A REVIVAL OF COMPOUND SEMICONDUCTOR MATERIAL INNOVATION: STRATEGIC TECHNOLOGY SPILLOVERS IN JAPAN'S NONFERROUS METAL INDUSTRY IN THE 2000s

By Nakagawa, Masahiro; Watanabe, Chihiro | Journal of Services Research, October-March 2010 | Go to article overview

A REVIVAL OF COMPOUND SEMICONDUCTOR MATERIAL INNOVATION: STRATEGIC TECHNOLOGY SPILLOVERS IN JAPAN'S NONFERROUS METAL INDUSTRY IN THE 2000s


Nakagawa, Masahiro, Watanabe, Chihiro, Journal of Services Research


Innovation in material technologies is induced by the co-evolution with technologies in other industries. This paper empirically analyzes the dynamism in material innovation in Japan's nonferrous metal industry in the early 2000s. A case study was made on development of GaN substrate for laser application. GaN substrate is a key material for large capacity storage devices like Blu-ray system. However, it had not been developed for a long time, until Sumitomo Electric Industries, Ltd.(SEI), one of the leading firms in Japan's nonferrous metal industry, released in 2003. R&D on GaN substrate was undertaken with a help of joint researches with electronics device firms. In this paper, an empirical analysis focuses on patent applications filed by SEI, demonstrates that an inter-technology spillover (technology spillovers between different types of technologies) induces intra-technology spillovers (technology spillovers within the same type of technology) after a joint research, that a co-evolutionary structure of external and internal technologies is implanted into a firm, and that those technologies can be integrated in the firm. Thus, co-evolution of technologies can continuously co-evolve even after joint researches closed, changing its style from inter-technology to intra-technology spillovers.

INTRODUCTION

Innovation is a key success factor for firm's strategy in technology. Today, the service innovation is highlighted as the role of services is becoming more significant than before. However, material innovation is also becoming more important because materials incorporate new functions in devices, which support new services. For example, semiconductor materials are applied to information communication devices, which support new services based on the Internet. Therefore, it is an appropriate time to conduct an empirical analysis on dynamism of material innovation.

There are so many studies on innovation and firm's survival. Sampling from recent papers, an empirical analysis in Netherlands concludes that the survival probability of innovators is higher than that of non-innovators, independent of size and age classes (Cefis and Marsili, 2006). Another empirical analysis suggests that knowledge spillovers play an important role in improving the quality of products (Ornaghi, 2006).

An empirical analysis on the R&D-patents relationship concluded that in-house organized R&D activities are the main source for those more significant innovations whereas external contracted R&D services are more productive in terms of incremental innovations (Beneito, 2006). Another analysis results that investors expect marketing-stealing effects to dominate spillover effects when outside inventors develop important innovations that are applicable to a focal firm's industry, except under conditions of low appropriability or high complementary assets (McGahan and Silverman, 2006). Manufactures should look systematically at the new product opportunities that user innovations, user innovation communities and related emerging marker represent (Baldwin et al., 2006). Complementarity was found for joint cooperation strategies with competitors and customers, and with customers and universities (Beldebos et al., 2006).

Although these analyses can not be unconditionally applied to Japan's material innovation, they demonstrate that external resources and technology spillovers play important roles for innovation, and that innovation plays important roles for firm's survival.

In addition to the above discussions, it has been demonstrated that technology spillovers have played important roles in the rise and fall of Japan's material industry. Figure 1 illustrates operating income to sales (OIS) for six major firms in Japan's nonferrous metal industry from 1980 to 2006.

Looking at Figure 1, we note that OIS for every firm rapidly decreased in 1990s, and increased from a certain year in the 2000s except Showa Holdings Co. …

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