Governmental Policies toward Forming an Innovation
Ecosystem
Seira Suzuki

Deputy Director for Innovation Policy
Secretariat of Science, Technology and Innovation Policy, Cabinet Office

1. Introduction
A law revising parts of the Basic Act on Science andTechnology (enacted in 1995) was established during
the 201st session of the National Diet in 2020, and it
was changed to the “Basic Act on Science, Technologyand Innovation.” In addition, the “Science, Technologyand Innovation Basic Plan”*1 was created for the fiveyear period starting in FY2021, based on the Science,
Technology and Innovation Basic Law in March

2021 (Figure 1). This article will provide a deeper
understanding of policies related to forming an innovation
ecosystem in the next five years, as indicated in theScience, Technology and Innovation Basic Plan.
2. Positioning within the Science, Technologyand Innovation Basic Plan
Based on the addition of “Innovation” in the revisions
described above, the Science, Technology and Innovation■ Figure 1: Science, Technology and Innovation Basic Plan overview (March 2021 Cabinet decision)＊1 Science, Technology and Innovation Basic Plan (March 2021 Cabinet decision) https://www8.cao.go.jp/cstp/kihonkeikaku/index6.html

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1Basic Plan set in March 2021 goes beyond discussion ofresearch and development, stipulating creation of societal
value and solutions to societal issues by creating andusing “Comprehensive Knowledge” that integrates thenatural sciences with the humanities and social sciences.
While the concept of creation implied by “innovation” hasconventionally tended to be taken as behaviors directly
related to product development or production activities byenterprises, in the Science, Technology and Innovation
Basic Plan, it is understood as a broader subject,creating larger changes in the economy or society andencompassing creation of new value and reform of society
itself. This also provides background for the changes to theBasic Act on Science, Technology and Innovation and theadditions regarding creation of innovation.
Based on the above, the Science, Technology andInnovation Basic Plan includes a policy to “Forman innovation ecosystem that will be a foundation for
creating new industries that co-create value,” which thegovernment will work on in the next five years, withthe goal reforming society by creating new value andsolving societal issues. Also as background to this is thetrend in which startup enterprises typified by the GAFA
companies, grow very quickly in a short time, overcoming
larger enterprises to become huge IT companies andreforming the structure of industry and even lifestyles.
Creating innovation is an important driving force increating startups, and advanced nations are working
strategically to form startup ecosystems to support creationof innovative startups. It is important for Japan to also
form a world-class startup ecosystem. It is also importantto form positive cycles of innovation driven by societal
need, creating businesses from the R&D results of startups
responding to societal need and creating products andservices that become popular around the world. OpenInnovation is also necessary for existing large enterprises
to collaborate with startups that are utilizing their mobility
to face challenges, and universities and R&D companies■ Figure 2: Basic policies for startup ecosystem formation (Excerpt from “A Startup Ecosystem Support
Package: A new path to growth and overcoming COVID-19,” July 2020 Cabinet, MEXT, METI)＊2	Global base cities: Tokyo area (Tokyo, Kawasaki, Yokohama, Wakou, Tsukuba, etc.), Nagoya and Hamamatsu, Kansai area (Osaka, Kyoto, Kobe), Fukuoka. Driver base cities: Hokkaido area(Sapporo, etc.) Sendai, Hiroshima, Kita-Kyushu.

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■ Figure 3: Startup ecosystem base formation (Excerpt from “Beyond Limits. Unlock Our
Potential: Strategies for forming bases for a world-class startup ecosystem,”June 2019)that have seed technologies. The Science, Technology andInnovation Basic Plan requires creation of an innovation
ecosystem as described above, closely-connected and interlinked to produce innovation.
3. Forming a startup ecosystem
To form a world-class startup ecosystem in Japan,eight “startup” cities (four as Global Startup Cities andfour as Startup cities) were selected in July 2020*2, basedon “Beyond Limits. Unlock Our Potential: Strategies forforming the base of a world-class startup ecosystem” (June2016)(Figure2). In July 2020, the Cabinet, the Ministryof Education, Culture, Sports, Science and Technology
and the Ministry of Economy, Trade and Industry also
compiled, “A Startup Ecosystem Support Package: A newpath to growth and overcoming COVID-19,” to build
startup support systems for a focused support period of

three years starting in 2020 (Figure 3).
For example, in its program to expand investment
in public and private R&D (PRISM), the Cabinet
established a new project to promote formation of a startup
ecosystem in FY2020, nurtured startups in the base cities
through lectures, individual consultation and networkbuilding, and started an Acceleration Program to support
overseas expansion and other initiatives. In FY2021, thenumber of enterprises being supported was expanded,field-specific courses were started so that programs
suited to the needs of participating companies could beoffered, and other support was provided for activities
such as expanding domestic startups overseas, conceiving
business plans to attract investment from overseas investors
and enterprises, matching specialists with startups andpromotional activities*3.

＊3	F Y2020 Supplementary budget Program to Expand Investment in Public and Private R&D (PRISM), Policy to enact the startup ecosystem formation project https://www8.cao.go.jp/cstp/gaiyo/
sip/210210/siryo3.pdf

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34. Forming positive cycles of innovation driven
by the needs of societyBased on the concept of innovation described above,
as something that creates new value and brings reform tosociety itself, producing solutions to problems considering
the needs of cities, regional areas and society is an
important driving force for innovation. The United States
has a Small Business Innovation Research (SBIR) systemthat suggests topics based on the needs of the country,
supports a wide range of R&D from the earliest stages,
and supports startups and other companies through amulti-stage selection process. With the USA SBIR,
government ministries have a duty to spend a fixed ratioof their R&D budgets on initiatives such as startups,
operating on uniform rules across ministries, and thishas produced many enterprises, such as Qualcomm andiRobot, that have brought innovation to industry andcontinued to grow.
Japan has also operated our own version of an SBIR
since 1999, the Small and Medium Enterprise TechnicalInnovation System, operated mainly by the METI
■ Figure 4: Japanese SBIR4New Breeze Spring 2022

Small and Medium Enterprise Agency. However, someshortcomings have been identified, such as not being
strategic in fields of expenditure, insufficient support
for earlier stages of R&D such as feasibility studies andproofs of concept, and the lack of consistent rules for
multi-stage selection and evaluation.
In 2020, the Law on the Revitalization of Science,
Technology and Innovation Creation was reviewed andrevised to strengthen initiatives spanning ministries andagencies and overseen by the Cabinet Office, to makethe SBIR in Japan more effective (enacted April 1, 2021).
Based on the law, the Cabinet issued “2021 Policy onExpenditure Targets for Funding to Support Specific
New Technologies,” and “Guidelines for DeliveringDesignated Support Funding,” in June 2021. Throughthis, a fixed ratio of specific R&D budgets (Specifiednew technology subsidies, etc.) in each ministry would
be allocated to initiatives such as startups, and a target
expenditure of 53.7B yen was established. Further, asa consistent set of rules for offering and operating thedesignated support funds from each ministry, concreteR&D topics were presented based on policy requirements,
guidelines were given for public procurement andperformance in order to implement results in society
using a voluntary agreement system, and plans were madeto build an integrated support system spanning R&D
through government procurement and use by consumers,
with cooperation among ministries and agencies andcoordination by the Cabinet Office (Figure 4). These
initiatives are building a system that will stimulate newchallenges for startups, which are responsible for muchinnovation.
5. Casting off policies of closed innovation andpromoting Open Innovation
Implementing results of R&D and other efforts insociety quickly and applying them as solutions to societal
issues or to create new value is a major issue recently,and Open Innovation is attracting attention as a way to
overcome organizational barriers, combine knowledge,
technology and management resources, and to promote
new initiatives. Businesses are also beginning to moveaway from policies of closed innovation and towardcollaboration with startups that are using their mobility
to take up challenges in various fields, and universities andnational R&D agencies that possess seed technologies.
To further promote Open Innovation in Japan, the“Japan Open Innovation Prize,” has been held each year
starting in 2018, to give recognition to initiatives thatshow strong leadership and originality, and promise to
be role models for the future. This is the fourth yearthat prizes have been awarded*4, and a variety ofparticipants have been honored, including startups,
businesses, universities and local governments. It is hopedthat this recognition will help to overcome the barriersof organizations, combining knowledge, technology,
and management resources to drive new initiatives andpromote advanced projects, thereby accelerating thepositive cycles of commercializing R&D results andcreating new added value through Open Innovation
among the various participants.

6. Conclusion
As discussed above, there is a need to form a startup
ecosystem and establish positive cycles of innovation
driven by the needs of society, and also to promote
movement away from policies of closed innovation toward
Open Innovation, based on the Science, Technology andInnovation Basic Plan. These objectives are closely related
to realizing an innovation ecosystem, to creating new value
in COVID and post-COVID times, and to reforming
society to achieve “a society in which all citizens canbenefit from the creations of science, technology andinnovation,” as stipulated in the Science, Technology andInnovation Basic Law.

Cover Art

kyotomeishonouchi arashiyama manka(Full Blossom at Arashiyama on the Oi River)
Utagawa Hiroshige (1797~1858)
Collection of the Art Research Center (ARC)
Ritsumeikan University
Object number: arcBK06-0013_004＊4	https://www8.cao.go.jp/cstp/openinnovation/prize/index.html

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