability, and (c) cultural characteristics and incentive systems which discourage Japanese entrepreneurialism generally, and particularly impact scientists. An alternative hypothesis is that U.S. incumbent firms have been deterred from entry due to U.S. tort-liability exposures. It remains for future research to determine both the relative importance of these factors and whether the two systems of organization of the biotech industry are associated with substantial differences in productivity and international competitiveness.