Dynamics of innovation policies and ecosystems in Japan

Abstract

Many public policies related to innovation have been implemented in Japan, especially focusing on promoting startups from universities, aiming at economic growth from technology. However, innovation ecosystem is complicated and dynamic that make difficult for policymakers to understand the system and evaluate policy effect. In this study, we analyze innovation ecosystem around a university and build a system dynamics model to have policy implications. We study the University of Tokyo and MIT, major universities for a large number of spin-off startups in each country, as cases of ecosystems. The study begins with policy and literature review of innovation and entrepreneurship, to understand present studies and policies. Next, stakeholders, system boundary, and causal relationships are analyzed to frame the system. Then, we build a system dynamics model of innovation ecosystem around a university. We included several causal loop structures in the model. For example, an Entrepreneur boom loop is a reinforcing loop which accelerates foundation of university spin-off startups and conversion of students to become entrepreneurial. A Risk capital depletion loop is a balancing loop which decelerates growth of startups when too many startups look for investment. Multiple loops and stakeholders interact closely in the systems, and the interrelated structures cause delay and side effects in simulation runs of our model. Results of the simulation infer policymakers need to consider combinations of policies rather than implement a single policy. Another interpretation from simulation runs is that patient policy implementation can lead to better outcomes because time delays in the loops make it difficult for policymakers to observe the effect of policies in the short term. Although additional data points are required for further calibration of the model, insights from this study and the model contribute to better understanding of innovation ecosystems around a university.