A growing number of new successful Japanese entrepreneurs have had significant international experience. Some have studied or worked overseas while others have worked for a foreign firm in Japan. Similarly, corporate chief executive officers (CEOs) who have had managerial experience overseas generate better firm performance, even in their domestic operations, than those without such experience.
When foreign-owned firms in Japan conduct research and development, reports Yasuyuki Todo, they generate seven times more spill-over efficiency benefits to other firms — suppliers, customers and even competitors — than domestic firms spending the same amount. Todo says that is ‘probably because knowledge of foreign firms is often new to domestic firms’.
The same results show up in scientific and technical research. When scientists in any country work with foreign counterparts, the quality of their work improves. Both Japanese scientists who have worked abroad and foreign scientists who come to work in Japan produce more highly cited papers. In the most influential journals, papers in which Japanese scientists collaborate with foreign counterparts outnumber those involving just domestic authors.
But Japan’s innovativeness is being hampered by a dearth of international collaboration and Japanese scientists are insulated from global trends. Relatively few Japanese university students study abroad for a year. While CEOs at nearly 90 per cent of leading companies in Europe and North America have worked overseas, the share in Japan is a mere 17 per cent. In 2019, Japan came last out of 196 countries in the cumulative amount of inward FDI.
The same fetter applies to scientific and technological innovation, as documented in the OECD’s 2017 Science, Technology, and Industry Scoreboard. While more than 3400 Japanese academic and business research organisations have produced more than 1.8 million papers and articles over the last couple of decades, only a thin slice of this work involves international collaboration. Among 30 OECD countries, Japan is last among scientific articles where scientists collaborate with those from other countries.
There is some good news. Among Japan’s top 12 research institutions involved in international collaboration, that collaboration has increased. At the elite University of Tokyo, the share of scientific papers involving international cooperation increased from 21 per cent in 2009 to 28 per cent by 2017. Unfortunately, that’s the exception. By contrast, Australian, British, Canadian, Dutch, French and German scientists now produce more papers involving international collaboration than ones with only domestic authors.
Only 2.7 per cent of Japanese scientists have spent time working overseas. Among the rest of the OECD, the average is 6.5 per cent. Only 1.3 per cent of Japan’s scientists are foreigners, compared to an OECD average of 4.4 per cent. On this measure, Japan comes in second-to-last.
This isolation starts early. Not only is there a drop in the number of Japanese university students studying abroad, but only 2.1 per cent of these students are science majors — the 3rd lowest in the OECD. Things are very different at the doctoral level. Among the Japanese PhD candidates who are internationally mobile, 29 per cent of them study natural sciences. That is not far from the OECD average of 37 per cent.
While difficulty in mastering English does pose an obstacle, the data suggests that it is only part of the problem. The number of Japanese students studying abroad almost quadrupled from 18,000 in 1986 to 65,000 in 2003. Then the numbers fell back to only 30,000 in 2016. Of these, only a few thousand students spent at least a year abroad. Language does not explain either the rise or the subsequent plunge of study abroad. Among 27 OECD countries, Japan comes in second-to-last in the share of students who received a college degree from a foreign university. The trend for international mobility of scientists is probably not that different from the trend for students.
Japanese companies fail as badly as scientists in collaborating across borders. Only 1.3 per cent of all Japanese patents include a foreign company or researcher as a co-inventor, the lowest rate in the OECD. The OECD average is 14 per cent. Among large companies, only 8 per cent engage in any collaborative innovation with foreign companies, the second lowest share in the OECD. The OECD average is 40 per cent. There is a big correlation between Japan’s low rate of international collaboration among scientists and the low rate of co-invention by companies. The more that countries do one, the more likely they are to do the other. Doing less of each translates into less impactful innovation.
The low level of international collaboration is a waste of Japan’s talent. Remedying this would help boost Japan’s economy.
Richard Katz is a Carnegie Council Senior Fellow. This article is an excerpt from his blog, Japan Economy Watch.