They are first party 100% owned by SCEI but they do their own production work like Sugar&Rockets, Arc Entertainment, and Contrail do. Digital Polyphony was SCEJ\'s first inhouse team, Software Development Div #1. They are the Japanese equivalent to SCEE\'s Team Soho (NBA Shootout \'97, Porsche Challenge, Rapid Racer, This is Football, The Getaway).
Most of Sony\'s teams are not externally known by name. For example, ICO was done by SCEI Product Development Dept #3.
edit: Also, Kazunori\'s group did some of the earliest PSX 3D demos and libraries that impressed Namco so much that they commited to porting Ridge Racer and designing a polygonal fighter based on System 11 (Tekken).