Citizen / non-profit sector fulfilling "seedbed function" of new industry - Input resourcesof regional innovation clusters and the creation process of new industries Masashi Imase (Associate Professor, Kyoto College of Economics, Junior college)
Keyword： regional innovation cluster, citizen / non-profit sector (NPO, NGO, volunteer), seedbed function,
regional resources, new industry, market mechanism, regional problem
Abstract
The citizen / nonprofit sector has the function as"economic entity" together with "public interest
entity", and has been creating new business in the area.
In the region with serious problems, innovation iseasy to create and new businesses are being created.
Activation of local contribution activities by
citizen / non-profit sectors and "businessization"
will make local needs visible.
In the fields of products and services where market
mechanisms were hard to work until then, companies
also started to do business, and new product andservice fields will mature. Through such processes,
new markets and industries are created. In the region,
the citizen / non-profit sector fulfills the "seedbed
function" of a new industry.
In this paper, the author report case studies of IT
business (internet related business) created bycitizen / nonprofit sector. Also report the estimateof economic scale and ripple effect of civic /non-profit sectors. Then, as a role played by the
citizen / nonprofit sector, the author will clarify"input resources" of regional innovation clusters andthe creation process of new industries.

sector have been active. In an effort to solve social
problems in the region, citizen / nonprofit sectorsthat are working to supply against such "unsatisfied
demand" have increased.
The citizen / nonprofit sector has the function as"economic entity" as well as the function as "public
interest entity". Citizen / nonprofit sectors such asprivate non-profit organizations and volunteer groups
have high public benefit / non-profit, pioneering anddo social experimental activities. The citizen /nonprofit sector is divided into two major types ofactivities in the process of activity development. One
type of activity is an organization that continues toact as a grassroots type or volunteer type "citizen
public benefit organization." Another type ofactivity is an organization that develops like abusiness as the organization and activities expand.
It is an organization that "businessizes" nonprofit
activities and volunteer activities.
1-2. Creation of new industries by citizen / nonprofit
sectorIn the region, citizen / nonprofit sectors have done
civic public interest activities that solve social
problems and revitalize the community in various ways.
These civil public interest activities will bebusinessized as "community business". Citizen /nonprofit sectors that supply goods and services
corresponding to "unsatisfied demand" began to appear.
Thereafter, general corporations also began to do suchnew business, imitating the business of the citizen/ nonprofit sector. As they spread, they grew as new
industries and began to form new markets.
As a case example of a new industry created by suchcitizen / nonprofit sector, there are the following
businesses.
(1)IT business (Internet related business) that
supports the introduction of personal computers and theInternet (2)Long-term care services for the elderly anddisabled (3)Welfare · nursing-related business suchas wheelchair and nursing care bed (4)Environmental
business promoting renewable energy such as solar power
generation and wind power generation (5)Educational
support business for non-attending children

1. "Businessization" of citizen / non-profit sectors
and creation of new industries by that
1-1. The seriousness of regional problems and"businessization" of citizen / non-profit sectors
In Japan, since the 1980s, potential demand for
activities such as welfare, nursing care, childrearing support, environmental conservation,
informationization support, etc. became manifest asa social problem in the region. However, there was notmuch effort to supply so as to satisfy such demand.
Because market mechanisms are hard to work, there havebeen few companies to commercialize. Despite being afield of high public nature and non-profit,
administrative agencies have not made much policy
because of low recognition of necessity and difficultyof handling.
Under such circumstances, since around 1990, thesocial and economic environment in the region changed
variously, and activities of the citizen / nonprofit-1-

In this paper, as one of them, we will report on the
results of the survey and analysis on the cases in the
Kansai region where the citizen / nonprofit sector
created the IT business (Internet related business)and created the opportunity to create a new industry.

Osaka Conference" held in November 1995, theexperiences, technologies, know-how, human networks,etc. of the citizen / nonprofit sector accumulated
through activities of earthquake disaster support andinformation conversion support, It was utilized in the
management of the meeting.
Indeed, the activities of the civic / non-profit
sectors for earthquake disaster support andinformation conversion support became one social
experiment. That created the foundation for a new IT
business (Internet related business) that supports
the introduction of personal computers and theInternet. That fulfilled the "seedbed function" thatcreates the IT industry, and created the new market.
If the citizen / non-profit sector did not have an
active part in the Great Hanshin-Awaji Earthquake, thespread of the Internet in Japan would have been delayed
for many years.

2. ＜Case Study＞ Citizen / Nonprofit Sector Creating
IT Business (Internet related business)
2-1. "Businessization" of the Internet created by NPO
activities
At the time of the Great Hanshin-Awaji Earthquake inJanuary 1995, the Internet which was not used at allin Japan was used for the earthquake support
activities of the citizen / nonprofit sector. As aresult, the method of utilizing the Internet and its
usefulness became clear, and the Internet spread
rapidly afterwards.
It has been demonstrated that the Internet canfunction as "communication means" in emergency
situations and "means for sending and receiving
information" and as a new activity tool for private
nonprofit organizations (NPOs / NGOs). It showed
possibility to dramatically increase NPO / NGO's
activity ability by "informationization". It also
showed that human networks spontaneously born on theInternet function organically. Regarding the Internet,
the citizen / nonprofit sector has shown thepossibility and direction afterwards.
In the industrial world, there were hardly any
companies that introduced the Internet at that timein Japan. Nobody knew about the application andutilization of Internet technology and functions tobusiness. Under such circumstances, the Internet was
utilized for support activities by citizen /non-profit sectors in the Great Hanshin-Awaji
Earthquake. By doing so, it was first empiricallyevident. "Which technology and function can be used","Which application can be used", "How to use it", "Howuseful is it", and so on.

3. Estimation of economic scale and ripple effect of
citizen / non-profit sector as economic entity
3-1. Development of "NPO / NGO built-in type
input-output table"
In 2000-2001, the author estimated the economic scale(production amount in the whole country and the Kansai
region) and the economic ripple effect of the private
non-profit organization (NPO / NGO) of the citizen /non-profit sector. The NPO /NGO covered “specified
nonprofit corporations” and “association without
rights” and “volunteer organizations”. No
statistical data on NPO / NGO activities existed sofar. Estimating it was an unprecedented attempt. Casesfrom around the world were not helpful. It was not easy
to develop a quantitative estimation method (model).
The author has developed a unique estimation method(model) utilizing the "Input-Output Tables (IOTs)"
and the financial statements of NPOs / NGOs. In theindustrial sector of the "Input-Output Table", theauthor was conceived to newly incorporate the NPO/NGO
sector which had never been before. The author
independently developed an NPO / NGO built-in modelof "input-output table" which newly incorporates"input (vertical)" and "output (horizontal)" as NPO/ NGO sector. The author estimated the economic ripple
effect of NPO by using this "NPO / NGO built-in type
input-output table".

2-2. Citizen / non-profit sector that fulfilled"seedbed function" of IT business (Internet
related business)
After that, the use of the Internet in support
activities of the citizen / nonprofit sector in the
Great Hanshin-Awaji Earthquake became the basis for
its dissemination. In addition, the release of
Microsoft's Windows 95 has also brought about asynergistic effect, and the use of the Internet has
also spread rapidly to enterprises and administration.
At the "Asia-Pacific Economic Cooperation (APEC)

3-2. Estimation of economic scale and ripple effectof NPO activities utilizing "input-output table"- Kansai region (Kobe · Osaka etc.) In 2000, the author first estimated the NPO /NGO2

activity in the Kansai region such as Kobe, Osaka. The
economic scale (production amount) of NPO /NGO
activities in the Kansai region was estimated to beabout 150 billion yen.
The magnitude of the production ripple effect of NPO
activities given to all industries in the Kansai
region was estimated to be 1.77 times. The figure showsthat the production ripple effect is 1.77 times in the
Kansai region due to the occurrence of one unit of
NPO/NGO sector demand. It was 0.3 point larger than
the average value of all industries 1.47 times.

NPOs as subjects of economic and industrial policy,
and began to address support policies. It also served
as a basis for revising the "Act on Promotion ofSpecified Non-profit Activities" and establishing apreferential tax system.
4. Citizen · Non-profit Sector as Regional Innovation
Cluster
4-1. Regional Innovation and New Industry Creation
In the region, various management resources andregional resources are necessary to create innovation,
create new business, and create new industries. With
demand becoming obvious in the region, companies
supply products and services, and new businesses are
created. However, even if there is a potential demand,companies will not supply products and services unlessa relationship between demand and supply isestablished.
Even if there are management resources and regional
resources, companies can not develop new business
unless market mechanisms work. In other words, in theregion, innovation is created, potential demand isfound, it becomes obvious, and the market mechanism
works. On top of that, companies have management
resources and regional resources, utilize them,
supply products and services, and create new
businesses.
Global innovation is triggered by regional innovation.
The needs of products and services that people demandin the region will become the needs of products andservices that people around the world want. Global
business and global markets are born first from local
businesses and regional markets. Products andservices are created to meet the needs of people insome areas or to solve social and economic problems
somewhere in the area. In some cases, they spread allover the world.

3-3. Estimation of economic scale and ripple effectof NPO activities utilizing "input-output table"- Nationwide In 2001, the author estimated about NPO /NGO
activities nationwide. The author conductedcomparative verification of production scale andtransaction type characteristics between NPO / NGO
sector and each industry sector. By doing so, theauthor tried to simulate the future economic ripple
effects of NPO /NGO activities.
As a result of the estimation, the economic scale(domestic production amount) of NPO activities
nationwide was estimated to be 694.1 billion yen on
the basis of 2000. By the way, the economic scale ofthe motorcycle industry was 686.8 billion yen, theeconomic scale of NPO activities was beyond that. This
amounted to 0.08% of the total production amount of
all industries.
In addition, as a result of trying simulation undera certain scenario, we estimated the economic scaleof NPO /NGO 10 years later. Due to the expansion ofdomestic final demand, it was estimated to expand to
1.7844 trillion yen as of 2010.
3-4. Support of social experimental projects byadministrative agencies
Estimates based on these NPO / NPO financial
statements and "NPO / NGO built-in type input-output
table" were completely new experimental attempts. The
success of this quantitative estimate proved that theeconomic scale and economic ripple effect of NPO/NGO
activities are not small. Until then, in general,
there were a lot of opinions that "private non-profit
organization (NPO / NGO) activities are done withvolunteers and hobbies, not related to the economy andno economic effect".
However, this estimate showed that there is arationale for the economic role of NPOs. The country(Ministry of Economy, Trade and Industry) positioned

4-2. "Input resources" of regional innovation
clusters and the creation process of new
industries- Citizen / non-profit sector
fulfilling "seedbed function" of new industry Based on examples such as IT business (Internet
related business), what kind of regional resources arebeing introduced into the region by regionalinnovation clusters? The author clarified the input
resources and arranged the process by which new
business and industry are created. It also summarizes
the role that the citizen / nonprofit sector
contributes there.

34-2-1. Revealing social and economic problems in theregion - Factors of regional innovation creation There are various social or economic problems in theregion. Regional innovation is sought to solve
regional problems, and it is created by the needs ofresidents, consumers, businesses, etc. who aremembers of the region.

citizen / nonprofit sector by administrative agencies
Administrative bodies develop various support
policies for social experimental projects for solving
regional problems by citizen / nonprofit sector. For
example, it is the following support policy.
(1)Provide subsidies from administrative agencies toprivate nonprofit organizations (NPOs / NGOs) andothers. (2)Outsourcing of administrative services to
NPOs /NGOs. (3)Development of collaborative project
between NPO and administrative agency.

4-2-2. Citizen / nonprofit sector activities to solve
regional problems - Revealing latent demand The citizen / non-profit sector is the one that finds
potential demand, become it obvious, and makes market
mechanism work. Citizen / non-profit sectors are
private nonprofit organizations (NPO / NGO),
volunteer organizations, etc. who develop businessand activities to solve regional problems. They havehigh public benefit / non-profitability, pioneeringand do social experimental activities.

4-2-7. Companies entering new businesses and creating
new industries
Through such processes, companies will enter thebusiness field. By increasing the number of companies
engaged in the business, new industries and newmarkets will be created.
5. Conclusion
In this way, the citizen / nonprofit sector has thefunction as "economic entity" together with "publicbenefit agent", and has created new business in theregion. Social experimental projects by citizen /non-profit sectors are initially very small as
individual projects. However, they have the power tocreate new business models in the region. They possess
the possibility of creating new industries and markets
by accumulating and collaborating many in the region.
In other words, due to the activation of citizen /non-profit sector activities and "businessization",
the supply-demand relationship of potential products
and services becomes obvious and expands. Along with
that, in the products and services fields where market
mechanisms were hard to work until then, an
environment where companies can enter easily iscreated. And as companies start to do business one
after another, such new products and service fields
will mature. Through such processes, new markets andindustries are created.
In this way, the citizen / non-profit sector has a very
high pioneering ability and can be said to be a"venture" that exceeds the company as an entrepreneur.
In the region, the citizen / non-profit sector
fulfills the "seedbed function" of a new industry.

4-2-3. Innovation by social experimental activities
of citizen / non-profit sectors
The citizen / nonprofit sector has the function as"economic entity" as well as the function as "public
interest entity". Citizen / nonprofit sectors create
innovation and develop businesses and activities in
the region against potential demand that market
mechanism does not work. The citizen / non-profit
sector develops business and activities pioneeringly
and socially experimentally, taking advantage of
non-profit characteristics and volunteer power.
4-2-4. Progress of "businessization" of citizen /non-profit sectors and creation of market mechanism
As its business and activities expand, theorganization expands, "businessization" progresses.
Potential demand that the market mechanism did notwork become obvious, and supply to it will expand.
4-2-5. Collaboration between companies and citizen /non-profit sectors
Citizen / non-profit sectors conduct various
pioneering activities and projects to solve regional
problems. On the other hand, companies will cooperateas part of social contribution activities and social
responsibility. In addition, there are cases wheresuch a business can also benefit the company'scommercial business (main business). In such a case,the company develops social experimental business incollaboration with the citizen / nonprofit sector.

References
Masashi Imase (June 14 2018), As an element of theregional innovation cluster, the citizen / non-profit
sector that fulfill the “seedbed function” of the
new industry, 21st Uddevalla Symposium 2018, Luleå

4-2-6. Support of social experimental projects by

University of Technology, 971 87 Luleå, Sweden

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