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 1, 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


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., Ltd. The former can be attributed to the exhaustion of technology spillover sources in a firm (Nakagawa and Watanabe, 2007). As for the latter, inter-technology spillovers1 attributed to external technologies can be a source. Actually, a joint research undertaken by Sony and SEI presents a typical example. Sony and SEI filed joint patent applications in the three years from 2001 to 2003. In this period, SEI targeted GaN substrate in R&D, Sony did GaN laser. Therefore, each technology can be complementary to each other. Table 1 demonstrates patent applications2 on GaN substrate and laser invented by leading researchers in SEI and Sony from 2001 to 20033.

Table 1 suggests that both Sony and SEI filed both substrate and laser technologies in the period of this joint research. Furthermore, looking at Figure 1 again, what is noteworthy is that OIS in SEI is still increasing even in 2006. Thus, following two questions can be presented. How can the firm utilize the fruits of the joint research for further innovation? Can material technology co-evolve with device technology without a collaboration partner? Answers to these questions may be useful for discussing firms' technological strategy for sustainable innovation.

HYPOTHESES

The first question presented in section 1 is "How can the firm utilize the fruits of the joint research for further innovation? …

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