The challenges and issues with nanotechnology at the product development stage

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1.Introduction
Nanotechnology1is expected to trigger
explosivegrowthinmanynewindustriesin
Japan. As a trigger for new industry, there are
three broad reasons as to why nanotechnology
receivessuch great attention in Japan. First,
nanotechnology is a fundamental technology that
willhaveagreatimpactonindustriesandsociety
in the next generation. For this reason, over 30
countries have already implemented
nanotechnology-related R&D programs.
GovernmentR&D fundings have dramatically
increasedinmanycountriesover the recent
years.Forexample,intheU.S.,theexpenditurein
R&D was 102.4 million dollars in 1997 and
increased to 293 million dollars by 2000. Also, in
that same time period, nanotechnology-related
expenditureintheEUincreased from 114.4
million dollars to 210.5 million dollars and from
0.935millionto 189.9 million dollars in Japan
（OECD,2003:44
―
45）.Secondly,Japanrecognizes
theexistence of an international comparative
advantage in basic research sectors. In Japan, a
numberof scientificpapersdealing withthetopic
ofnanotechnologyrankssecondintheworld,only
afterthe U.S.（OECD, 2003 : 44）. Finally, the
gainingofregionaleconomicpowerbyEast-Asian
countries such as China and Korea makes
Japanesemanufacturingsectorhavetoevolveand
developproductioncapabilitiesthatstrongly
65
TheChallengesandIssueswithNanotechnology
attheProductDevelopmentStage
TetsuyaKirihata（AssociateProf.,KyotoUniversity,andVisitingAssociateProf.,
NaraInstituteofScienceandTechnology）
〈日本知財学会誌〉Vol.5No.2 ― 2008:65
―
71
Many experts predict nanotechnology-related businesses to become one of the leading new industries in Japan. There
are several reasons as to why nanotechnology is attracting such attention in Japan. For one, nanotechnology is a
fundamental technology and as such has a big influence on the existing industry and society. Furthermore, in the fields
of fundamental nanotechnology research, Japan is seen as having an international comparative advantage.
In this paper, to examine the challenges and issues of nanotechnology commercialization in detail, I classify the
process for commercialization into three stages : basic research stage, product development stage and commercialization
stage. The challenges and issues at the product development stage of nanotechnology are discussed based on a
questionnaire survey with nanotechnology businesses. This paper reveals that “funding”, “external collaboration”, and
“extracting visions and conceptualizing market needs” are the main challenges at the product development stage of
nanotechnology business.
Finally, I conclude the paper with policy recommendations regarding the commercialization of nanotechnology,
especially in terms of “funding” and “external collaboration”.
■KEYWORDS Nanotechnology, Commercialization, Product Development Stage, Financing,
External Cooperation, Extracting Visions, Conceptualizing Market Needs
ISSN1349
―
421X
蘓2008 IPAJ Allrightsreserved.
〈自由論題〉
＊本論文は，日本知財学会誌編集委員会による複数の匿名レフェリーの査読
を経たものである．

enhance its value creation. Japan once had the
greatestmarket share in the worldfor many
productssuch as TVs and VCRs, however, these
advantages have recently shifted to the East-
Asian countries. As a consequence, the
development of value added products in which
nanotechnologyisutilizedisimportant in helping
Japan’smanufacturersreceivegreater recognition
andoutdistanceotherEast-Asiancountries.
2.Classificationofthe
CommercializationProcess
Although there are a number of ways to look
into the commercialization process, this paper
classifies it into three stages : basic research,
product development, and commercialization. In
the basic research stage, basic science is turned
intotechnologiessymbolizedbypatentsandother
intellectual properties.2In the product
developmentstage,prospectivetechnologies
derivedfrombasicresearcharefurtherdeveloped
and a product prototype is produced. Finally, in
thecommercializationstage,thesaleofthenewly-
developed product is expanded so as to create a
sustainablenewmarket.3Therearevarious
difficulties that must be overcome in
commercializing nanotechnology, as is the case
withallnewtechnology.
Thispaperfocusesontheproductdevelopment
stage. With regard to this phase, Day and
Schoemaker（2000）discussed the significance in
hightechnologycommercialization.Dayand
Schoemaker（2000 : 52）remarked that the
product development stage provides the biggest
challenge for management and went on to state
thatthesuccessoftheproductdevelopmentstage
requires continuing support from senior
management,creationofnewventuresfrom
ongoing business activities, organizational and
strategicflexibility, as well as willingness to take
risksandlearnfrom experience. Inoue, Nihei and
Hunabiki（2003）argues that the Japanese
manufacturingindustry experiences a severe
difficulties in the product development stage and
raisesseveralcausalfactorsthathavebeen
recognizedbythecompanies in which they
researched.Theseincludeissueswith “extracting
visions and conceptualizing market needs,”
“humanresources,”and“Intra-organizational
linkage”.Based on an interview survey of 20
companies in Switzerland which have introduced
nanotechnology to their products, Bucher,
Birkenmeier, Brodbeck, and Escher（2003 : 162）
argued that to create success in nanotechnology
product development stage, the assessment and
repeated introduction of new technology,
participation of top management, and
implementation of an interdisciplinary team for
theprojectareessentialtosuccess.
3.Methodology
For this paper, I conducted a questionnaire
survey regarding challenges and issues in the
product development stage of nanotechnology
commercialization, mainly with those who
participatedintheOsakaScienceandTechnology
Center’s Kansai Nanotechnology Promotion
Conference. The questionnaires were sent at the
beginning of December 2003 and collected at the
beginning of January 2004. A total of 329
questionnairesweresentoutwith132valid
responses received. Among valid responses, 88
companiesindicatedthatthey havebeenworking
on nanotechnology commercialization. Regarding
thecompanytype,54werelisted companies
whereas 34 were unlisted companies. The
questions were identical to those conducted by
Inoueet al.（2003）, which were sent to 3,626
manufacturing listed companies（491 listed
companies responded）. This paper’s contribution
〈日本知財学会誌〉Vol.5No.2 ― 2008
66

is, as a consequent, a provision of comparative
research of challenges and issues at the product
development stage between nanotechnology and
thewholemanufacturingindustryinJapan.
4.Results
4.1.ThechallengesandIssuesattheProduct
DevelopmentStage
In reply to the question “How much difficulty
are you having in the production development
stage?”,50.0percentanswered“facingsome
difficulties”, 12.5 percent answered “facing a fair
numberof issuesandchallenges”, and5.7percent
answered “facing a significant number of
difficulties”.Theresults show that nearly 70
percentof companiesrevealedsomedifficulties in
theproductdevelopmentstage.
The survey further asked companies who face
some,a fairnumberof,ora significantnumberof
difficulties how they would classify the causes of
such difficulties. “Extracting visions and
conceptualizing market needs”was the highest
（58.3 percent）, followed by “funding”（41.7
percent）, “human resource”（35.0 percent）, and
“externalcollaboration（28.3percent）”. It is
remarkable that “funding”and “external
collaboration”arerecognized as one of the major
challenges. With regard to “funding”, the whole
manufacturing industry marked approximately
twice as high the percentage as the result by
Inoue et al.（2003）, and “external collaboration”
marked 3 times higher. When focusing only on
listed companies, “funding”and “external
collaboration”indicates approximately twice the
percentageof those by Inoue et al.（2003）. I will
laterdiscussabout “funding”and “external
collaboration”which are both peculiar to
nanotechnology business, and also about
“extracting visions and conceptualizing market
needs”which is recognized as the highest
challenge faced by nanotechnology-related
companies.
4.2.Funding
In response to the question, “Is R&D
expenditure, as a percentage of total investment,
higher for nanotechnology-based businesses than
other businesses?”, the total percentage of
companiesanswering “very high”or “slightly
high”was40percent,exceedingthoseanswering
“slightlylow”and“verylow”by10percent.There
is a tendency for the percentage of R&D
expenditures in nanotechnology-based businesses
toexceedthatinotherbusinesses.
Regardingthe source of capitalization for R&D
withnanotechnology, 62.5percentor themajority
ofthe respondents replied “funding from the
governmentor municipalities”, while “funding
from own businesses not directly connected to
nanotechnologybusinesses”camesecondwith56.8
percent, followed by “sales from the
nanotechnology business itself”at 31.8 percent.
TheChallengesandIssueswithNanotechnologyattheProductDevelopmentStage
67
EVC
FUN
HRE
ECN
CCE
IOL
MON
OTS
All
58.3
41.7
35.0
28.3
23.3
16.7
10.0
6.7
Listed
66.7
46.2
25.6
15.4
25.6
20.5
7.7
10.3
（2003）
65.0
22.0
46.0
9.0
30.0
37.0
10.0
6.0
Non-Listed
42.9
33.3
52.4
52.4
19.0
9.5
14.3
0.0
Nanotechnology Inoueetal.
Table1：Challenges of nanotechnology commer-
cialization at the product development
stage
Remarks：
1）Figures show percentage of respondents who responded to-
wardthechallengesof nanotechnology commercialization at the
productdevelopmentstage
2）Multipleanswersallowed
3）EVC＝Extracting visions and conceptualizing market needs,
FUN＝funding,HRE＝humanresource,ECN＝externalcollabora-
tion, CCE＝corporate culture, IOL＝Intra-organizational linkage,
MON＝motivation,OTS＝others

“Research expenditure from business partners”
and“revenuefrompatentandlicense sales”each
took 12.5 percent. It seems that the
nanotechnology business itself is unable to cover
the cost of R&D and commercialization. A high
expectation of subvention from the government
andlocal municipalities is characterized. This
tendencyis probably due to the expensive
equipment needed for nanotechnology
commercialization.
4.3.ExternalCollaboration
This section discusses collaboration with other
industries and collaboration with universities and
institutionsregarding“externalcollaboration”.
4.3.1.CollaborationwithOtherIndustries
Regarding relationship with other industries,
four alternatives were given for respondents to
choose from, namely, “already have relationship”,
“making up relationship”, “not making up
relationship”, and “won’t have relationship”. More
than half of the companies replied “already have
relationship”or “making up relationship”. Aside
fromthis,four choiceswereprovidedin response
tothenecessityof collaboration with other
industries which were “very necessary”, “fairly
necessary”, “not very necessary”, and “not at all
necessary”.Almost80percentreplied“very
necessary”or“fairly necessary”. Comparedtothe
resultsbyInoueetal.（2003）,itshowsthat
companies engaging in nanotechnology
commercialization are more enthusiastic in
collaboratingwithotherindustries.
4.3.2.CollaborationwithUniversitiesand
Institutions
More than 80 percent of the companies
answered “already have relationship”or “making
uprelationship”regardingrelationshipwith
universities and institutions. Also more than 80
percent responded “very necessary”or “fairly
necessary”regarding the necessity of
collaboration with universities and institutions.
Comparedto theresultsby Inoueetal.（2003）, it
showsthatcompaniesengaginginnanotechnology
commercialization are also more enthusiastic in
collaboratingwithuniversitiesandinstitutions.
4.4.ExtractingVisionsandConceptualizing
MarketNeeds
Extracting visions and conceptualizing market
needs are recognized as the most critical
challengesto nanotechnology business at the
productiondevelopmentstage. The following
sectionsdiscuss“top-down management”in
relation to extracting visions and “describing
marketneeds”inrelationtoconceptualizing
marketneeds.
〈日本知財学会誌〉Vol.5No.2 ― 2008
68
Relationship1）
Necessity2）
All
55.7
79.6
Listed
61.2
87.0
（2003）
36.0
69.0
Non-Listed
47.1
67.7
Nanotechnology Inoueetal.
Table2：Collaborationand thenecessity ofcollab-
orationwithotherindustries
Remarks：
1）Figuresshowpercentage of respondents who answeredal-
readyhaverelationshipormakinguprelationshipwithregard
totherelationshipwithotherindustries
2）Figuresshowpercentageofrespondentswhoansweredvery
necessaryorfairlynecessarywith regardtothe necessityof
collaborationwithotherindustries
Relationship1）
Necessity2）
All
83.0
87.5
Listed
87.0
90.8
（2003）
62.0
83.0
Non-Listed
76.5
82.4
Nanotechnology Inoueetal.
Table3：Collaboration and necessity of collabora-
tionwithuniversitiesandinstitutions
Remarks：
1）Figuresshowpercentage of respondents who answeredal-
readyhaverelationshipormakinguprelationshipwithregard
totherelationshipwithuniversitiesandinstitutions
2）Figuresshowpercentageofrespondentswhoansweredvery
necessaryorfairlynecessarywith regardtothe necessityof
collaborationwithuniversitiesandinstitutions

4.4.1.Top-downManagementandits
Necessity
Tothequestion“towhatextenttop-down
management are engaged in the product
developmentstage?”,14.8percentanswered“very
engaged”, 58 percent replied “engaged only with
company’s direction”, while 14.8 percent claimed
“not at all engaged”. On the other hand, to the
question “is top-down management needed for
innovative product development?”, more than 80
percent answered “verynecessary”or “fairly
necessary”.Theresultsfrom thisstudyregarding
both implementation and necessity of top-down
management.arealittlelowerthantheresultsby
Inoueetal.（2003）.
4.4.2.DescribingMarketNeedsandits
Necessity
Regarding the implementation of describing
marketneeds,respondentswere tochooseamong
five choices : “very described”, “fairly described”,
“fifty percent described”, “not very described”,
and“notatalldescribed”.Tothequestion“doyou
describethemarketneedsclearlyand concretely
in writing or charting for your own company?”,
59.1 percent answered “very described”, ”fairly
described”and”fifty percentdescribed”.Onthe
otherhand,morethan90percentanswered“very
necessary”or “fairly necessary”regarding the
necessityofdescribing market needs. This
indicates that, regarding the implementation of
describing market needs, this survey reveals a
slightly higher result than that of Inoue et al.
（2003）.
5.SummaryandDiscussion
5.1.Summary
This paper reveals that major challenges with
nanotechnologyin theproductdevelopmentstage
are “funding”, “external collaboration”and
“extracting visions and conceptualizing market
needs”.
Withregardto“funding”, a high expectation of
subvention from the government and local
municipalities is the characteristic of
nanotechnologybusiness.Comparedtothesurvey
conductedbyInoueetal.（2003）,regarding
“external collaboration”, this research shows that
companies engaging in nanotechnology
commercialization are more enthusiastic in
collaborating with other industries, universities
andinstitutions. Also, concerning “extracting
visions and conceptualizing market needs”, the
implementationof“top-down management”is
lower but “describing market needs”is higher
than the result of Inoue et al.（2003）. The
companies that pursue nanotechnology
commercialization seem to emphasize the
development of products based on market needs
TheChallengesandIssueswithNanotechnologyattheProductDevelopmentStage
69
Implementation1）
Necessity2）
All
72.8
83.0
Listed
68.6
85.2
（2003）
81.0
90.0
Non-Listed
79.4
79.4
Nanotechnology Inoueetal.
Table4：Implementationandnecessityoftop-
downManagement
Remarks：
1）Figuresshowpercentageofrespondentswhoansweredve-
ry engagedandengaged only with companys directionre-
gardingtheimplementationoftop-downmanagement
2）Figuresshowpercentageofrespondentswhoansweredve-
ry necessaryorfairly necessaryregarding the necessity of
top-downmanagement
Implementation1）
Necessity2）
All
59.1
92.0
Listed
64.8
92.6
（2003）
30.0
90.0
Non-Listed
50.0
91.1
Nanotechnology Inoueetal.
Table5：Implementationandnecessity of describ-
ingthemarketneeds
Remarks：
1）Figuresshowpercentageofrespondentswhoansweredve-
rydescribed,fairly described, andfifty percent described
regardingtheimplementationofdescribingmarketneeds
2）Figuresshowpercentageofrespondentswhoansweredve-
ry necessaryorfairly necessaryregarding the necessity of
describingmarketneeds

throughout the R&D phase. However, when it
comes to getting top management involved in
extracting visions for commercialization, it seems
thatnanotechnology businesses putlessemphasis
onthisissuethanthe overall manufacturing
business.
5.2.Discussion
Within Japan, the expectation will continue to
grow in nanotechnology commercialization. For
this reason, it is important to identify the
challenges and issues within the nanotechnology-
based businesses, not only on the product
developmentstage, butalsoonthebasic research
andcommercialization stage. Aside from this,
comparative researches in high technology
between nanotechnology, IT, biotechnology, and
thelikesareessential.
Based on the additional interviews with
companies which work on nanotechnology
commercialization, I would like to conclude this
paper by discussing the public support required
anditseffectsonthe direction of nanotechnology
commercialization especially regarding the
“funding”and“externalcollaboration”.
5.2.1.PublicSupportfor“Funding”
Inthe U.S.,thefundingissueis recognizedasa
high-priority issue for the commercialization of
new technology. For this reason, in the 1980s, to
eliminate the funding gap in the basic research
stage,R&Dassistancesystems targeting medium
and small companies such as Advanced
Technology Program, and Small Business
Innovation Research were introduced in the U.S.
However, it has been observed that “companies
thatdo receivepublicfundingforR&Dshouldbe
allowedtoreroutethemoney to promising
businessotherthanthatwhichwasinitially
funded（Lerner,2000 : 91）”. Companiesmust
respondflexiblyasbusinessenvironmental
changesovertime.Itisarguedthatthereisalack
offlexibilitywithpublicfunding.Thesamelackof
flexibility of public funding found in the U.S. is
also found in Japan according to the interviews
conducted.Theimprovementof flexibility in
public fundings will be a high-priority policy in
fosteringnanotechnology-relatedbusinesses.
In the interviews concerning nanotechnology
venture,thereweremultipleresponsesexpressing
the desire for the improvement of partner
relations with venture capital firms that provide
investment funds. One president of a
nanotechnology venture said that “The cost of
truly innovative nanotechnology product
development will be over one billion yen.
However, venture capital firms in Japan have a
shortsightedbusinessphilosophy. They are
unwilling to provide the funds on a billion yen
scale”.Inthiscase, the public sector, namely, the
nationalgovernment andlocalmunicipalitiesneed
toestablishpublicpoliciestoassistventurecapital
filmsthatcansupportnanotechnologyventures.
5.2.2.PublicSupportfor“External
Collaboration”
Anexecutiveofananotechnology venture
claimed that “For product development in
nanotechnology, it is important to present
preproductionprototypes to other companies
besides existing partners. Dramatic and
unexpectednewapplicationsmay be found
through this process”. It can be stated that an
interdisciplinary approach can be an advantage
and collaboration with different fields and
businesses are essential for innovative product
development. Within the public sector, the
encouragementandprioritizationofR&Dprojects
withparticipationfrom many differentbusinesses
are required. Policies that prioritize the use of
public research facilities must be established to
promote projects that contribute to partnerships
〈日本知財学会誌〉Vol.5No.2 ― 2008
70

acrossvariousfieldsandbusinesses.
Acknowledgements
The questionnaire survey for this paper was entrusted to Osaka
Scienceand TechnologyCenter’s KansaiNanotechnology
Promotion Conference.I would like to express my g ratitude to all
thoseinvolvedattheCenterandConference.
Note
1OECD（2003）defines nanotechnology as a range of new
technologies that aim to manipulate individual atoms and
molecules in order to create new products and processes :
computersthatfit ontheheadof apinor structuresthatare
built from the bottom up, atom-by-atom. This paper follows
OECD’sdefinitionofnanotechnology.RichardP. Feynmanand
Eric K. Drexler are representatives of the scientists who
originallysuggested the possibilities of nanotechnology.
Feynman, who is known as the father of nanotechnology,
definedits potential byimplying the possibility ofwriting the
entirecontentsofalarge encyclopediaonthetipofa needle.
He also promoted the idea of finding a way to physically
synthesizechemical substancesthroughthe useof
nanotechnology. These ideas were presented in his lecture
entitled“There’s Plenty ofRoom at theBottom”at the
American Institute of Physics in 1959. Also, Drexler, in his
papercalled “Enginesof Creation”proposedthe possibilityof
creating nanomachines by controlling atoms and molecules
andmanipulatingtheminaprecisecontrolledmanner.
2With regard to the basic research stage, Tamada, Kodama,
andGenba（2003） conductedseveral surveys covering
Japanese patents in four fields : biotechnology,
nanotechnology,IT, and environmentaltechnology. The
resultsindicated thatbiotechnology has thegreatest
science linkage to patents, while nanotechnology, IT, and
environmentaltechnologyfollowinconsequentorder.
3Moore（1991）indicatedthatthe difficultiesinthe
commercialization stage, in which Moore called Chasm, can
occur when high-technology based products are brought to
market. Moore（1991 : 134
―
135）argued that focusing
exclusively on the products quality is a major cause of the
difficultyinthecommercializationstage.
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71