Research Policy 33 (2004) 921–938

Rethinking the public sector: idiosyncrasies of biotechnology

commercialization as motors of national R&D reform
in Germany and Japan
Mark Lehrer a,∗ , Kazuhiro Asakawa b,1
a College of Business Administration, University of Rhode Island, Kingston, RI 02881, USA
b Graduate School of Business Administration, Keio University, 2-1-1 Hiyoshi-honcho, Kohoku-ku, Yokohama 223-8523, Japan
Received 12 February 2003; received in revised form 20 November 2003; accepted 29 January 2004

Available online 10 May 2004

Abstract
Recent policies to promote biotechnology are motors of broader R&D reform in Germany and Japan. The idiosyncrasies of
biotechnology commercialization could not be readily accommodated by these countries’ traditional technology policies, thus
prompting reforms in institutions governing the commercialization of basic scientific research. These reforms provide a novel
perspective on the nature of innovation in biotechnology; while previous research has underlined factors such as the national
science base, industry–university links, entrepreneurship and venture capital, the German and Japanese cases highlight the
importance of other mediating variables such as the level of public governance within national research institutions, the
autonomy of the university/research sector, and the historical role of the public sector generally.
© 2004 Elsevier B.V. All rights reserved.
Keywords: National R&D policy; Biotechnology commercialization; Private-public sector linkages

The concept of “comparative institutional advantage”
(Hall and Soskice, 2001) suggests that the industries
in which countries specialize depend not only on the
relative factor costs of classical trade theory, but on the
national institutional frameworks in which a country’s
producers are embedded. However, institutions are not
fixed but evolve over time. To the extent that countries
can create or reform national institutions that support
targeted industries, they may be able to create sources
of comparative advantage that take root in specific
∗ Corresponding author. Tel.: +1-401-874-7882
fax: +1-401-874-4312.
E-mail addresses: lehrer@uri.edu (M. Lehrer),
asakawa@kbs.keio.ac.jp (K. Asakawa).
1 Tel.: +81-45-564-2021; fax: +81-45-562-3502.
arrangements but ultimately affect hard economic
factors like relative costs, the flow of new ideas, and
incentives to innovate (Zysman, 1983; Ziegler, 1997).
While economists generally deny the proposition that
nations compete over markets like firms do (Krugman,
1996), the belief by policy-makers that their coun-
tries do compete is nonetheless an important factor
in explaining institutional change. Just as Japanese
advantages in electronics and semiconductors led not
only to US protectionism, but also to US domestic
reforms in the 1980s (e.g. the Sematech consortium,
more flexible application of antitrust laws), the US
lead in biotechnology has inspired other countries to
initiate institutional changes (Casper, 2000; Casper
and Kettler, 2001).

0048-7333/$ – see front matter © 2004 Elsevier B.V. All rights reserved.
doi:10.1016/j.respol.2004.01.011
922 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
As demonstrated by German and Japanese efforts
to improve their national frameworks for biotechnol-
ogy, comparative institutional advantages, just like
trade advantages, are often “revealed” by performance
statistics. There is one positive consequence of con-
sidering oneself engaged in cross-border competition
that is overlooked by conventional Ricardian trade
theory and it is this: trade and other performance
statistics serve as valuable heuristics for helping na-
tional policy-makers to identify domestic institutions
in need of reform and as political leverage for pushing
such reforms through. Competition between nations
or regions can serve as a stimulus to modernize and
innovate institutionally (Dohse, 2000), to combat the
institutional sclerosis decried by Olson (1982). Thus,
when German policy-makers announced in 1995
that Germany should try to become “number one in
Europe” in the life sciences by the end of the decade
(BMBF, 1996), the objective was not to “beat the UK”
but to reform the German R&D landscape. What fol-
lows is essentially a study of “revealed comparative
institutional advantage” and its effects.
Although the political economies of Germany and
Japan are rather different (Soskice, 1994; Streeck and
Yamamura, 2001), the two countries are often grouped
together on the basis of topical economic similari-
ties, notably bank-based finance (Porter, 1992), high
levels of firm investment in human capital (Lazonick
and O’Sullivan, 1996), and even national systems of
innovation (Patel and Pavitt, 1994). Undeniably, Ger-
many and Japan are linked by striking, partly coinci-
dental parallels in historical development, from late
“catch-up” industrialization in the 19th century and
authoritarian nationalism in the 1930s to post-WW2
economic “miracles” and unexpected stagnation in the
1990s. Not surprisingly, recent German and Japanese
R&D policies to promote “catch-up” in biotechnology
exhibit significant parallels.
German and Japanese reforms to promote biotech-
nology are of both empirical and theoretical interest.
Empirically, biotechnology induced minor revolu-
tions in the R&D policies of both countries. Because
biotechnology was more dependent on basic scientific
research than prior strategic technologies (e.g. semi-
conductors), biotechnology catch-up policies required
fairly broad reforms in the national R&D system.
At a more theoretical level, these reforms shed new
light on the nature of innovation in biotechnology,
in particular the idiosyncratic institutional linkages
between basic science and technology commercializa-
tion. While prior studies of biotechnology underline
the need for institutions facilitating the production
of basic scientific knowledge, industry–university
links, entrepreneurship and venture capital, the Ger-
man and Japanese cases highlight the importance of
other mediating institutional variables such as public
governance of national research institutes (Whitley,
2003), the autonomy of the university/research sector
(Ben-David, 1971), and the historical role of the pub-
lic sector generally (Streeck and Yamamura, 2001).
The crux of the matter is this. When biotechnol-
ogy was found to require incentives for scientists to
engage in commercial activities such as patenting
and firm founding, countries like Germany and Japan
found themselves in a “public-sector bind.” This bind
arose because the majority of top scientists were em-
ployed in the public sector whose raison d’être was
largely defined by its contrast to profit-motivated,
private-sector activity. Discussion of how German
and Japanese policy-makers attempted to cope with
the “public-sector bind” is organized as follows. First,
a review of prior literature on the idiosyncrasies of
biotech innovation clarifies the institutional difficul-
ties that Germany and Japan faced. Second, some
historical background on the university and research
sectors of Germany and Japan is provided. Third, re-
cent biotechnology policies in the two countries are
outlined, and fourth, the role of biotechnology pol-
icy as a motor for broader reform of national R&D
is discussed. The conclusion raises the question of
whether recent developments are truly indicative of
a path towards longer-term success or whether even
broader institutional and societal changes, extend-
ing well beyond the R&D and educational system,
might be required for Germany and Japan to develop
vigorous biotechnology-based industries.
The patenting statistics in Fig. 1 give a basic indica-
tion of the German and Japanese lag in biotechnology
vis à vis the US in the 1990s. Germany and Japan also
lagged far behind the US in the number of biotech-
nology firms: whereas the US had over 1300 biotech
companies in the mid 1990s, Germany and Japan had
well under 100 each (BMBF, 1996: 42; Interministerial
Agreement, 1999). Table 1 indicates the importance
of start-up companies for patenting in biotechnology
and suggests that Germany and Japan were both overly
 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938 923

Fig. 1. Patenting intensity of US, UK, Japanese and German biotechnology.

Table 1 1. The idiosyncrasies of innovation in

Percentage of patents by institutional type, 1987–1993 biotechnology: a review
Technology Established Universities,
start-ups corporations research 1.1. Sectoral ecology
firms institutes
USA 40.4 38.1 20.7
In the biomedical sector, biotechnology innovation
UK 23.7 44.7 31.6
Germany 3.0 80.0 17.0 commonly involves a division of labor between new
Japan 3.1 86.9 10.0 technology-based firms (NTBFs) and large estab-
lished pharmaceutical companies. Explanations for
Source: Henderson et al. (1999).
the small–large firm mix include the vastly different
economics involved in the discovery as opposed to the
dependent on established firms for conducting R&D testing and commercialization of biotech therapeutics,
in biotech. By the mid 1990s, the need for start-up as well as differences between drug search activities,
firms to build an internationally competitive biotech more easily undertaken by large companies, and the
base had become manifest.2 search for new production techniques, which can be
German and Japanese policies to create more mastered by smaller firms (Henderson et al., 1999).
biotechnology start-ups illuminate the institutional In some ways, the presence of different firm sizes in
framework required by biotechnology. A brief review biotechnology fulfills a division of labor considered
of prior findings on the idiosyncrasies of biotechnol- to be natural under common economic conditions
ogy commercialization, besides facilitating compre- (Arrow, 1983; Gambardella, 1995).
hension of the issues that confronted policy-makers
in Germany and Japan, enables the identification of 1.2. Networks
important public-sector characteristics affecting the
rate of biotechnology innovation. Biotechnology has spawned extended networks
of relationships between pharmaceutical firms and
smaller biotech companies. A major factor behind
2 One possible interpretation of Table 1 is to attribute these leads
such networks is technological uncertainty (Powell
and lags in NTBFs to different “varieties of capitalism” (Casper
et al., 1999; Hall and Soskice, 2001) and comparative market
et al., 1996). Large pharmaceutical firms there-
institutions like venture capital. We return to the matter in the fore develop “portfolios” of relations to NTBFs in
conclusion. order to diversify and manage their risk (George
924 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
et al., 2001). Networks of inter-firm relations en-
able especially the large companies to learn rapidly
of emerging developments and to re-allocate re-
sources quickly among different technological ap-
proaches as events unfold (Gambardella, 1995:
Ch. 7).
1.3. Importance of start-ups
Biotech NTBFs generally pursue particular prod-
uct or process development techniques that had shown
promise of commercial applicability in the research
laboratory. The multiplicity of explorable approaches
is high, giving rise to high “opportunity conditions”
(Malerba and Orsenigo, 1997). NTBFs are viable par-
ticipants because the current economics of biotech-
nology allow for low experimentation costs (Pavitt,
2001). Whereas novel production techniques in tra-
ditional industries are often pioneered on the shop
floor (“learning by doing”), new techniques of produc-
tion in biotech are frequently developed in a test-tube
environment. Pisano (1996) terms this “learning be-
fore doing” and cites biotechnology as a prime ex-
ample of a sector characterized by learning before
doing.
1.4. Link with basic science
A fundamental characteristic of the biotechnology
industry is its tight link to basic science (McMillan
et al., 2000). Biotechnology confounds traditional
distinctions between basic and applied science, just
as scientists at biotech companies regularly publish
in leading scientific journals, academic scientists in-
volved in basic research regularly start their own
firms and file key patents (Murray, 2002). The pri-
mary source of competitive advantage for US biotech
firms is usually considered to be the national science
base (Orsenigo, 1989; Pavitt, 2001). Studies in the
geography of biotech lend additional support to this
view. Not only did Zucker et al. (1998) find a tight
distribution of NTBFs around star scientists, but the
residual effect of venture capital actually appeared
to be negative. Of particular interest to German and
Japanese policy-makers was the fact that biotechnol-
ogy start-ups tend to cluster around research insti-
tutions, especially universities (Swann and Prevezer,
1996).
1.5. Private appropriation of publicly funded
research
An important characteristic of the biotech sector
is captured in a remark by Orsenigo (1989: 126–7)
that “in a sense, the creation of a [biotech] company
was equivalent . . . to the establishment of a new de-
partment entirely devoted to the main interest of the
leading scientist and under his sole responsibility.”
A pronounced idiosyncrasy of the biotech sector are
the dual hats worn by major scientists as contributors
to basic science and simultaneously as profit-driven
firm managers (Murray, 2002). Given the constantly
evolving state of knowledge, remaining in the scien-
tific loop is a condition sine qua non for successful
biotech companies.
Familiar though these facts are, they pose consider-
able institutional stumbling blocks for policy-makers.
The for-profit ventures of biotech scientists who re-
main in their research positions create debate about
entitlements to the pecuniary gains of R&D commer-
cialization. On the one hand, it can be claimed that
scientist–entrepreneurs effectively appropriate pub-
licly funded research for private gain. Objections of
this kind to technology start-ups are common in all
countries, including the US. There is, however, an
alternative way of viewing biotech start-ups by sci-
entists. According to this view, start-ups funded by
outside venture capital represent welcome additions
to the national science base at no additional cost to the
public. To the extent the mission of publicly funded
R&D is to provide positive knowledge externalities
(Nelson, 1959), encouraging the formation of NTBFs
can be considered a legitimate way for policy-makers
to derive such externalities and to fund supplemental
R&D cost-effectively.
In a nutshell, the politico-ideological challenge for
German and Japanese policy-makers was to make the
transition from the former to the latter way of viewing
biotech start-ups. Part of the interest of the German
and Japanese catch-up policies is the implicit per-
spective they provide on the institutional advantage of
the US and UK. The US biotech advantage has been
attributed to the “closer integration between industry
and the academic community” in the US (Henderson
et al., 1999: 306). The present research is consistent
with this statement, though in a specific sense. The US
advantage does not inhere in different communication
 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938 925

patterns, but in different institutional patterns. In parisons of German–Japanese patterns of institutional

particular, the US institutional advantage appears to evolution in the volume by Streeck and Yamamura
derive from the fact that its universities and scientists (2001).
were not nearly as much part and parcel of public-
sector institutions as their German and Japanese 2.1. Elements of historical continuity
counterparts. American universities were more on the
In both countries, industrial development preceded
“non-profit” border between the public and private sec-
political liberalism. Industrialization was encouraged
tors (an analogous argument could be made for certain
by a governing elite as a means of achieving national
highly autonomous elite universities in the UK like
security and self-sufficiency. To this end, the gov-
Cambridge and Oxford). This made it inherently eas-
erning elite conferred special privileges on specific
ier for American (and British) scientists to jump into
social groups whose cooperation was important—in
private science-based ventures than for German and
Japan, to private corporations (often privatized after
Japanese scientists whose behavior was more narrowly
starting out as state enterprises), which were consti-
circumscribed by public-sector regulations and norms.
tuted as tight-knit social communities dedicated to in-
dustrial expansion; in Germany, to labor and industry
2. The public-sector status of universities and associations whose ancestry dates back to medieval
research centers guilds. To this day, Germany and Japan are referred
to as “corporatist” countries, yet the use of a com-
mon term is misleading because the “corporations” in
German and Japanese universities are, for slightly
the Japanese case are vertically integrated joint-stock
different reasons, dominated by the effects of
companies-qua-social-communities whereas the “cor-
public-sector governance. In Germany, the over-
porations” in the German case are horizontally orga-
whelming majority of universities are state-funded
nized producer groups, i.e. industry associations and
and state-controlled; only a few small private col-
industry-specific labor unions (Ziegler, 1997).
leges exist. Though private universities are common
Yet in both national variants, “corporatism” casts
in Japan, most are fairly impoverished tuition-funded
the public sector as the highest authority in a social hi-
schools (aside from a small number of leading private
erarchy. For the state to be a dispenser of social privi-
universities), while the publicly funded national uni-
leges, the public sector requires at least the aura (if not
versities, with vastly better resources for conducting
always the reality) of independence from private inter-
research, account for at least 75% of university R&D
ests. In both countries civil servants enjoyed substan-
(Kneller, 2003a: 357). This is in marked contrast to
tial status and autonomy, and a traditional role of the
the US, where private elite universities play a leading
universities was to select and train the nation’s most
role in the American research landscape and exert
qualified individuals for civil service; certain Japanese
competitive pressures on state universities to emulate
elite universities to this day conserve some of this
private-university practices. In both Germany and
heritage.
Japan, state control deeply conditions the functioning
The university systems in both Germany and Japan
of the university system, either directly as in Ger-
have traditionally been divorced from commercial
many or more indirectly as in Japan, where the vast
interests and, indeed, relatively divorced from other
regulating and funding powers of the education min-
sectors of society (Swinbanks, 1995; Kocka, 1999).3
istry exert considerable control even over the private
universities (Cummings et al., 1979). 3 This fact may seem surprising given the prominent role played
While understanding traditions of public-sector by university professors in the 19th-century German dyestuffs
governance in these countries’ universities and re- industry, which, however, was rather an anomaly. The clearest
search centers requires a certain historical review, the manifestation of this is that Germany’s universities in the 19th
mix of historical continuity and discontinuity in both century ferociously opposed the right of the polytechnic colleges
to award PhDs—precisely because the application-oriented nature
countries makes providing a brief synopsis difficult. of polytechnic education was seen as tainting “pure” science.
The following separation of components of continuity The objections of the universities were overridden by personal
and discontinuity is heavily indebted to in-depth com- intervention of the Kaiser in 1899.
926 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
Nonetheless, the autarkic nature of the academic
community in both countries follows logically from
corporatist forms of organization and privileges con-
ferred on special social groups in return for basic
loyalty to the state. In Germany, academic freedom
(Lehrfreiheit) was an age-old privilege of professors
whose collective “mandarin” identity entailed sub-
stantial social distance from commerce and the indus-
trial class (Ringer, 1983). While Japan’s universities
date only from the 1870s as part of a general effort
to catch up with Western science and knowledge,
Japanese academics quickly grasped the German idea
of academic freedom and in the early part of the 20th
century were quick to assert their autonomy.
As in Germany, academics in Japan were unable
to withstand the nationalist authoritarianism of the
1930s (Marshall, 1992). However, Japanese professors
re-asserted their social autonomy after the war, and
their interaction with the private sector was quite lim-
ited. Indeed, the main economic function of post-war
Japanese universities has been to screen talented indi-
viduals through grueling entrance examinations; the
real training of employees took place within large
firms, which were little concerned with the content of
academic curricula (Jolivet, 1985). Given the relative
autarky of universities, Japanese professors have by
and large focused their energies on research, though
academic research has not always been especially
international in scope (Shimbori, 1979; Kitamura,
1985).
2.2. Elements of historical discontinuity
Germany and Japan accomplished their successful
transitions to democracy not by dismantling their re-
spective types of “corporatism” but by broadening
them to include larger segments of the population
(Streeck, 2001). For example, the German welfare
state essentially involved extending corporatist modes
of social service provision to virtually all members of
society, while Japanese corporate social communities
proved able to assimilate Western-style labor unions.
With respect to universities and research centers,
historical discontinuity in some ways deepened the
public-sector orientation of research institutions. The
transition from elitist to mass higher education in both
countries was accompanied by often violent student
protests, and the major thrust of higher education re-
form since the late 1960s has been to cope with broad
social demands, not specific economic challenges
(Teichler, 1996). Germany’s universities, formerly
somewhat elitist, were opened to any graduate of a
German Gymnasium. Free-tuition enrollment at Ger-
man universities swelled, but without commensurate
increases in university funding, so that class sizes
swelled as well (Buechtemann and Vogler-Ludwig,
1996). The transition to mass education was in some
ways even more drastic in Japan, which financed
expansion of the university system on the cheap by
allowing the expansion of private colleges to meet the
demand for higher education. Most tuition-funded col-
leges lack the means to fund major research projects.
Post-war Germany and Japan deepened the in-
stitutional divide between education and research
by creating specialized research institutes. Germany
entrusted research in several biotechnology-related
areas to Max-Planck and Helmholtz institutes, gener-
ally with joint funding from Land and federal levels.
Japanese counterparts include RIKEN (Institute of
Physical and Chemical Research) and the National
Institute of Genetics. To be sure, the move toward
specialized research institutes to cope with new scien-
tific sub-fields was not unique to Germany and Japan
(Whitley, 2003).4 Nor was the development entirely
discontinuous: on the eve of World War I, Germany
founded its first Kaiser Wilhelm Institutes in chem-
istry and physics, later transformed into Max Planck
Institutes (Ben-David, 1971).
The public-sector orientation of national education
and research created a series of institutional obstacles
to the commercialization of basic research:
2.3. Intellectual property rights
While professors in both countries could patent
discoveries made using their own institutional base
funds, this privilege disappeared in the case of external
4 For additional information on why US universities were
fairly unique on being able to integrate new emerging scientific
fields while most European countries instead founded special-
ized research institutes, see Ben-David (1971) and Mowery and
Rosenberg (1998). The latter book, to which an anonymous re-
viewer called the authors’ attention, cites a SPRU working paper
(Sharp, 1989) that coincides with much of our general argument
about public-sector science (1998: 36).
 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
funding, weakening incentives for professors—or any-
one else—to pursue commercially promising leads
emerging from larger research projects (Abramson
et al., 1997: 300; Kneller, 2003a). According to
Japanese law, inventions arising under government-
sponsored research projects belonged to the nation;
researchers had little incentive to see their discoveries
classified as National Inventions, which in practice
was often “equivalent to the technology slipping into
a black hole” (Kneller, 2003a: 383). While Japanese
researchers could and did obfuscate their funding
sources so as to circumvent National Invention classi-
fication, the “Sword of Damocles” threat of such clas-
sification was detrimental in areas like biotechnology
where clear exclusive intellectual rights are needed
to encourage private-sector investment in promising
early-stage inventions (Kneller, 2003a: 432). In Ger-
many the intellectual property rights situation was not
much better, as the government was entitled to a vary-
ing share of revenues generated from publicly funded
research.5 Just as importantly, little infrastructure ex-
isted to help scientists or their research institutions
explore patenting options (Abramson et al., 1997).
2.4. Employment rigidities
Differences between public- and private-sector em-
ployment conditions made it difficult for public-sector
employees to manage private-sector enterprises. In
Japan, professors at the national universities were for-
bidden to serve on or start private companies because
of their civil servant status; in Germany, professors
could devote up to 20% of their time to outside ac-
tivities, yet dual public–private appointments were
nearly impossible for staff, with mobility between the
public and private sector rendered difficult by dis-
parate regulatory regimes in job security, promotion,
and social security coverage.
2.5. Institutional incentives
Perhaps the deepest obstacle to biotechnology
entrepreneurship was simply that most academic re-
search scientists, employed in the public sector, had
5 The exact share depended on the classification of research
institution involved and level of government funding. For specifics,
see Abramson et al. (1997).
927
their jobs defined as the production of public goods;
neither they nor the institutions that employed them
had ever taken more than a peripheral interest in com-
mercial revenue. Technology licensing organizations
(TLOs) at universities did not begin to emerge until
the mid 1990s in Germany and the late 1990s in Japan
(Abramson et al., 1997; Kneller, 2003a).
3. Basic principles of recent German and
Japanese biotech policies
3.1. Indicators of “technology gaps”
Policy-makers in Germany and Japan had no-
ticed a growing biotech gap in the 1980s, but by the
1990s awareness of US domination in biotech be-
came acute. Indicators of the gap went beyond just
the already-mentioned differences in start-up activity.
The German government’s own official technology
report of 1996 noted that biotech patenting in the
years 1987–94 had increased by 120% in the US,
but only by 16% in Germany; the US had over 300
genetic-engineering production facilities in 1994, but
Germany only nine (BMBF, 1996: 42). However,
German policy-makers were convinced that the gap
lay more in commercialization than in basic science,
citing R&D spending levels, Nobel prizes, and repu-
tational studies as evidence of high-quality German
research capabilities (BMBF, 1996: 42, 208).
In Japan, in contrast, both the basic science base
and commercialization rates were considered deficient
(JBIF, 1999). The number of individuals engaged in
genome research was only about 8000 in Japan, com-
pared to about 71,000 in the US and 64,000 in the
EU. Japan produced only 200 PhDs per year in biol-
ogy, compared to 6000 in the US (Nakazawa, 2000).
In addition, the US competitive advantage was much
more broadly based. In Japan, large firms continued
to dominate the patenting process for pharmaceuti-
cals (Thomas III, 2001; Kneller, 2003b). Thus, 86% of
the total biotechnology patent applications came from
large firms. This was the mirror opposite of the US,
where the bulk of total patent applications in biotech-
nology were from universities, research institutions
and venture firms (JPO, 2000).
Policy-makers in both countries identified biotech-
nology as a key strategic technology for the 21st
928 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
Fig. 2. Comparative patenting in genomics.
century with a limited time window of opportunity.
German government-sponsored Delphi studies of the
1990s suggested that by 2020 biotechnology would
contribute about half of the top 30 most important
innovations (BMBF, 1996: 208). Such forecasts were
familiar to Japanese policy-makers as well,6 who
were in addition concerned about a Western patent
blockade in genetics. A special concern of Japanese
R&D reformers was to induce scientists to patent and
stem the kind of genomics patenting rout indicated in
Fig. 2.
3.2. Foci of German and Japanese biotechnology
policies
In both Germany and Japan, the focus of biotech
policies was on producing a new class of high-tech
actor: the “networked scientist–entrepreneur.” Con-
vinced that the networked scientist–entrepreneur was
an indispensable element in the technological regime
of biotechnology, policy makers endeavored to enrich
the institutional and economic resources available to
scientists. The German policy-makers were essen-
tially officials in the Federal Research and Education
Ministry (BMBF), with some input from the Eco-
nomics Ministry (BMW). In contrast, the Japanese
6 The German survey instrument was a virtual translation of
the Delphi survey funded by the Science and Technology Agency
(STA) in Japan (Cuhls et al. (1995)).
effort involved a broader coalition of ministries and
agencies. The formulation of an overarching policy
framework—the “Basic Policy Towards Creation of
a Biotechnology Industry” of 1999—required agree-
ment among five ministries—the Directorate General
of the Science and Technology Agency, the Ministry
of Education, the Ministry of Health and Welfare, the
Ministry of Agriculture, Forestry and Fisheries and the
Ministry of International Trade and Industry (MITI).7
Thus, whereas biotechnology reform in Germany was
a fairly quiet bottom-up and compartmentalized pro-
cess (leading ultimately to minor rather than major
R&D reform), in Japan more top-level consultation
and political management was involved (and entailed
a more radical effort to reform the national R&D
system).
3.3. German biotechnology policies
German biotech policy focused on encouraging
start-ups to cluster around existing research institu-
tions. The so-called BioRegio competition of 1995
(Dohse, 2000) awarded prize money to regions offer-
ing the best regional biotechnology commercializa-
tion networks. In the BMBF’s words, the competition
7 The titles of some ministries are abbreviated here for the sake
of brevity and familiarity. For instance, the Minister of Education
is actually the Minister of Education, Culture, Sports, Science and
Technology. The fuller titles are given in some instances below.
 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
was “to provide an incentive to induce regional
cooperation among scientific research institutions
from the public and private sectors, venture capital-
ists, banks, local support programs, and regulatory
agencies” (BMBF, 1996: 43). There were two rea-
sons for choosing the novel policy instrument of
an interregional competition rather than direct fund-
ing. The first was limited federal funds. The second
was that the Länder controlled the universities and
partial funding of many research centers, thus favor-
ing devolution of policy implementation to regional
levels.
In response to the BioRegio competition, 17 re-
gional biotechnology offices sprang into existence.
These were technology parks in which the public
sector provided services normally associated with
the private sector (Casper, 2000). The biotechnology
offices offered German scientists help in writing busi-
ness plans, guidance on financing options and mar-
keting assistance for their start-ups. They subsidized
patenting activities as well. In essence, the regional
offices taught German scientists how to appropriate
their discoveries.
The BioRegio competition was seen as a signif-
icant policy success (Casper, 2000; Dohse, 2000).
Virtually all of the biotechnology offices became
permanent installations as Germany experienced a
take-off in biotech start-ups. As foreseen, the majority
of start-ups clustered around German universities and
research centers (Casper and Kettler, 2001).8 From
about 75 biotech firms in 1995 Germany counted 222
by 1998 and 379 by the end of 2002, according to an-
nual surveys of Ernst and Young. A milestone along
the way was that Germany actually surpassed the UK
in the number of biotech firms in 1999 (Ernst and
Young, 2000). Nonetheless, Germany remains far be-
hind the UK in the development of therapeutic drugs
(see Table 2) and most of the German NTBFs are
very small; only one German biotech NTBF figures
among the eight largest European biotech companies
8 The Martinsried biotechnology center outside Munich exem-
plifies the German biotech boom. In 1973, a Max Planck Insti-
tute for biochemistry was built. A decade later, the University of
Munich added a center for genetic research to the village. In the
wake of the BioRegio competition, Martinsried was designated the
Munich center for biotech start-ups. Within 5 years Martinsried
housed over 50 biotech companies and more than 1000 biotech
employees, constituting a major European biotech center.
929
Table 2
Therapeutic product pipeline of UK and German public companies,
mid-2001
Preclinical Phase I Phase II Phase III Total
United 32 37 46 13 128
Kingdom
Germany 2 2 1 1 6
Source: Ernst and Young.
in stock market value and no other German biotech
start-up comes close (Ernst and Young, 2002).
3.4. Japanese biotech policies
While Japan’s “Basic Policy Towards Creation
of a Biotechnology Industry” of 1999 did mention
the importance of NTBFs (and set a target of 1000
biotechnology start-ups by 2010), the starting point
was Japan’s belated entry into the international patent
race. The following excerpt from the Basic Policy
expresses the Japanese worry about being shut out of
a major 21st century industry:
In recent years, governments in Europe and North
America have rapidly enhanced initiatives for re-
search and development of biotechnology and for
promotion of industries related thereto, while devel-
oping legal systems, etc. related to life sciences. In
consideration of the finite organic generic resources
and heavy investment for patenting in Europe and
the USA, the coming few years seem to be a very
important period for developing foundations for fu-
ture development of the industry . . . The ministries
and agencies concerned should drastically reinforce
their initiatives for accelerated promotion of indus-
trialization utilizing genome information for which
the coming few years are very critical, in order to
industrialize biotechnology intensively and swiftly.
(Interministerial Agreement, 1999)
As discussed, public-sector obstacles stood in the way
of university professors engaging in commercial ac-
tivities and, in addition, the performance evaluation
system in Japanese academia failed to include patents
as an index of achievement.
The Basic Policy vowed to change all this and
some of its objectives were subsequently realized in
the Strengthening Industrial Technology bill, which
930 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
passed the legislature in April 2000. The new law
allowed faculty in national universities to assume
management positions in companies established to
develop their technologies; to work after hours with
pay; and to take up to three years off to commercial-
ize their discoveries and still return to their faculty
position (Kneller, 2000).
Concurrently with the formulation of the Basic Pol-
icy, Japanese lawmakers approved measures allowing
universities to set up their own Technology Licensing
Organizations (TLOs). The Japanese TLO law passed
in August 1998. Virtually all major universities took
immediate advantage of the TLO law.9 In the case of
CASTI (the TLO of the University of Tokyo), the pro-
portion of biotechnology-related technology transfer
was quite high as early as 2000—52% of marketed
technologies; six out of seven licensed technologies;
and six out of eight nearly contracted technologies
(Takada, 2000). A number of problems nonetheless
plague Japanese TLOs at this time (Kneller, 2003a).
The effects of the TLO law were enhanced by pas-
sage in 1999 of the “Special Law for Revitalizing
Industry.” The effective equivalent of the Bayh–Dole
act in the US, the law resolved the question of own-
ership of government-sponsored research in favor of
the consigned researchers and was especially advanta-
geous for private universities (as well as private com-
panies). All these measures, flanked by grants, loans
and equity financing to start-ups from various govern-
ment agencies, have generated a certain momentum in
changing the habits of university scientists. Patenting,
working in firms, and even founding enterprises are
no longer the unheard-of activities that they largely
used to be among Japanese professors. By 2002, there
were several Japanese biomedical investment capi-
tal funds (Kneller, 2003b). From only about 60 total
biotech venture companies in 1995 (Interministerial
Agreement, 1999), Japan counted 334 by the end of
2002 (Japan Bioindustry Association, 2003), exactly
one-third of the Basic Policy’s target of 1000 by 2010.
Beyond encouraging commercialization of biotech,
the Basic Policy envisaged both quantitative and
9 A partial list of universities that quickly moved to establish
TLOs include Holkkaido U., Tohoku U., Tsukuba U., U. of Tokyo,
Nihon U., Waseda U., Keio U., Tokyo Denki U., Tokyo Institute
of Technology, Yamanashi U., Nagoya U., Kyoto U., Kobe U.,
Yamaguchi U. and Kyushu U.
qualitative improvements of the research base. Quan-
titatively, despite scanty overall fiscal resources, the
Basic Policy committed the government to fund more
competitive research, new bioinformatics institutes,
and more doctoral stipends. Qualitatively, policy
called for more “networking” among national actors
in the sector—“We will work on the improvement and
networking of Japanese research organizations . . .
We will promote greater cooperation among indus-
try, academic circles and government by improving
the information flow of research results to promote
commercialization...” (Interministerial Agreement,
1999).
The Japanese Government installed a national
biotechnology panel in July 2002 to supervise policy
implementation. The Biotechnology Strategy Council
is headed by Dr. Kishimoto, President of Osaka Uni-
versity, and it includes Prime Minister Koizumi and
six of his key ministers as well as a dozen experts
from medical, academic and business circles. A set
of strategic objectives included an action plan for
development of technology capabilities to the year
2010 and guidelines for the use of genetic engineer-
ing in food products. Further strategic goals include
attaining a 25 trillion yen market for biotech-related
products and a doubling of the government’s R&D
budget for biotechnology within 5 years.
4. Biotechnology policy as a motor of broader
R&D reform
In both Germany and Japan, recent biotechnology
policies were part and parcel of broader reforms in the
national R&D system. The institutional requirements
of biotechnology were basically incompatible with the
existing framework of public-sector science, necessi-
tating reform. More broadly, however, R&D reform
was a response to relatively poor economic perfor-
mance in these countries during the 1990s, prompting
greater departures from prior technology policies.
While the originality and success of the BioRegio
competition are well documented, less well-known are
the ramifications of this competition for the overall
R&D policies pursued by the Federal Research and
Education Ministry (BMBF). Prior to the mid 1990s,
this highly endowed ministry (1999 budget: 5.3 billion
Euro) had primarily funded R&D as a public good,
 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
leaving commercialization largely in the hands of the
private sector. Occasional forays into the commercial
realm, such as subsidizing German computer compa-
nies in the 1970s, had proven to be failures, while
ideologically and politically the involvement of the
BMBF in commercial activities always risked putting
it at odds with the Economics Ministry, which by tra-
dition since Ludwig Erhard (the Economics Minister
from 1949 to 1963, credited with Germany’s “eco-
nomic miracle”) has been a bastion of market liber-
alism in Germany (Stucke, 1993).10 In other words,
within the German context, an ideology of market lib-
eralism long had the effect of reinforcing boundaries
between the public and private sector. For example, in
the German high-tech crisis of the early 1990s (col-
lapse of major domestic computer companies, stag-
nation in semiconductors and electronics) the BMBF
rejected strong public pressure to emulate MITI—as
MITI was understood in the West at the time—as a na-
tional agency of central strategic technology guidance
(Reister, 1995).
Nonetheless, concurrently with the BioRegio com-
petition, the BMBF was formulating a fundamental
reorientation of technology policy, now conceived
as “innovation policy” and called the Innovation ‘96
initiative (BMBF, 1996: 29). The public manifesto of
this initiative was contained in the Federal Research
Report of 1996, normally a dutiful but dull catalogue
of the ministry’s funding activities issued every 3–4
years. The front end of the 1996 report struck a num-
ber of new notes with no equivalent in either the
preceding (1993) or following (2000) versions of the
report. The Minister’s opening letter evoked the dras-
tic unemployment problem, the “alarming” stagnation
of German R&D, and the need for fundamental system
changes, most specifically in the commercial exploita-
tion of German research capabilities (BMBF, 1996: 1).
The R&D policy reorientations were formulated
in a section entitled “From Research to Innovation”
that began with the announcement—“Important com-
petitors in the Triad have made greater progress in
new technologies (microelectronics, biotechnology,
10 The Economics Minister was frequently a member of the
liberal Free Democratic Party (FDP). Yet even when the FDP
was not in the governing coalition, other parties generally put a
free-marketer into this post. For example, during the 1998–2002
term, the Economics Minister was a party-unaffiliated businessman.
931
IT) and transform their knowledge faster into new
market products” (BMBF, 1996: 28). The basic thrust
of the section can be divined from the titles of the
sub-sections (Table 3). Many proclamations were,
compared with traditional German technology pol-
icy, fairly novel, especially the depiction of private
spin-offs by public-sector scientists as a natural exten-
sion of national R&D and, more generally, the view
of scientists as central technology transfer agents re-
quiring stronger individual incentives to engage in
commercialization.
Another significant shift involved policies for small-
to medium-sized firms (SMEs). The BMBF’s tradi-
tional programs to help SMEs involved earmarking a
certain amount of funding for R&D projects in which
SMEs participated. Promotion of start-ups had never
been more than a peripheral BMBF objective and had
never been considered part of its policies for SMEs.
In the 1996 manifesto, SME policy now emphasized
start-ups. Just as telling was the description of the new
policy for start-ups as Mittelstand policy (Table 3).
The German Mittelstand is usually associated with
established medium-sized family-owned firms, espe-
cially those occupying high-margin specialized niches
using highly skilled labor. To describe its policy for
technology start-ups as Mittelstand policy involved the
retroactive fitting of old terms (Mittelstand) into a new
context (NTBFs) that reflected the ministry’s radically
increased emphasis on technology start-ups.
While not the only technology area affected by
R&D reform, biotechnology was evidently the prime
driver of reform. First, in the section of the 1996 mani-
festo devoted to specific “future-oriented” R&D areas
(Section 4), biotech is discussed first, ahead of IT,
energy, environment, and transportation. Second, the
BioRegio competition served as a model for further in-
terregional competitions designed to promote start-ups
(Wilson and Souitaris, 2002). For example, the EXIST
initiative (co-sponsored by the BMBF and the Eco-
nomics Ministry) awarded prize money to the best pro-
posals for university-based entrepreneurial regional
networks. The federal government was able to solicit
109 proposals from over 200 out of 326 total German
universities and colleges, another policy success. A
Multimedia Start-up Competition was similarly orga-
nized, and in biotechnology another interregional con-
test, the BioProfile competition (1999–2001), funded
the top four of 20 proposals to develop regional
932 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938

Table 3
Sub-section headings and excerpts from the Federal Research Report, 1996, Section 2.3 (“from research to innovation”)
Lead projects as an element of research, technology and innovation promotion
Building of innovative networks between public science and the private sector . . .
Including research institutes in the innovation process as partners and technological service providers
The flexibility of state research institutes will be raised through introduction of private-sector organizational forms and incentives. . .
Initiative to found and promote NTBFs
Market access through the founding of new firms is a dynamic element of structural change . . . . The federal government therefore
views a consistent policy of strengthening market forces and the opening and keeping-open of markets as a central component of
its policies for the Mittelstand . . .
Provision of innovation capital (i.e. venture capital)
Support of SMEs in the new federal states (i.e. in East Germany)
Support of spin-offs from research institutes
The founding of NTBFs through employees of research institutes (“spin-offs”) is an important method for transforming R&D
results into industrial application . . . but the potential for spin-offs to date has only been partially exploited . . .
Patent promotion
The planned support of SMEs in their initial patent applications rests on the general realization that SMEs often possess
patent-relevant inventions but fail to apply not only because of economic considerations, but because of ignorance or reservations
about the effort and expense. These firms need to be guided to the patent system; especially their nervousness needs to be
overcome. Only personal experience with the patent system will help them increase their applications . . .
Technology transfer
Scientists themselves must be motivated to make the technology transfer of their knowledge succeed . . . (we will set up) transfer
organizations to assist scientists with contracts, patents, licensing, marketing, invention issues, and building up contacts . . .
Source: BMBF (1996: 28-34).

networks of specific biotech expertise, e.g. “functional
genome analysis” in Southern Lower Saxony.
Helped by the Internet boom and the numerous
government initiatives to promote NTBFs, Germany
experienced a brief explosion of high-tech start-ups
generally in the years 1996–2000. A low-cap stock
market, the Neuer Markt, was launched in early 1997
and by early 2000 listed over 300 companies with
a total market capitalization of some 200 billion
Euro at its peak (Lehrer, 2000). After mid-2000, the
Neuer Markt collapsed and was closed in September
2002. Interestingly, the least novel aspect of German
high-tech policy in the 1990s was venture capital; the
German government (in particular the BMBF) had
funded substantial programs to inject venture capital
into NTBFs since the 1980s (Kulicke, 1997). More-
over, the often-cited lack of venture capital overlooks
the fact that venture capitalists since the 1980s had
long combed the German landscape for lucrative
business ideas but failed to find viable enterprises
(Wupperfeld, 1997; Lehrer, 2000).
Despite these improvements in the German
high-tech landscape, the scope of German R&D re-
form was actually fairly narrow. This is shown by the
contrast with Japan. German R&D reform enabled
scientists to wear a second hat as entrepreneurs but left
the system of conducting basic science more or less
unchanged. In contrast, recent biotechnology policies
in Japan accompanied a tectonic shift in the whole
system of public science. The Japanese government
is endeavoring not merely to improve the commer-
cialization of scientific discoveries, but also to raise
the productivity and international competitiveness of
the Japanese science base. Whereas German R&D
reform essentially added an entrepreneurial layer on
top of the existing public-sector science system, Japan
is committed to substantial administrative reform of
Japanese science altogether.
Japan is in the process of converting its national
universities and national research laboratories into
self-governing Independent Administrative Institu-
tions (IAIs) and subjecting them to more competitive
pressures. Ongoing reforms will remove these insti-
tutions from direct ministry control and civil service
employment regulations while imposing more strin-
gent external evaluation to encourage internationally
 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
oriented research and measurable R&D results. The
new rules will also permit merit-based salary increases
rather than the age-related salary scales that have pre-
vailed hitherto. The first change of status began with
several dozen national research labs converted into
IAIs in 2001. The planning of administrative auton-
omy for universities, involving many rather complex
questions, is still ongoing at the time of writing, with
the first conversion of national universities into IAIs
scheduled for 2004.
The overall framework for reform is set forth in
the Second Science and Technology Basic Plan of
2001–2005. (A First Basic Plan of 1996–2000 was
comparatively modest in scope.) The Second S&T
Basic Plan calls for Japan to become a top con-
tributor to the world’s scientific knowledge; major
goals include creating more Nobel Prize winners
and promoting powerful linkage mechanisms among
firms, universities and government to develop future
industries.
The plan establishes clear science and technol-
ogy (S&T) priorities for R&D funding. The four
top-priority S&T fields chosen are—(1) Life Sciences;
(2) ICT [Information and Communications Technolo-
gies]; (3) Environmental Sciences; (4) Nanotechnol-
ogy and Materials. Notably assigned to merely the
second tier of S&T fields is manufacturing technol-
ogy, “the very source of Japan’s economic power”
(Government of Japan, 2001). In fact, the plan is
quite explicit about the need for Japan to create “new
knowledge bases” for its economy and to evolve into
a science-based society.
The S&T Basic Plan of 2001–2005 addresses R&D
reform within the context of large-scale social chal-
lenges like an aging population, security risks, and
sustainable development. Table 4 lists the general and
specific goals in the overall “vision of Japan” artic-
ulated in the document. The odd combination of vi-
sionary declarations and specific R&D goals is held
together by the central goal of permeating Japanese
society with scientific thinking: “The nation will have
to prepare an atmosphere where the scientific view,
scientific way of thinking, and scientific mind are
highly valued; and to build a knowledge-based soci-
ety that nurtures talented persons who can create new
knowledge” (Government of Japan, 2001).
In fact, the 2001–2005 S&T plan clearly betrays a
certain heritage of elite guidance that extends beyond
933
the nuts and bolts of R&D policy to the overall outlook
of society:
In promoting S&T to make Japan into the nation
it aims to become, we must adopt and implement
S&T policies formed on the basis of how they re-
late to society. As S&T holds true value only if
accepted by society, society’s understanding, judg-
ment, and acceptance of S&T are crucial. This is a
point to be recognized and striven for not only by
the natural scientists and technological experts, but
by experts in the social sciences and humanities as
well (Government of Japan, 2001).
Such a declaration is less conceivable in Western coun-
tries, including Germany; technology doubters are
numerous in Germany and enjoy powerful political
representation in the Green Party. The Japanese gov-
ernment, in contrast, has elected to face technology
foes (including humanities professors and students)
in head-on fashion. Thus, the S&T plan harps on
“the need for human wisdom to integrate the natural
sciences with social sciences and the humanities”
(Government of Japan, 2001).
There are several reasons for believing that biotech-
nology is the most important driver of Japanese R&D
reform. The life sciences are mentioned first among
the four top S&T priorities and biotechnology is the
most frequently mentioned S&T area throughout the
document; furthermore, biotechnology is a component
of all three other high-priority S&T areas (ICT, en-
vironment, nanotechnology). Just as significantly, the
life sciences constitute the only S&T area in which
Japan is recognized as lagging far behind North Amer-
ica and Europe; the S&T plan describes Japan as ba-
sically at parity in the other three top-priority S&T
areas. Finally, the S&T plan refers repeatedly to the
challenge of Japan’s aging population and the poten-
tial of biotechnology to help respond to this challenge.
Unlike German R&D reform, which was confined
mainly to a single ministry at the margins of gov-
ernmental decision-making, recent Japanese R&D
reform is quite central to national policy. This is sig-
naled by the establishment of the Council for Science
and Technology Policy (CSTP) in 2001. The CSTP is
chaired by the Prime Minister, counts six ministers as
members along with several top Japanese professors,
science officials, and two business executives. The
CSTP is one of four major advisory councils in the
934 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938

Table 4
“Vision of Japan” in the science and technology plan 2001–2005, Section 1.2
1. A nation that contributes to the world by creating and using scientific knowledge
Firstly, a nation that creates new knowledge by clarifying unknown phenomena and discovering new scientific laws and principles; and
secondly, a nation that copes with various problems by utilizing accumulated knowledge . . .
More specifically, the goal is to create outstanding R&D results and to disseminate them widely across to the world, for example, by
publishing a profusion of excellent papers . . . by providing centers of excellence that attract outstanding foreign researchers, and by
producing just as many Nobel Prize winning scientists as the most technologically advanced European countries (some European
countries have produced as many as 30 Nobel laureates in the last 50 years)
2. An internationally competitive nation capable of sustainable development
A nation that can improve people’s living standards and maintain vitality for sustainable economic growth and international
competitiveness by overcoming current difficulties . . . Industrial technological power is not merely a foundation of international
competitiveness for Japanese companies, but a driving force to vitalize all industrial activities that support people’s lives . . .
More specifically, the goal is to strengthen international competitiveness by widely transferring R&D results from public research
organizations to private companies, by proposing various international standards, by further increasing the number of international
patents obtained, and by improving industrial productivity
3. A safe, secure nation where people enjoy a high quality of life
A nation that reliably assures safe and high-quality living for its people. Such a nation serves its people by: improving disease
treatments and prevention to maximize its citizens’ chances for a long and healthy life; minimizing the risks posed by natural and
artificial disasters . . .
The specific goals are to form S&T bases to analyze genetically caused diseases and develop tailor-made medical therapies for their
treatment, to minimize damage from natural disasters such as earthquakes and typhoons, and to secure stable supplies of
high-quality foods by applying biotechnology, whilst minimizing the possible risks of S&T
Source: Government of Japan (2001).

Prime Minister’s so-called Cabinet Office. To date,
the Council has already conducted several “summits”
to facilitate networking among industry, academia
and government at all levels—national, regional, and
local. A major task of the Council is to overcome or at
least palliate ministerial sectionalism within the gov-
ernment, which is considered a major impediment to
the creation of new industries such as biotechnology.
The CSTP acts as advocate for university reform,
including reform of private universities, which com-
prise nearly 80 percent of all universities in Japan.
Fostering the creation of academia-industry networks
(a major priority of the 2001–2005 S&T plan) is a spe-
cific charge of the Council. Indeed, recent Japanese
policies for biotechnology and R&D represent a first
peak in a slow decade-long effort to improve connec-
tions between higher education and industry in Japan.
Traditionally, industry and government, students and
parents alike had passively accepted the gap between
what students learned at the university and genuinely
useful job skills. Yet even during the booming late
1980s it had become apparent to policy-makers that as
Japanese science and technology had all but fulfilled
the program of “catching up” with the West, the educa-
tional system would have to produce more creative in-
dividuals who could advance the technological frontier
rather than merely learn the state-of-the-art through
traditional study (Cummings, 1991; Haiducek, 1991).
A major thrust of the Science and Technology Ba-
sic Plan, in fact, concerns measures to promote the
efforts of young researchers: better career tracks to
enable young researchers to get started, better oppor-
tunities for young researchers with creative ideas to
gain access to competitive project funds, and further
reforms of R&D project evaluation methods to iden-
tify proposals with scientific breakthrough potential.
5. Final comments: is it enough to reform
national R&D?
The R&D reforms outlined above undoubt-
edly helped spark a wave of firm foundings in
biotechnology—several hundred new biotech firms
in both nations. Yet doubts must always be raised
about the long-term efficacy of taxpayer-sponsored
activism. While biotechnology subsidies are no doubt
unlike agricultural subsidies, there is no doubt that
biotechnology has become—even with the active
participation of private venture capital—a subsidized
 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
activity. As of this writing, the largest biotechnology
companies in Germany and Japan are not the recent
start-ups. Germany’s largest biotech company, Qia-
gen (headquartered in Holland) was founded in the
1980s; a maker of “platform technologies,” its mar-
ket capitalization of roughly 3 billion Euro has been
almost ten times as large as the next largest Ger-
man biotech company (Ernst and Young, 2002). In
Japan, too, the largest biotech operations tend not to
be recent start-ups, but older divisions or ventures of
established companies, especially of pharmaceutical
firms and distillers with special fermentation skills
(Ernst and Young, 2002).
It is therefore important to raise certain critical
questions, particularly for the sake of tracking future
progress in German and Japanese biotechnology. Two
related questions will be briefly considered. The first
is whether R&D reform in Germany and Japan goes
far enough to promote science-based industries like
biotechnology. The second question is whether R&D
policies per se can address sufficiently deep charac-
teristics of the German and Japanese economies to
succeed in science-based high-tech sectors.
Concerning the first question, the German–Japan
comparison reveals the much greater seriousness of
Japan toward structural reform of the public-sector
science system. There is no comparative drive in
Germany to makes its numerous research universities
administratively autonomous. While some reforms
to improve efficiency and accountability have taken
place on the margins, Germany’s new approach to
R&D can essentially be characterized as one of basic
complacency with German science combined with
some novel economic incentives for public-sector sci-
entists to undertake entrepreneurship on the side. Yet
a truly serious push to abolish obvious anachronisms
like Lehrstühle and Habilitationen at the universities
has not taken place.11 Profound reform of the R&D
system in Germany is made difficult, it is true, by
overlapping jurisdictions for education and research at
the federal and Länder levels (Politikverflechtung). In
11 A Lehrstuhl is a professorial chair with many subordinate as-
sistants, a Habilitation is like a second doctoral dissertation which
qualifies one to become a professor. The system of Lehrstühle
and Habilitationen give a comparatively small number of German
professors extensive control over people and resources at German
universities. Recently, a few junior professorships have been in-
troduced.
935
contrast, the Japanese conversion of R&D institutions
into independent administration institutions testifies to
more than just incremental reform effort. This is not to
say that every element in the government’s Basic S&T
Plan of 2001–5 is immune to skepticism: in perusing
the document, one can hardly refrain from wonder-
ing whether the government’s rhetoric on behalf of
“science” reflects, in part, an embarrassing lack of
more focused policy responses to difficult questions.
One can imagine that if Germany and Japan develop
thriving biotechnology industries, then it will be more
because of diffuse institutional side-effects of policy
than of specific measures to assist biotech companies.
What may, in the longer run, turn out to be more
important than the initial programs of biotechnology
sponsorship is the weakening of boundaries between
the public and private sector—the opening-up, as it
were, of the “corporatist” structures. Biotechnology
has provided an important impulse for the creation of
new R&D spaces at the intersection of publicly funded
science and private finance, of higher education and
industry. The longer-term impact of recent biotech-
nology policies might well be better indicated by the
growth of total patent revenues and IPOs from uni-
versity and research institute spin-outs than by perfor-
mance statistics in biotechnology alone.
The other question is whether R&D reform alone
will suffice for Germany and Japan to become global
leaders in the commercialization of fields like biotech-
nology. To be sure, reforms in both countries did spill
over to other areas (start-up incubation, new priori-
ties for higher education, etc.) Nonetheless, the issue
must be faced as to whether, in the long run, success
in biotechnology depends less on reform of the R&D
system per se than of these countries’ overall economic
framework. As recently as the early 1990s, the combi-
nation of patient labor and patient capital in Germany
and Japan was considered a major competitive ad-
vantage in knowledge- and skill-intensive sectors. Yet
while the “coordinated market economies” (Hall and
Soskice, 2001) of Germany and Japan fit the require-
ments of certain sectors, rapidly evolving technology
sectors represent something of a quandary (Casper and
Whitley, 2004). The presence of high-powered incen-
tives in the “liberal market economy” of the US may
well be just as important in explaining American suc-
cesses in biotechnology as the institutional details of
the R&D system (Casper et al., 1999).
936 M. Lehrer, K. Asakawa / Research Policy 33 (2004) 921–938
The risk of R&D reform not being enough is large
in both countries but takes, very broadly speaking,
somewhat different forms. In Germany, biotech re-
forms were mainly the province of a single agency, the
Federal Education and Research Ministry (BMBF).
While the Economics Ministry (BMW)—now the
Economics and Technology Ministry (BMWi)—did
participate in certain programs as well, the impression
still remains that reforms to favor new science-based
industries like biotechnology remain highly com-
partmentalized. While there was much talk of en-
couraging “entrepreneurship” in German political
discussions of the 1990s, even the talk hardly out-
lasted the collapse of the short-lived Internet bubble.
In Japan, the interministerial coordination of effort to
promote biotechnology is broader than in Germany.
Yet the top-down nature of the government effort
to promote “science” in Japanese society raises a
troubling paradox. Science research and discovery
also require dynamic bottom-up and self-organizing
processes. And such processes pre-suppose the prac-
tice of authority being rather different from what it
has been in Japan. Simply making science-worship
the centerpiece of broader societal reform may not
achieve a great deal. While the government is un-
doubtedly right to emphasize the huge qualitative
difference between being a leader as opposed to a
fast-follower in global science, the societal challenge
that is involved for Japan is probably a great deal
more diffuse—and a great deal more difficult—than
what can be achieved by government initiative alone.
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