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Innovation and Entrepreneurship in Japan: Why Japan (Still) Matters for Global Competition
Working Paper

Through the 1980s, Japan was significant in global competition largely by shaping global technological trajectories, transforming major global industries, and contributing to fundamental innovations in industrial production processes, creating enough wealth along the way to propel Japan to the world’s second largest economy. After the economic bubble burst in the early 1990s, however, other places such as Silicon Valley in the United States, moved to the forefront of transforming technology, industries, and production, creating vast wealth along the way. While Japan’s role in global competition seemingly became largely irrelevant from the 1990s onward, careful analyses reveal that Japan was in fact transforming quietly and gradually, but significantly. In a pattern of “syncretism,” Japan’s economic transformation was characterized by the coexistence of new, traditional, and hybrid forms of strategy and organization. This paper examines core areas of the “new” and emerging “hybrid” areas — the startup ecosystem and the efforts of select large firms to harness new forms of innovation from outside their corporate borders. Japan’s startup ecosystem, though still small compared to Silicon Valley, as is everywhere else, has dramatically transformed over the past twenty years through a combination of regulatory shifts, corporate transformations, and technological breakthroughs that have opened up vast new opportunities. Some large corporations such as Komatsu, Honda, Toyota, and Yamaha are undertaking innovative efforts of sorts unseen in Japan’s recent history to harness Silicon Valley and other startup ecosystems into their core business areas.

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