Endogenous Development Models and Endogenous Development Models and Economic Gardening: A Case of an Economic Gardening: A Case of an

Entrepreneurial Farming Village in JapanEntrepreneurial Farming Village in Japan

Takashi YamamotoTakashi Yamamoto

Center for Entrepreneurship and Leadership Center for Entrepreneurship and Leadership Studies for Regional Economies (CELS)Studies for Regional Economies (CELS)

Akita International UniversityAkita International University

Y = F (K, L, E)

OutlineOutline

Comparing Endogenous Comparing Endogenous Development theories Development theories

Case: Ogata Village, JapanCase: Ogata Village, Japan HistoryHistory StatisticsStatistics

AnalysisAnalysis

Endogenous Development Theories - Endogenous Development Theories - West and EastWest and East ““Inside-out” instead of “Outside-in”Inside-out” instead of “Outside-in”

Emphasizing local initiativesEmphasizing local initiatives Local resources supplemented by outside Local resources supplemented by outside

resources and buyersresources and buyers Exercising Schumpeterian Exercising Schumpeterian

entrepreneurshipentrepreneurship WestWest

Economic growth as a primary goalEconomic growth as a primary goal Capital accumulation strategyCapital accumulation strategy

EastEast Sustainability of local economy as a goalSustainability of local economy as a goal Motivated “key persons” as change agentsMotivated “key persons” as change agents

Key PersonsKey Persons

Appeared in Japanese endogenous development Appeared in Japanese endogenous development literatureliterature

Attractive local leaders as change agentsAttractive local leaders as change agents Knowing both inside and outside of the regionKnowing both inside and outside of the region Keeping and developing network with outsideKeeping and developing network with outside Change agents seeing the region comparatively and Change agents seeing the region comparatively and

objectivelyobjectively Key persons in AkitaKey persons in Akita

““Outside-in”, who migrated into AkitaOutside-in”, who migrated into Akita Mr. Wakui in Ogata VillageMr. Wakui in Ogata Village

““U-turn”, who came back to AkitaU-turn”, who came back to Akita Mr. Ebinne and others in Neiger ProjectMr. Ebinne and others in Neiger Project

Characteristics Exogenous Approach Endogenous Approach (European and American)

Endogenous Approach (Japanese)

Source and nature of development impetus

Factors external to the local or regional economic and social system largely determine development, requiring mobility of capital and labor.

Critical change factors are seen as inherent in the local or regional economic and social system.

Motivated “key persons” function as change agents. Utilization of local resources including culture and custom is important for development

Structures

Bureaucratic top-down organizational structure as basis for production and support of economic activities.

Flexible organizational structures of local production and support

Flexible organizational structures of local production and support. Focus on networking and connection with upstream- and downstream-industries

Key values underlying initiatives

Dependency on large-scale enterprise and central government policies for initiatives and control of development

Endogenous entrepreneurship and innovation are key success factors for competitive advantage in global economy.

Endogenous entrepreneurship and innovation are key factors. Self-governance of the local community is essential.

Development strategy

Pursuit of growth through urban-based large-scale enterprise based on standardization and capital intensiveness.

Incentives for capital accumulation by local small firms. Small firms key to development, with emphasis on specialization and skill; tendency toward de-urbanization.

Reducing transaction costs for local small firms Collaboration with firms and/or consumers in urban area.

Decision-making

Top-down decision-making initiated outside the local area by a limited number of professionals and / or others in centralized locations.

Broad-based local participation, decision-making; use, development, and control of local resources.

“Bottom-up” decision-making through local participation; use, development, and control of local resources; local ownership and leadership

Goals

Primary goal: reduction of disparity

Primary goal: growth Primary goal: sustainable growth of local community

Developed by author based on Table 1, Diochon (2003), p. 20

Endogenous Development in JapanEndogenous Development in Japan

Ogata Village, Akita:Ogata Village, Akita:

Unique History of DevelopmentUnique History of Development Created by a national project of land reclamatioCreated by a national project of land reclamatio

n in 1957 to increase rice productionn in 1957 to increase rice production Initial Initial 580 settler families from all of Japan580 settler families from all of Japan Basic infrastructure such as irrigation and roads Basic infrastructure such as irrigation and roads

completed at the earliest stagecompleted at the earliest stage National policy changed in 1970 to reduce rice National policy changed in 1970 to reduce rice

productionproduction Entrepreneurial farmers struggled to continue produEntrepreneurial farmers struggled to continue produ

cing rice and to develop new marketing channels sincing rice and to develop new marketing channels since 1980sce 1980s

Japan is the Least Entrepreneurial CountryJapan is the Least Entrepreneurial Country

Akita is the Least Entrepreneurial PrefectureAkita is the Least Entrepreneurial Prefecture

Economic indicatorsEconomic indicators Prefectural incomeincome per capita (2001): 41th out of 48 prefectures Prefectural savingsaving per capital (2002): 44th out of 48 prefectures

Comparative Survey on Entrepreneurship among 48 PrefecturesComparative Survey on Entrepreneurship among 48 Prefectures (2000) (2000) Number of researchersresearchers at public research institutes (per 1000 firms): 5th from the top Number of public business incubator roomsbusiness incubator rooms (per 1000 firms): 8th from the to

p Number of industry-academy-public cooperation centercooperation center (per 1000 firms): 2nd from the bottom Number of venture firmsventure firms (per 1000 firms): 13th from the bottom Number of firms listedfirms listed in major stock markets (per 1000 firms): 16th from the bottom Number of public seminars for entrepreneurshippublic seminars for entrepreneurship (per 1000 firm): 12th from the bottom

““Why have to changes while I am doing well enough?”Why have to changes while I am doing well enough?”

““I won’t do it. Therefore, you shouldn’t do it, either” I won’t do it. Therefore, you shouldn’t do it, either”

““I want to look good, so I do not want to fail.”I want to look good, so I do not want to fail.”

Where SME are significant,Where SME are significant,

1.1. ““MiceMice” with 9 employees or less” with 9 employees or less 81% of establishments, 29% of employment81% of establishments, 29% of employment

2.2. ““RabbitsRabbits” 10-19 employees” 10-19 employees 10% of establishments, 17% of employment10% of establishments, 17% of employment

3.3. ““DeerDeer” 20-99 employees” 20-99 employees 8% of establishments, 35% of employment8% of establishments, 35% of employment

4.4. ““BearsBears” 100 employees or more” 100 employees or more1.1. 1% of establishments, 19% of employment1% of establishments, 19% of employment

But this Entrepreneurial Village is Successful.But this Entrepreneurial Village is Successful.

Municipality income per capita (2003): US$34,243.Municipality income per capita (2003): US$34,243. 68.2 percentage points larger than the prefectural average. 68.2 percentage points larger than the prefectural average. Largest among municipalities in Akita since 1990, except Largest among municipalities in Akita since 1990, except

during "IT bubble" years in 1999 and 2000.during "IT bubble" years in 1999 and 2000.

Highly specialized in rice productionHighly specialized in rice production sector centrality value of agriculture is 0.7598sector centrality value of agriculture is 0.7598

€

IPSi =

RhiRH

⎛ ⎝ ⎜ ⎞

⎠ ⎟

PoiPO

⎛ ⎝ ⎜ ⎞

⎠ ⎟

Rhi = Annual production output of each municipality

RH = Annual production output of Akita Prefecture

Poi = Population of each municipality

PO = Population of Akita Prefecture

Entrepreneurial FarmerEntrepreneurial Farmer Toru WakuiToru Wakui

Disobeyed government policy of reducing rice Disobeyed government policy of reducing rice production, and sold rice through direct production, and sold rice through direct marketing to consumersmarketing to consumers

Established a rice marketing company with other Established a rice marketing company with other farmers.farmers. Currently hiring 160 employeesCurrently hiring 160 employees

Akita Komachi Corp.Akita Komachi Corp.

http://www.akitakomachi.co.jp/

History of Ogata Village compatible History of Ogata Village compatible with…with…

Endogenous development philosophyEndogenous development philosophy Entrepreneurial farmer as key personsEntrepreneurial farmer as key persons Use of local resourcesUse of local resources

““Rural” Economic GardeningRural” Economic Gardening Use of information for direct marketing channels Use of information for direct marketing channels

to sell rice products to consumersto sell rice products to consumers Collaboration among farmers, researchers, and Collaboration among farmers, researchers, and

agriculture cooperativesagriculture cooperatives Combination of tourism and agricultureCombination of tourism and agriculture

Another Entrepreneurial “Key Person”Another Entrepreneurial “Key Person”

Tamotsu EbinaTamotsu Ebina Former wrestler, now Former wrestler, now

“Neiger the Hero”, who “Neiger the Hero”, who could save Akitacould save Akita

All handmadeAll handmade Performing 200 shows Performing 200 shows

in a year, only in Akitain a year, only in Akita Producing contents of Producing contents of

local heroes for other local heroes for other prefecturesprefectures

Photo downloaded from http://akita.keizai.biz/headline/photo/126/

The Neiger ProjectThe Neiger Project Started in 2005 to Started in 2005 to vitalize local communityvitalize local community

No support from government or businessNo support from government or business Established a firm Established a firm Seigi no MikataSeigi no Mikata ( (Allies of JusticeAllies of Justice) fo) fo

r promotionr promotion Several employees and professional artistsSeveral employees and professional artists Character goods from snacks to cell strapsCharacter goods from snacks to cell straps

Media coverageMedia coverage Short programs on local TVShort programs on local TV Comics sold Comics sold nation-widenation-wide and in and in TaiwanTaiwan! No English yet! No English yet

Same stage charges since initiationSame stage charges since initiation Received an award in 2006 for encouragement to local Received an award in 2006 for encouragement to local

peoplepeople

http://homepage1.nifty.com/nexus/neiger/

Neiger show in Odate, AkitaNeiger show in Odate, Akita

Photo downloaded from http://northline.blog82.fc2.com/blog-entry-108.html

ConclusionConclusion ““Endogenous development philosophy + EG polEndogenous development philosophy + EG pol

icy framework” applicable in Japanicy framework” applicable in Japan Key factors of local economic revitalization: Key factors of local economic revitalization: 1.1. Good environment & Key personsGood environment & Key persons2.2. Focused on promising entrepreneurs:Focused on promising entrepreneurs:

Owners portray a genuine interest in being helped.Owners portray a genuine interest in being helped. Growing firms.Growing firms. Management values innovation and new ideas.Management values innovation and new ideas. Local business, rather than a corporate subsidiary.Local business, rather than a corporate subsidiary. Cluster of companies.Cluster of companies. (Rossouw & van der Walt, 2003) (Rossouw & van der Walt, 2003)

3.3. Cooperation among business (farmers), Cooperation among business (farmers), academics, and governmentacademics, and government

4.4. Y = F (K, L, Y = F (K, L, EE))

P.S.P.S. Economic Gardening getting known in JapanEconomic Gardening getting known in Japan

「エコノミック・ガーデニング」「エコノミック・ガーデニング」 No hits in 2007; No hits in 2007; about 100 hits today by Googlingabout 100 hits today by Googling

Introduced by some blogs and newslettersIntroduced by some blogs and newsletters Dr. Iuchi of CRIEPI as research partnerDr. Iuchi of CRIEPI as research partner

What an economist can do?What an economist can do? EG Case studies and check-rides in JapanEG Case studies and check-rides in Japan Prove effectiveness of “EG + ED + Entre” setProve effectiveness of “EG + ED + Entre” set Next destination: Korea or Taiwan?Next destination: Korea or Taiwan?

What is What is CommunityCommunity ？？

空空 SpaceSpace 　　 SpaceSpace

風風 WindWind 　　 WisdomWisdom

火火 FireFire 　 　 ProductionProduction

水水 WaterWater Amenity Amenity

地地 Earth Earth Connection Connection

People People and and LocationLocation

空空　　　　 SpaceSpace 　　　 　　　 environment, atmosphereenvironment, atmosphere

風風　　　　 WisdomWisdom 　　 　　 intellectuals, talentedintellectuals, talented

火火　　　　 Production Production entrepreneurs, farmersentrepreneurs, farmers

水水　　　　 AmenityAmenity 　　　　 nature, festivals, servicesnature, festivals, services

地地　　　　 ConnectionConnection 　　 tradition, governancetradition, governance