Hitotsubashi University
Institute of Innovation Research

Study of the Management for Successful
R&D Projects Supported by Public Funds

Akira Yamazaki
Kazunari Matsushima
Kenichiro Mizuno
IIR Working Paper WP#12-09

July 2012

Institute of Innovation Research
Hitotsubashi University
Tokyo, Japan
http://www.iir.hit-u.ac.jp

Study of the Management for Successful
R&D Projects Supported by Public Funds

Akira YAMAZAKI, Chiba Institute of Technology
Kazunari MATSUSHIMA, The University of Tokushima
Ken-ichiro MIZUNO, Greenblue Corporation

Abstract

There are various factors associated with success or failure of R&D projects, such as
maturity of the technology, circumstances surrounding R&D systems withincompanies and environments for commercialization of R&D projects. For R&D
projects supported by public funds in particular, it has been difficult to clarify whatmakes R&D projects successful, because such projects were caught in the idea thatthey must naturally succeed. What is really required in utilizing public funds for R&D
projects, however, is ensuring the public funds should be used most effectively, bymaking R&D projects truly successful. To do so it is very useful to analyze past cases
and identify success factors that can be easily followed.
In this study, surveys and interviews were conducted for past publicly supported
projects, and success factors were extracted based on the circumstances of the
projects by using statistical methods. It was confirmed that the quantitative results
were quite consistent with the qualitative anticipation. After streamlining the successfactors, further examination of each success factor was carried out for realizing
proper management of projects supported by public funds.
Next, the guidelines for selection and process management for publicly supported
projects while making the best use of these success factors were presented. That is,satisfying the success factors should be a requirement for public support from thestart during the selection stage. However, in some cases it is desirable to adopt
projects even though the success factors are not satisfied at the time of selection,
when such projects are expected to provide extraordinary results in the future. In suchcases, executing proper process management and leading projects in a manner thatsatisfies the success factors is indispensable.
-2-1. Background and Purpose of the Research

The factors determining the success or failure of R&D projects are thought to berelated to various parameters, including maturity of the technology, the circumstances
surrounding R&D systems within companies and environments for commercialization.
While the success factors of a project can be envisaged to some extent, the fact is theparameters that have been explicitly clarified are very limited[1]. Typically, examples
of R&D failures are not readily exposed for all to see, yet amidst this limitation, newopportunities to clarify past problems from a management standpoint have continued
to appear in the private sector[2]. At public institutions, on the other hand, conditions
have made it difficult for examples that can be deemed failures to even officiallyexist[3]. The reason is thought to have been widespread existence of the attitude thatprojects had to succeed when publicly supported[4]. The Consortium R&D Projects
for Regional Revitalization, a program of publicly solicited projects implemented inpast years on public themes, is a valuable example in which success factors for
projects that used public funds were analyzed. Based on this program, the following
have been enumerated as factors that, excluding those unique to specific projects, will
typically apply as matters required by a project to lead the effort to success[5].
・ Project management aspects: The presence of a key person to manage theresearch; the setting of clear objectives
・ R&D aspects: The establishment of themes with adequate consideration given toneeds; a sufficiently formulated intellectual property strategy
・ Marketing aspects: The participation of a key person from a marketing
perspective on the research teamWith such conditions as a premise, it would be worthwhile if easy-to-judge-3-

success factors were elucidated, to ensure R&D projects based on the use of publicfunds attain success in the true sense of the word, and achieve more effective use of
public funds. In this study, such success factors based on examples of specificsystems are clarified, and they are used to suggest indicators to emphasize during the
project selection and progress management processes when utilizing public funds inthe future. We believe this approach to success factors can be applied for R&D
project management at private sector entities as well.

2. Research Methodology

In the present study, our analysis of success factors focused on the system bywhich private sector firms use public funds to conduct R&D and contribute to society
and the economy by putting the results of their research to practical use. Specifically,
we looked at participating projects under the Development Grant Program for
Practical Application of Industrial Technology that have been implemented by the
New Energy and Industrial Technology Development Organization (NEDO), a public
institution[6].
For the study, we implemented a questionnaire survey and conducted interviews
concerning specific projects supported by this system. Based on this information, we
took into account the successful and unsuccessful results of the supported projects
themselves, and sought to analyze the success factors for a system that utilizes publicfunds and outlined management considerations for the use of public funds.

-4-3. Selection and Analysis of Success Factors

The system reviewed in the present study is one in which NEDO, a public
institution, selects projects it considers worthy of support from among project
proposals based on the initiatives of private sector firms, and provides them withpublic support. In that sense, it is possible to view such success factors of R&D as
simultaneously being those for public support as well as those at private sector
companies. Here we have defined “success” as a company being able to record sales
within three years after such R&D assistance has been completed (including when acompany expects to report sales) , which is the expected result of this support systemfrom the beginning.
We first implemented a questionnaire survey of 54 firms, which are all of thetargeted firms for the survey, that had completed a grant project after conducting
R&D with support under this system. From the results, we selected items the firms
considered to be success factors, then conducted interviews at 28 of the companies
and analyzed the success factors.

-5-3-1 Selection of success factors

At firms that had completed their projects, we implemented a questionnaire survey
concerning the factors that led to the success of their project or the factors that wereinsufficient and resulted in the project not achieving its goals. Figure 1 shows theresults. The question items in the survey were each item in Figure 1, and the result foreach item summarizes the number of firms that indicated they considered the item asuccess factor at the time of starting the project. Based on the results, the following
items were clarified as the factors having the greatest importance from the perspectiveof the firms.
・The research topic was closely related to the firm’s core business and enabled thefirm to use its accumulated knowledge and experience・A highly influential engineer who worked on the project as a core member
・Formation of an organization that brought together administrators on the technicaland management sides
・A sufficient effort to develop sales channels and marketing had been undertaken
・Market trends were accurately understood and planning details were revised if
necessary
Using the above survey results as a premise, we conducted interviews at 18
successful firms and 10 firms that did not have successful results and attempted to
extract the project success factors．At this juncture, based on the indication that “inorder to be manageable it must be visible,” we were mindful that for easy judgments,
success factors should be specific rather than abstract[7].

-6-Table 1 Survey of Conditions at Successful and Unsuccessful Firms, Based on Firm Interviews○
12

Preceding research results
Superiority based on owned patents and know-how, noreliance on other companies for core technologies
Feasibility of achieving the technical development objective
Presence of dedicated, full-time researchers
Whether R&D is positioned within Company’s
R&D

proper targets; presence of a competentorganization

manager
Participation by the operating division
Existence of customers as evaluators

Clarity of the sales channels
Reliability from a production aspect
Certainty of market formation
Verification of customers' needs
Certainty ofcommercialization
planning

Has a steady outlook
Project period is appropriate(Legend)△

Successful firms
Ｘ NA Total ○: Pct. Ｘ: Pct.
51
0 18 66.7% 5.6%

1

Unsuccessful firms
Ｘ NA Total ○: Pct. Ｘ: Pct.
7
2
0 10 10.0% 20.0%

○

△

12

6

0

0

18 66.7%

0.0%

2

4

4

0

10 20.0% 40.0%

5
16

13
1

0
1

0
0

18 27.8%
18 88.9%

0.0%
5.6%

0
7

7
0

3
2

0
1

10 0.0% 30.0%
10 70.0% 20.0%

10

8

0

0

18 55.6%

0.0%

0

8

2

0

10

14
14
16
13
12
10
6
10

2
3
2
5
6
8
10
6

2
1
0
0
0
0
0
0

0
0
0
0
0
0
2
2

18 77.8% 11.1%
18 77.8% 5.6%
18 88.9% 0.0%
18 72.2% 0.0%
18 66.7% 0.0%
18 55.6% 0.0%
18 33.3% 0.0%
18 55.6% 0.0%

3
1
2
5
0
2
0
0

0
2
7
3
10
2
9
8

7
7
1
1
0
5
0
1

0
0
0
1
0
1
1
1

10 30.0% 70.0%
10 10.0% 70.0%
10 20.0% 10.0%
10 50.0% 10.0%
10 0.0% 0.0%
10 20.0% 50.0%
10 0.0% 0.0%
10 0.0% 10.0%

0.0% 20.0%○: Pertinent; △: Generally pertinent, but not applicable to some aspects; Ｘ: Corresponding conditions not provided; NA: Cannot obtain information.

Next, based on the results of theTable 2 Results of χ2 test on interview items and success or failure

Interview items

questionnaire, we selected the items

Preceding research results
Superiority based on owned patents and know-how,no reliance on other companies for core
Feasibility of achieving the technical development
objective
Presence of dedicated, full-time
researchers
R&D
Whether R&D is positioned withinorganiza- Company’s proper targets; presence of ashown in Table 1 as those items thatmight be deemed to influence thesuccess of a project. In the interviews,

tion

we asked the firms to indicate their

Participation by the operating division
Existence of customers as evaluators

Clarity of the sales channels

response to each item in Table 1 by

Reliability from a production aspect
Certainty of market formation

using a circle (○), triangle (△) or “X”.

Verification of customers' needs
Certainty ofcommer-

The meaning of each mark wascialization

Has a steady outlook
Project period is appropriate

χ２
8.372 **
10.080 ***8.182 **
2.087
10.578 ***10.464 ***14.897 ****
13.481 ****
2.313
11.667 ****
12.300 ***4.441 **
10.119 ***Note: **p<0.05, ***p<0.01, ****p<0.001○: Pertinent;△: Generally pertinent but not applicable to some aspects;
X : corresponding conditions not provided

Table 1 is a summary of the results. At this point we performed a chi-square test
based on the results in Table 1. The result is shown in Table 2. Each item was thought
to be a factor that might be deemed to influence the success of a project, and given
the outcome shown in Table 2. Thus it can be supposed that the items have an effect-7-

on the success of a project except “presence of a dedicated, full time researcher” and“reliability from a production aspect”.
While each item presented in the interviews was based on qualitative assumptions,
given the results of the above analysis those items which, with several exceptions,influenced the success of the projects (referred to below as “the influencing items”),
could also be quantitatively confirmed.

3-2 Analysis of the success factors

By grouping related items, we trimmed the influencing items discussed above to thefollowing five success factors for R&D projects.

・The existence of R&D that preceded the project in question・The clear position of the R&D theme as part of the company’s medium-term
management plan and other efforts

・

A close cooperative relationship with operating divisions

・

A clear understanding of core customers

・The presence of a key researcher who continuously plays a key role as afull-time individual on the project

The specific conditions concerning these success factors, which were derived
based on the results of the questionnaires and interviews, are discussed below,
together with supplementary information obtained from the firms during theinterviews.

-8-

(1) The existence of R&D that preceded the projectThis item is derived from several of the interview items: “preceding research
results,” “superiority based on owned patents and know-how” and “the feasibility ofachieving the technical development objective.”
One consideration enumerated as a factor leading to a project’s success washaving made progress in basic research on the subject theme and the clarification ofprinciples to a certain extent, prior to efforts aimed at commercialization R&D.
Another critical parameter is having obtained patents, based on the preceding R&D,
that provide a foundation for commercialization. It is believed that in many situations
the prospects for achievement of the technological development objectives are
obtained through these steps.
On the other hand, setting a commercialization objective that is far from theresults of the previous research has been cited as an instance when the benefits ofpreceding research cannot be used to maximum advantage. But this means suchresearch ultimately has not really become preceding research at all.
Moreover, in situations where an important component of the preceding researchdepended on another company’s technology as well, the effect of the previous work
diminishes in the sense the company’s own control becomes less effective. In addition,
no positive results have been generated when the scale of the previous work was too
small, or when there is too little connection between the preceding research and thesubject theme.

(2) Position in the medium-term management plan and other efforts
This is another way of restating the item “Whether R&D is positioned within
Company’s proper targets; presence of a competent manager”-9-How clearly the target R&D has been positioned within efforts such as thecompany’s medium-term management plan has a significant influence on the successor failure of the project. According to the interviews, a position that demonstrates theresearch is an important project and a new business as a company means acompany-wide system of cooperation, and remarkably elevates the importance of thetheme at the firm. For the individuals implementing the R&D, such positioning isunderstood to mean “failure” is not acceptable. Especially at private sector firms,
R&D is considered a failure if it does not result in sales and generate earnings.
Consequently the research division will become more earnest.
Furthermore, the fact that R&D is positioned clearly within the company willproduce results that improve its chances of success, such as a new organization being
formed and the involvement of managers, other than the persons directly responsible
for the research, who understand the project with an awareness of acting as ago-between with other management layers. Moreover, a powerful organization within
the operating division as described in the following section becomes easier toachieve.
Because of reasons such as those described above, it is thought that over time, thetendency for managers to aspire to a “commitment (pledge)” will be heightened, andthe probability of achieving an objective that has been set forth as a company will
increase. Moreover, even if R&D is not clearly described in a medium-term plan orother material, the same effect is thought to be achieved if the position within thecompany, such as its recognition by top management, is clear. As a success factor,
such positioning is explicitly manifest as the difference between success and failure.

- 10 -

(3) Cooperative relationship with the operating divisionThis item is related to the interview items “participation by the operating division”
and “clarity of the sales channels.” During the commercialization phase, keeping
considerations such as mass production and cost reductions in mind and maintaining
close cooperation with the operating division are necessary because of the fact thatthe product image will have solidified to some extent. An operating division andprofit center does not want to spend money on a project with little feasibility.
Therefore the operating division’s display of interest can itself be seen as “insuring”
the feasibility of the theme that will be the subject of the R&D. In addition, because
the operating division also possesses information concerning users, markets andregulations, as well as knowledge of environmental-related constraints, close
cooperation with the operating division has the effect of increasing a project’s
feasibility.
Here, for firms that achieve success without the participation of the operating
division, other factors are thought to offset the lack of operating division participation.
Either an understanding of the details of customers’ requests based on a technology
development road map for the sector where the pertinent R&D has been carried out,or customer-related information that was easily obtained through research results andexisting product activities over long periods of time, has been enumerated. In any
event, it can be said that circumstances that enable a company to have an outlook forcommercialization with the participation of the operating division can be called asufficient condition for project success.

(4) A clear understanding of core customers
A clear understanding of core customers can be related to many factors. Among- 11 -

the interview items, it is related to “certainty of market formation,” “verification ofcustomers’ needs,” “existence of customers as evaluators” and “certainty ofcommercialization planning.”
In the “certainty of market formation” sense, the point is whether the development
objective has clarified differentiation with existing products, and whether theobjective has sufficient strengths and those strengths are recognized by customers. In
the “verification of customers’ needs” sense, it is clear that core customers are tosome extent certain if the R&D theme is akin to their core business. In such situations,contact has already been made with the envisaged customers and the specifications
have been clarified with them, and their cooperation in the research process has also
been obtained, and by clarifying the objectives it is possible to proceed efficiently
with the R&D. Specifically, when the “sales window” is limited by the capital
equipment update period cycle, communications with customers makes it possible toattain well-timed understanding. Shortening the research period by narrowing down
the productgoals

from afunctional

perspective throughcorrectionofover-specifications, for example, has also been cited. In the sense of “existence ofcustomers as evaluators” commercial development feasibility declines undercircumstances where no contact with the envisaged customers has been made and theranking in the user’s evaluation is inferior to those of competing firms. Finally,
because it leads to a precise judgment of the market and makes it less likely fordiscrepancies to occur between the development goals and the specs demanded bycustomers, the clarification with customers as described above is also linked to the“certainty of commercialization planning” and increases the probability thatcommercialization will proceed as planned. A solid grasp of customers’ needs can becalled a critical characteristic for business success.
- 12 -

In cases where success had been achieved despite a lack of understanding ofcustomers’ needs, on the other hand, market cultivation was undertaken after the factusing the powers that are a large enterprise’s strong points, or has been supplemented
by a focus on providing products quickly rather than on addressing customers’ needs.
In cases that do not achieve success despite an understanding of customers’ needs, theconditions involved either an obstacle to raw materials supply in recycling-related
operations, or some problem that occurred during the principle clarification phase.

(5) Presence of dedicated researchers
One item that does not necessarily influence the success or failure of an R&D
effort is “the presence of dedicated, full-time researchers.” Nevertheless, this item
was emphasized in the initial questionnaire survey and evaluation of otherbusinesses[5], and we want to add it to the discussion.
Having dedicated, full time researchers can mean various things. One point thatcomes to mind is that when the research to be undertaken has a sufficient position
within a firm, preceding research results tend to exist and, based on the research,
progress has been made in securing positive results, including the accumulation ofknowledge and patents. Moreover, because of their ability to gather information on
the status of competing technologies and the possibilities for creating external
networks, for example, such researchers also play a key role in setting the R&D trend.
At many firms an R&D theme is transferred from the laboratory or other development
division to the operating division when the firm begins nurturing the R&D effort, andin such situations it is typical for the researchers who have been involved up to thattime to continue their research by some means such as reorganization.
In this research there were multiple examples where dedicated, full time- 13 -

researchers have been assigned even at firm where R&D was not a success. Therefore
although we might be unable to say whether this item has an effect on the success or
failure of an R&D effort, we can say it has the characteristics of the necessary
conditions needed to lead a project to success. Therefore it is true that the position of
R&D internally or the presence of human resources who can cooperate with the effort
for commercialization are important elements as noted in the preceding section, andciting the presence of dedicated, full time researchers as a necessary parameter for
project success is considered appropriate.
Because small and medium-sized firms would form an organization with a limited
number of researchers, however, it is not considered appropriate that they be required
to support projects with dedicated researchers in the same manner as large enterprises
as a premise for receiving public support.

By adding such considerations to the identified success factors as described above,these items can be positioned among the important factors that lead a project tosuccess.

4. Application of the Success Factors to Public Funds

In the questionnaire survey sent to 54 companies as described above regarding
projects to carry out R&D with the goal of pursuing commercialization by receiving
public funds, we asked about the internal positioning of these projects. The results areshown in Figure 2. Glancing at the figure, we can see that we can direct our attention
to the items with relatively high weights: “a sector peripheral to core business” and“development has (commercial) viability risks”.
- 14 -

That is, the outlook as a technology is to some degree established by the firm. But
because any project involves uncertainties regarding its commercial feasibility, andoffers poor prospects when it veers away from a company’s core business, companies
can be seen to adopt a stance of trying to implement their R&D after receiving a
grant.
With regard to a project as a core business, technical issues for the project can besolved sufficiently in-house, where the project can be pursued with adequate forecasts,
and existing sales channels and customer relationships can also be used for thebusiness. For a project on the periphery of a core business, on the other hand,comprehensive in-house response that is a critical factor for the project’s successcannot be achieved, and new sales channels must also be created and new customer
relationships must be built. In other words, even if the technical issues are resolved,
other commercialization risks remain until the project is developed into a business.
Such an inclination is thought to be at work from the start as an intention to rely on
public funds.
Nevertheless, according to the results of a chi-square test performed for the
relationship between the success or failure and the internal positioning of a project for
which a firm requests public funds shown in Figure 2. Whether a project is or is not acore business does not necessarily have an effect on the project’s actual results interms of success or failure. The reason for this is thought to be the fact that theboundaries of the “core” business are not necessarily self-evident. Nor does anawareness of other risks influence success or failure. That is, the result indicated isthat neither the reason for requesting public support nor awareness of risk factors
influences success or failure. Therefore, the point is that a company’s preparation of
the success factors described in the preceding section, rather than how a project is- 15 -

positioned, forms the line dividing success from failure.
Given the recent severe business environment, firms are making strong demands
internally to boost their commercialization success rate through R&D, and, therefore,
the needs for public funds increase. In this situation, public support should be given to“low-risk projects with a short development period” , if a public institution tries only
to boost its success rate. When we return to and consider the true necessity of publicfunds, however, this type of support merely results in an improper situation ofemphasizing only a numerical value as the success rate; i.e., the means are mistaken
for the ends. Today, firms themselves can be noted to have a tendency to aim at R&D
that has a short time horizon. So, making use of public funds with similar time frame
is inappropriate when considered from the standpoint of public and private sectorroles.
Public support is not something that is worthwhile only if the success rate is high.
One problem that has been noted when evaluations are made by emphasizing
objectivity and a formulaic approach is that “challenging and risky project themes forwhich projections are difficult will garner low evaluation points, while project themeson the safe side that are more predictable will obtain high evaluation points.”[8]When public entities try to simply pursue numbers only, they can achieve their results
if they support projects that are not accompanied by novelty or innovation. Thiscannot be deemed the proper direction, however, if the intent of public funding – thatis, support for projects where private corporations alone would have difficulty bearing
the risks – is considered. Moreover, even if projects fail in the end, that may not be
considered a “failure” because the experience of the project can be utilized in otherprojects in the future[3].
Consequently, when working to improve the success rate, ensuring management- 16 -

that will continue to maintain quality and improve the success rate as a result
becomes an extremely vital issue. That is to say, management should be implemented
by positioning the satisfaction of these success factors as the necessary conditionalparameter for support. If satisfying all of these conditions is required when adopting
projects, the success rate can be expected to improve. Setting the required standards
unduly high when selecting projects at the start, on the other hand, could nip
promising technologies in the bud. Therefore, when selecting projects for support, if aproject can be expected to yield technologically notable results but does not meetthese requirements, it is necessary to address this issue as an aspect of progress
management once the project has been selected, through progress management
adequate to meet the requirements.

- 17 -

5. Conclusion

We extracted the following five conditions as success factors for R&D
implemented using public funds by a private sector firm as the main entity.
・The existence of R&D that preceded the project in question・The clear position of the R&D theme as part of the company’s medium-term

management plan and other efforts
・

A close cooperative relationship with operating divisions

・

A clear understanding of core customers

・The presence of a key researcher who continuously plays a key role as afull-time individual on the project
These quantitatively summarize the results of the questionnaire survey andinterviews, and are conceptually consistent with the qualitatively envisaged successfactors.
The selection of and focus on high-caliber projects is critical for the effective useof limited, valuable public funds. We believe this can be achieved by managing R&D
projects while taking the success factors described above into account.
Specifically these success factors must be incorporated explicitly into the selection
and progress management of projects targeted for support. That is, while selecting
projects that fulfill these factors, it is important to actively take up projects worthy of
public support even if they do not satisfy these parameters, based on recognition of
the success factors discussed in this paper. Then, executing management in a form
that gives sufficient consideration to the success factors and provides the necessaryorientation correction to ensure the success factors are met during the project
implementation phase, is an invaluable response.
- 18 -

< Reference Literature >[1] Matsui, K., “The ‘Success or Failure’ Fork in the Road for Venture Businesses,” Diamond, Inc.,
2004[2] Itoh, K., “Why do Projects Fail?,” Nikkei Business Publications, Inc., 2003
[3] Yamazaki, A., T. Fukano and M. Okada, “Study of the Setting of R&D Objectives,” The Journalof Science Policy and Research Management, Vol. 21, No. 2, 2006, pp. 194-201[4] Tsujimoto M. and K. Sakakibara, “Survey of Private Sector Companies Concerning
Government-related R&D Projects; Development of More Transparent and Fair R&D Evaluation
Procedures,” Japan Productivity Center for Socio-Economic Development, 2003, p. 145[5] Honda, N. and Y. Tsukamoto, An Analysis of Research and Development Project Success andFailure Factors, The Japan Society for Science Policy and Research Management, 18th Annual
Academic Conference Papers, 2003, pp. 465-468[6] NEDO, Public Solicitation Guidelines for “Industrial Technology Commercialization Grant
Projects”, 2004
[7] Ino, H., The Challenge to Achieve Project Success, Eiji Press Inc., 2003
[8] Yamanouchi T., “Greater Research and Development Efficiency and a New Viewpoint,”
Research and Development Management, December 1994 edition, Vol. 4, No. 12, 1994, p. 10- 19 -