Mitsutaka MATSUMOTO, Ph.D.Research and Innovation Promotion Office,

National Institute of Advanced Industrial Science and Technology (AIST), Japan

OECD workshop on “Assessing the socio-economic impacts of public R&D investment”

11 June 2008, at OECD, Paris

Assessing the impacts of public R&D in National Institute of Advanced Industrial

Science and Technology (AIST)

1. Outline of AIST

2. A modeling framework to estimate the market creation economic impacts of AIST R&D

Presentation Outline

1. Outline of AIST

AIST Chugoku

AIST Shikoku

AIST Hokkaido

AIST TohokuAIST Tsukuba Headquarters / AIST Tsukuba

AIST Kyushu AIST Kansai AIST Chubu AIST Tokyo Waterfront

Missions of AIST Under our fundamental philosophy “To Realize a Sustainable Society”, we have set the following

four goals in order to produce the seeds of innovative technologies (which could involve a level of risk) and promote the effective realization of our research findings as products, in accordance with the national policy for economy and industries.

Contribution to a sustainable societyAIST strategically engages in research and development to provide a high-quality, safe, and sound life where people can coexist with nature.

Contribution to industrial competitivenessAIST transforms the structure of Japanese industries and strengthens the industrial competitiveness through innovations in industrial technology by enhancement of its function as the innovation hub.

Contribution to local industrial developmentAIST engages in world level research and development using local technological resources. It also helps the local industrial technology by strengthening the cooperation among local industries, academia, and governments.

Contribution to industrial technology policiesAIST identifies research and development issues to be undertaken by the Japanese government, by understanding and analyzing the environment of the industrial technology, and then proposes policies about mid- and long-term industrial technology strategies.

Mission Areas of AIST 3 AIST missions are stated by the government

Research and development in science and technology

Geological survey and provision of geo-information

Development of metrology standards

Research Fields and Staffs

Number of Employees(As of April 1, 2007)

(NOTE : Each figure is estimate of visiting researchers accepted during FY 2006.)

850From overseas

900From corporation etc

2,000From universities

950From private companies

600Postdoctoral researchers

Number of Visiting Researchers at AIST

3,191Total number of employees704Administrative staff

2,487ResearchersLife Science& Technology18%

Metrology andMeasurementTechnology15%

InformationTechnology& Electronics16%

Geological Surveyand Applied Geoscience10%

Environment& Energy24% Nanotechnology,

Materials& Manufacturing17%

Composition of Research Staff by Research Field

(Excluding 12 executives)

Budget

( FY 2006, Unit : Million yen (=10 thousand US$) )

Revenue98,574

Expenditure98,574

Miscellaneous3,851

Facilities management grants5,800

Commissionedresearch fund

22,486

Subsidy66,437

Directresearch cost44,626

Indirectresearch cost13,146

Employmentcost

35,002

Facilities management cost5,800

AIST R&D output

Research Papers, Publicationsand Presentations

Public Relations

207Publications on Measurement TechnologyStandardization for Measurement

74Publications on Earth Sciences

775Books and Reports

12,108Presentations

6,654Papers

4,233Number of Tours andVisitation Arrangements

1,969　Total

120　　TV / Radio

1,849　　Newspapers

Number of Reports on AISTActivities in Mass Media

108Number of Press Releases

(FY 2005)

Activities Involving Intellectual Property

446 million JPYRoyalties640License AgreementsUtilization

(Domestic + Foreign)

158Registered193ApplicationsForeign Patents

(no. of countries)

375Registered1,185Applications

Domestic Patents

(FY 2006)

(FY 2005)

2. A modeling framework to estimate the market creation economic

impacts of AIST R&D

Assessment Scope (1)

1. Economic Impacts(a) Market creation (technology transfer,

commercialization)(b) Geological information provision(c) Metrology standards provision

1. Economic Impacts(a) Market creation (technology transfer,

commercialization)(b) Geological information provision(c) Metrology standards provision

2. Scientific Impacts(a) Scientific knowledge (b) R＆D platform (c) Skill training

2. Scientific Impacts(a) Scientific knowledge (b) R＆D platform (c) Skill training

3. Policy Contributions(a) Contribution to policies(b) Specialist advices(c) Personnel contributions

3. Policy Contributions(a) Contribution to policies(b) Specialist advices(c) Personnel contributions

Assessment target

We classified socio-economic impacts of AIST R&D to 3 categories. Our studies are currently targeted at the economic impacts.

Assessment Scope (2)

Effects of avoiding social losses by providing disaster prevention information, environmental monitoring information, etc. Effects of saving costs in other organizations’ by providing metrology standards, etc.

Loss aversion (Avoidance)

Assessment target

We classified the economic impacts to 3 categories. Of the categories, our studies are currently targeted at the market creation economic impacts (positive contribution).

Economic impacts

Market creation contribution(Positive Contribution)

Risk offset contribution (Negative Contribution)

Economic effects of evincing some technologies or methods are unsuccessful. Such works prevent others from wasting time and resources. Public R&D institutes have a role of undertaking high-risk research which are not undertaken by private companies.

Economic effects of creating new markets of products or services originating from new technologies.

ApproachDeveloping a modeling framework to estimate the market creation economic

impacts of AIST R&D Bottom-up approachEstimating the market creation economic impacts of annual AISTR&D outputs

Measuring the impacts by the market scale (not by consumer surplus, etc.)Not considering/multiplying the contribution ratio of AIST

1,37812,108 6,654 FY2005

1,569 10,622 5,796 FY2004

Domestic patent

applicationsPresen-tationsPapers　

Research Question

How to estimate the market creation economic impacts of annual AIST R&D output?

Annual R&D outputs

. . . .

Case Study (1): Market creation from AIST R&D output

Poly-acrylo-nitril (PAN) based Carbon FiberCarbon reinforced plastics are hard and light. They are widely used for golf club shafts, fishing rods, aerospace base, and recently, passenger aircraft and automobiles.

R&D Output1959: Patent application by an AIST researcher

Technology Transfer1965-82: Technical assistance to 28 companies

Commercialization1970-: Patent licensed TORAY Co.

commercialized golf shafts. Market scales

Peak at 40 billion yen (0.4 billion USD) in 1988. 20-25 billion yen in 1990s. Might re-increase with applications to aircraft and autos.

Innovation process

Global market scale of PAN carbon fiber

100

milli

on y

en

(mill

ion

US

D)

FY

Case Study (2): Market creation from AIST R&D output

R&D Output1981: Patent application by an AIST researcher

Technology Transfer1986-89: Collaborative research and patent

applications with a companyCommercialization

1997: Collaborating company began to sell products.

Market scales15 billion yen in 2005 (600 billion yen for functional food total). Still growing.

Innovation process

Hypotensive (blood pressure lowering) functional foodMarkets of functional food such as immune recruiting food, cholesterol-lowering food are growing. AIST undertook research for hypotensive functional food.

Cow milk casein based hypotensive peptide

0

1000

2000

3000

4000

5000

6000

7000

1997 1999 2001 2003 2005

年度

億円

0

20

40

60

80

100

120

140

160

億円

合計規模

血圧関連

100

milli

on y

en(m

illio

n U

SD

)

Market scales of functional food in total and functional food for blood pressures

TotalBP

100

milli

on y

en(m

illio

n U

SD

)

FY

Modeling FrameworkA typical process of R&D outputs’ creating market impacts

R&D OutputR&D

OutputTechnology Transfers

Technology Transfers

Commercia-lization

Commercia-lization

Market ImpactsMarket

Impacts

ACkACk MKk

MKk

A quantity of R&D output during year k

Economic impacts of the market originating

from ACk

What are the market creation economic impacts ( MKk) of annual AIST R&D output ( ACk) ?

Modeling Framework6 parameters in the model

τ1 : Time lagBetween the R&D output (year k) and

technology transfers

τ1 : Time lagBetween the R&D output (year k) and

technology transfers

R&D output Technology transfer Commercialization Economic impacts

p1 : RatioRatio of ACk to TRk

p1 : RatioRatio of ACk to TRk

τ2 : Time lagBetween technology

transfer and commercializatoin

τ2 : Time lagBetween technology

transfer and commercializatoin

p2 : RatioRatio of TRk to BMk

p2 : RatioRatio of TRk to BMk

τ3 : Time lagDuration of the created market

τ3 : Time lagDuration of the created market

S : Market ScaleMarket scale when it

becomes the maxmum

S : Market ScaleMarket scale when it

becomes the maxmum

Papers

Patentapplications

Researchcollaboration

Patent licensing

Producti-zation

Spin-offventures

Market Impacts

AC TR BM MP

Modeling FrameworkParameters of the case studies

Time lags and market scales of the 2 cases

Currently15 billion yen

(150 million USD)

Over 8 yearsNot yet reaching the peak

10 years1997: Product selling

6 years1981: Patent application1987: joint patent application

Hypotensivefunctional food

40 billion yen(400 million USD)

18 years1988: Peak(might re-increase)

5 years1970: Commercialization

6 years1959: Patent application1965-82: Technology assistance

PAN Carbon Fiber

Market scale in peak

Years forCommercialization → Market scale peak

Years for technology transfer → Commercialization

Years forR&D output .

technology transfer

Market scaleTime lags

Presently undertaking and accumulating case studies

Model Formulation

R&D output Technology transfer Commercialization Economic impacts

Papers

Patentapplications

Researchcollaboration

Patent licensing

Producti-zation

Spin-offventures

Market Impacts

AC TR BM MP

τ1 : Time lagτ1 : Time lag

p1 : Ratiop1 : Ratio

τ2 : Time lagτ2 : Time lag

p2 : Ratiop2 : Ratio

τ3 : Time lagτ3 : Time lag

S : Market ScaleS : Market Scale

p1 : Coefficient

: A distribution function of time t. The integration is 1:

p2 : Coefficient

: A distribution function of time t. The integration is 1:　

:　A time function of average market scale from the commercialized year

)10( 1 ≤≤ p

1τ ∫∞

=0 1 1)( dttτ

2τ ∫∞

=0 2 1)( dttτ

),( 3 Sf τ

An example definition of the parameters

)10( 2 ≤≤ p

Model FormulationACk : A quantity of AIST R&D output during year k

TRk(t) : A quantity of technology transfers of ACk during year k+t

BMk(t) : A quantity of commercialization of ACk during year k+t

MPk(t) : Market creation economic impacts of ACk during year k+t

MPk : Total market creation economic impacts of ACk(defining the discount rate R )

)()( 11 tACptTR kk τ⋅⋅=

θθτθτ dtppACtBMt

kk ∫ −⋅⋅⋅⋅=0 2121 )()()(

∫ ∫ −⋅⎟⎠⎞⎜

⎝⎛ −⋅⋅⋅⋅=

t w

kk dwwtfdwppACtMP0 0 2121 )()()()( θθτθτ

( ) dtRdwwtfdwppACMP tt w

kk −⋅⎟⎠⎞⎜

⎝⎛ −⋅⎟

⎠⎞⎜

⎝⎛ −⋅⋅⋅⋅= ∫ ∫ ∫

∞1)()()(

0 0 0 2121 θθτθτ

Model Formulation

0

500

1000

1500

2000

0 5 10 15 20 25 30 35 40 45 50

0

5000

10000

15000

20000

25000

30000

35000

0 5 10 15 20 25 30 35 40 45 50

By setting the parameters and functions, market creation economic impacts are estimated.

Illustration of the model applicationMPk(t)

tMarket creation economic impacts of ACk during year k+t

tCumulative market creation economic impacts MPk(t)(taking the discount rate into account)

dwRwMP wt

k )1()(0

−⋅∫ MKk

Future WorkCurrently quantifying the parameters and functions

Accumulating and analyzing case study data

Refining the modelReflecting research field attributes

(e.g. technology transfer ratio (p1) differs in different research field)Reflecting interdependencies among the parameters

(e.g. faster commercialization increases the market scale (S))Reflecting the contribution ratio of AIST

)( 21 ττ +

SummaryAIST outline

AIST is one of the largest public R&D institute in Japan

The research field covers: “Life Sciences & Technology”, “Information Technology & Electronics”, “Nanotechnology, Materials & Manufacturing”, “Environment & Energy” and “Geological Survey & Applied Geoscience” and “Metrology & Measurement Technology”.

Modeling frameworkThe model is a bottom-up one and is targeting at assessing the market creation economic impacts of R&D outputs

The model formulates market creation impact processes with 4 processes (R&D output, technology transfer, commercialization, and market impacts), and consists of 6 parameters (3 time lag parameters, 2 ratios, and market scale)

Future work includes refining the model and quantifying the parametersby accumulating case study data