A Study of Innovation and Entrepreneurship in Japan: Adapting to the Changes of the 21st Century to Nurture a Creative Environment of Enlightened Self-Interest to Drive Markets in Today’s Knowledge-Based Economy.

Michael Philip KoryckiMay, 2011MKT 799: Independent Study

Executive Summary

Entrepreneurship empowers women and youth, highlights the importance of education, science

and technology, and most importantly, provides new economic opportunities for investors and

established businesses. Entrepreneurs and innovators, and the new businesses they create, are the

engines of economic growth and job creation. Despite Japan’s rigid cultural norms, which often get

misunderstood as prohibiting bold risk-taking that challenges the status quo, its SME environment is

robust and constantly seeking new ways to challenge the United States, Europe, China, and India to

introduce disruptive technology to the market place and bring innovative services that constantly

redefine industry and create new ones where none existed before. The government of Japan, despite

past failures, is closely working with the private sector to foster entrepreneurship and encouraging

Japan’s largest companies to rethink the way they do business in the information age, if at all.

Intro

The first contact between Japan and the West took place in Nagasaki in 1543, when Portuguese

ships landed on the nearby island of Tanegashima.1 Over the next three hundred years, Nagasaki would

be the conduit for all Western technology coming into the country, setting up the first metal printing

press, which vastly expanded knowledge and ideas throughout the Hermit Kingdom.2 In 1640, the Dutch

would bring with them medicines, later certifying local students in training and care with European

medical techniques. By the start of the nineteenth century, a Japanese doctor would perform the first

surgery under general anesthesia.3 Combining Eastern and Western knowledge, the Japanese had pulled

ahead in the field of medicine, and it would take four decades for the Europeans to catch up.4

1 Glaeser, Edward “Triumph of the City” p.232 Ibid3 Ibid4 Ibid

And it was not just medicine that the Dutch brought. With their ships came scopes, barometers,

camera obscuras, and even sunglasses through Nagasaki, leaving the Japanese much to tinker with in

addition to Western medicines.5 By the time the American gunboats showed up in 1853, the Japanese

could quickly catch up to their new adversaries because they had many engineers, laborers, students,

and doctors trained in the “Dutch Studies”6 Two years later, the Dutch gave the Japanese their first

steam ship, and the Japanese, rather ominously, began aggressively copying Western military

technology.7 Over the next forty years, Japan had thoroughly mastered Western technology and became

a formidable power on the world stage. From 1894 to 1910, the Japanese would wage and win wars

against China, Russia, and Korea, while continuing to build ships and planes that were often at times

better than their American counterparts.8 That military and technological know-how enabled Japan,

within a hundred years of Commodore Perry’s arrival, to conquer much of Asia and surprise the

American Navy at Pearl Harbor.9

Innovation and Entrepreneurship in Japan: An Overview

Since the dawn of the modern era, Japan’s goals had been unquestioned and its society

precision-engineered to conquer the industrial age.10 Its skill at making manufacturing more efficient

made the Japanese less concerned with the ways computers and software could increase productivity,

and caused it to overlook the growing importance of the service economy.11 This, for Japan, was a grave

mistake. Ultimately what this spurred in the United States was a race not to compete with the Japanese

in manufacturing, who were quickly on course to becoming the world’s largest economy in terms of GDP

by the late 1980s, but to out innovate them, leading to a “new age” knowledge-based economy that

5 Ibid6 Ibid p.247 Ibid8 Ibid p.239 Ibid10 Zielenziger, Michael “Shutting Out the Sun” p.9611 Ibid p.97

relied more on services than on traditional manufacturing.12 However, despite the setbacks now

incurred across Japan over two decades of deflation and anemic growth that has left much of the

economy in an economic paralysis, a new age of innovators and entrepreneurs are thriving in Japan –

you just have to look beneath the surface and away from headlines to find them.

When asked to define the entrepreneurial environment of Japan students of business in the

United States often have preconceived notions of a rigid industrial society that is littered with ‘yes men’

in black suits and bureaucrats in blue suits, all either working for a single organizational keiretsu like

Sony, Toshiba, or Toyota their entire life destined to retire there after a life of government service.13

This notion though only tells the story of about 1% of the biggest firms and 25% of the work force.14

According to Kathyrn Ibata-Arens, author of Innovation and Entrepreneurship in Japan: Politics,

Organization, and High Technology Firms, the “entrepreneurial mavericks at the helm of small and

medium-sized enterprises at the base of the production pyramid are the true narrators” of Japan’s

success story.15 On the flip side of the rigid industrial class of ‘yes men’ these entrepreneurs and

workers compromise 99% of the firms and 75% of its working people – making up a critical source, of

course, of new business and employment.16 What this tells us is that entrepreneurs across the Hermit

Kingdom have long been eschewing the accepted career path of the “best and brightest” that leave the

top universities to work for a single keiretsu conglomerate and have been laying out their own path.

Mr. Tsuji’s Story

Take for example the path of Osamu Tsuji of the firm Samco, who in the 1970s, like his tech geek

visionaries across the Pacific tinkering at their own designs, challenged the status quo establishment in

12 Ibid p.10213 Ibata-Arens, Kathryn “Innovation and Entrepreneurship in Japan” p.114 Ibid p.115 Ibid p.116 Ibid p.1

his garage-built thin film tech development company in Osaka and took the keiretsu head on to become

one of the first companies in Japan to be successful at delinking from a production hierarchy. In the

1970s and 1980s “exclusive rational contracting” made competing against established keiretsus almost

impossible because in this system buying from unaffiliated suppliers like Samco was considered too risky

for purchase managers buying within the keiretsu group.17 Mr. Tsuji, an innovator and pioneer,

challenged this assumption that you could only truly succeed in Japan by being hand-in-glove with the

keiretsus and simply took his business elsewhere. IBM, National Semiconductor, and Arco, all U.S. based

firms, would seal the first contracts for Samco during this difficult time of almost mafia and monopolistic

buying power in Japan and lead the way for Samco , under Tsuji’s stewardship, to become an

internationally renowned thin-film technology producer.18 Samco set the stage for firms in Japan

managing to circumvent state-sanctioned and big-business approved associations and networks in favor

of forming and joining loose, horizontal, inter-regional networks.19 As we shall see, nowhere did that

network thrive more than in Kyoto.

Tsuji’s story is just one of many success stories of innovation and entrepreneurship coming out

of Japan. Rather than focus on the men and women behind these stories, however, this paper wishes

more to explore the structures in place both in the public and private domain to ensure that such

entrepreneurs have the tools, environment, and incentives to want to take a risk.

The Local Political Economy of Innovation

According to Ibata-Arens, “The local political economy surrounding these struggling

entrepreneurs - and how these entrepreneurs connect with it – has a much greater impact on the firm’s

ability to innovate at the national level system.”20 Further, “the civic engagement of entrepreneurs and

17 Ibid p.418 Ibid p.419 Ibid p.1620 Ibid p.7

other community leaders in linking the strategic interests of firms to larger issues of community-wide

development is an important factor in explaining the sustainability of innovative communities in the

long-term.”21

For the longest time, the top-down technocrat approach coming out of post Second World War

Tokyo failed to foster the ‘innovative communities’ that Ibata-Arens believes self-sustains

entrepreneurship and that it’s the people, not the policy, which creates such innovative clusters. This

paper wishes to examine both. Japan, of course, had to learn by trial and error whether national policy

could dictate entrepreneurship at the local level and areas of implementation and improvement will be

discussed further in another section of this paper as to what Tokyo can do in the future. In the

meantime, let’s look at the basic ingredients for product innovation and new business creation and

critique on the pros and cons of Tokyo’s former approach.

For an innovative business community to thrive, you need:

1.) Infrastructure, both in terms of transportation and access to markets via airports, seaports, and

supply chain hubs

2.) Research universities, undergraduate and technical schools to continue to supply the raw talent for

future innovators

3.) A cluster of large corporations with large R&D budgets

4.) Stable, strong, and business friendly local government

5.) Established service industries

6.) Venture capitalist and risk takers and

7.) Attractions for potential residents.22

21 Ibid p.822 Ibid p.9

With the ingredients and success model so simply laid out, what then makes the difference between

Tokyo and Kyoto? Los Angeles and Palo Alto? Chicago and Detroit? The answer lies in the civic

leadership of those who not only want to create a thriving entrepreneurial cluster, but those who also

want to make their communities a great place to live – something often ignored in most major text

books. And these great places to live are often vast urban meccas.

Cities forge ties, translate vision into practice, and maintain groups of people with a shared goal

of improving the economic situation of their communities.23 In addition, a great sustainable innovative

community is more than just a special cluster of competitive enterprises, but more of a geographic

concentration of like-minded stakeholders (the entrepreneurs, business executives, workers, community

activists, residents, and local government officials) in the economic outcomes of local enterprises who

have shared goals of developing new products in growth sectors.24 This then starts the chain reaction

cycle that enhances competition that further stimulates innovation, which again enhances even more

competition. The problem for Japan is that its national government believes that innovation and

entrepreneurship can be manufactured by policy fiat. As we will discover, this is hardly the case.

Booming Times in Bangalore

One of the world’s great success stories of an innovative region that thrives off a decentralized

industrial system that is organized around regional network firms tied to R&D at local universities and

supportive governments is Bangalore, India. The success of places like Bangalore is not only about

international intellectual connections where foreigners come to sample a host society’s art, science, and

commerce.25 According to Edward Glaeser, author of Triumph of the City, a city like Bangalore creates “a

virtuous cycle in which employers are attracted by the large pool of potential employees and workers

23 Ibid p.924 Ibid p.1025 Glaeser, Edward “Triumph of the City” p.25

are drawn by the abundance of potential employers. So firms come to Bangalore for the engineers, and

engineers come for the firms.”26 This model also softens the effect of both minor and major recessions.

As Glaeser states, “an abundance of local employers also provide implicit insurance against the failure of

any particular start-up. In Bangalore, there is always another start-up company.”27 And if there is always

another start-up company willing to build off your previously failed attempt, there is a bigger appetite

for risk and taking chances. This makes a city a perfect incubator for the next Bill Gates and Nandan

Nilekani.

The Kernel, the Cluster, and the Critical Mass

In Bangalore, an initial kernel of engineering expertise attracted companies like Infosys, and a

virtuous cycle was born, where the smart workers and smart firms all flocked to be within closer

proximity to each other.28 The story of Infosys, of course, is a story of a firm that maximized Bangalorean

proximity. Founded in 1981 and calling Bangalore home in 1983, Infosys now has over 100,000

employees and a market capitalization exceeding $30 billion, truly a flat-world phenomenon with

operations in banking services, software, and consulting.29 Perhaps Infosys’ success can also be

attributed to the fact that it was far, far away from the bureaucracy that plagued fledgling

entrepreneurs in Delhi. After all, two of Infosys’ first clients were an American and a West German firm.

Today, Infosys operates in dozens of countries that may seem to suggest that distance is dead; however,

it may be interpreted as evidence that proximity matters as much as ever.30 According to Glaeser, “By

concentrating so much talent in one place, Bangalore makes it easier for outsiders, whether from St.

26 Ibid27 Ibid28 Ibid29 Ibid30 Ibid p.26

Louis or Shanghai, to do business with Indian entrepreneurs.”31 They come for Infosys; they stay for the

many other talented firms dotted throughout.

Unlike Japan’s past approach of a top-down technocratic model of spreading innovate clusters

blindly throughout Japan, the success of a city like Bangalore is built around the fact that the dense

concentrations of entrepreneurial talent encourages growth of related industries making skill, and not

geography, as the source of Bangalore’s strength.32 Unlike the story of Japan’s Cluster Model as well,

Bangalore grew organically from the enthusiasm of civic mavericks who had a vested interest in the city.

In Bangalore, that civic maverick was Sir Mokshagundam Visvesvaraya, or Sir MV for short, the

state’s prime minister during the early 20th century.33 His focus, unlike the government’s at the time, was

to push through a sweeping modernization program, including dams, hydroelectricity, steel mills, and,

most importantly, schools.34 What should have been the mantra of the Parliament of India, “Industrialize

or Perish”, took root only in Bangalore making it one of the most progressive cities in all of India; as a

matter of fact, it still is. Sir MV did not just of course want to build big industrial projects, but instead

emphasized the education needed to build the projects in the first place. Unlike the roads which are

destined to crumble, education perpetuates itself as one smart generation teaches the next.35 Sir MV

would go on to found the University of Mysore and Bangalore’s engineering college, which now bears

his name.36 Those two schools first generated a cluster of engineers that still persists to this day.

Bangalore’s early pro-business government nurtured a cluster of engineers by fostering strong

education and paving the path for IT dominance by launching an extensive program to improve roads,

electricity, and other utilities that would attract global IT firms.37

31 Ibid32 Ibid33 Ibd34 Ibid35 Ibid p.2736 Ibid37 Ibid

The Mother of all Clusters

America’s greatest information technology hub is Santa Clara County, California, which everyone

knows better as Silicon Valley.38 Like Bangalore, Silicon Valley is a decentralized network-based system

which comprises of loosely linked firms employing technologist having greater loyalty to the craft than

the firm. Much like Bangalore, the Valley also achieved this status by focusing on education. Whereas

Bangalore had Sir MV, Silicon Valley’s civic maverick was Senator Leland Stanford, a railroad magnate,

who decided to build a university on a horse farm that would later help brand the area as the world

capital of high technology.39 From the early 20th century, the Valley would go on to create the spark

telephone, the arc transmitter, and the transistor, attracting talent from all over the country to come to

this central location where the best and brightest were pouring out the latest iterations in technology.40

The value-added level of these products was an incentive as well, which further drew talented firms to

the region. However, value-added or not, Silicon Valley would not have reached its full potential

without the visionary thinking of Frederick Terman who would make the critical link between industry

and institution by creating the world’s first industrial park in the valley, which would go on to turning

Palo Alto into the center of the computer industry.41

Taken from the words of Mr. Glaeser, “His vision, which would inspire technology-intensive

clusters in Bangalore and throughout the world, was to create an area packed with technology

businesses.”42 In a few short years, the Valley would see the likes of Hewlett-Packard, Lockheed, General

Electric, and Westinghouse all deploy around the area to utilize the critical mass of innovation and ideas

unfolding throughout Palo Alto.43 From there, the likes of Intel, Cisco, Sun Microsystems, eBay, Apple,

38 Ibid p.2939 Ibid p2840 Ibid p.3041 Ibid42 Ibid p.3143 Ibid

Oracle, Facebook, Google and Yahoo all began to call the Valley home. And these firms continue to

encourage future entrepreneurs to come to the Valley.

In April of 2011, Google and Cisco joined the White House effort for entrepreneurs by

contributing $100 million for start-up companies to use Google’s advertising and Cisco’s IT training

platforms.44 This is a great example of the public and private sector joining together to promote

entrepreneurship in the hopes of fostering private-sector investments in start-ups and small businesses

as a way to improve the economy.45 The generous donations from the likes of Google and Cisco once

again show that it is the craft, and not the enterprise, that drives innovation and entrepreneurship in the

Valley, which has galvanized other firms to join the effort as well.

Today, Palo Alto is a city where smart entrepreneurs share ideas with one another outside the

confines of their various day jobs through organizations like the Homebrew Computer Club, which is

once again being re explored in other parts of the country.46 In Chicago, for example, many

entrepreneurs don’t know a whole lot of other entrepreneurs, which is why local Chicago entrepreneur

Edward Domain started his group, “Flyover Geek”, to model the culture of Palo Alto’s and the Bay Area’s

love for the start-up culture and the ideas they share together in the informal environment of such

clubs.47 Mr. Domain’s model is simple, every Friday at 5:30 everyone in the community is invited to

come out and have a beer, talk shop and engage with other members of humanity outside their

immediate circle.48 The local government has taken notice and provides space and support via the Illinois

44 Johnson, Nicholas “Google and Cisco to Join White House Effort for Entrepreneurs” as taken from Bloomberg News on April 20, 201145 Ibid46 Glaeser, Edward “Triumph of the City” p.3447 Domain, Edward “Flyover Geeks: Building an Entrepreneurial Community in Chicago” Taken from Chicagobusiness.com48 Ibid

Technology Association, providing a forum for the free flow of ideas to help strengthen the community

overall.49 Similar associations do exist in Kyoto, and more on them will be discussed later.

To sum, all great cities renowned for growth and innovation, whether Bangalore, Chicago, Palo

Alto, or Kyoto, tie their success in the strength of their human capital, nurtured by their research

institutions and their universities that attract the raw talent needed to innovate and iterate. As we have

seen, these communities are often similar across national boundaries, while often dissimilar from other

regions in their own national economy. According to Ibata-Arens, they should all share three main

characteristics. For one, and most importantly, politically savvy enterprise mavericks, like Sir MV, act as

civic entrepreneurs that have a keen sense of giving back both firm and individual wealth and also

expertise to the larger community for mutual long-term gain that gives a community positive social

capital and most importantly it galvanizes owners behind their efforts.50 Secondly, inter-firm networks

provide critical information and creative ideas that are good at facilitating innovation in member firms

and are generally unfettered by hierarchy, which generally proves better at creating new product

innovation, as seen in Bangalore and Silicon Valley.51 Lastly, local governments act as advocates at the

national level for local firms, effectively lobbying for the help of Delhi, Washington, or Tokyo.52 What this

tells us is that the politics of innovation has as much as an effect on market outcomes as any other

factor. In essence, innovative market success often depends on political savvy entrepreneurs and local

stakeholders who can navigate spaces in between institutions and networks.53 So what has Japan

learned from both Bangalore’s and Silicon Valley’s Success, if anything?

Cluster’s Last Stand

49 Ibid50 Ibata-Arens, Kathryn “Innovation and Entrepreneurship in Japan p.1151 Ibid p.1152 Ibid p.1253 Ibid p.12

By 2003, Japan was less entrepreneurial – as defined by firm start-ups, innovative output, and

the like – than all the other advanced industrial countries save for Russia.54 To counter the decline, the

Ministry of Economy, Trade and Industry launched the “Cluster Plan” to improve productivity, spur

innovation, and foster new business creation.55 This robust approach would ultimately involve 5,000

SMEs, 200 Universities, and a whole host of support institutions all coordinated from METI. Initially

lauded as the right kind of thinking expected out of Tokyo in Japan’s second decade of malaise, it did not

go without its criticism; particularly for its hubris in thinking that whatever they decided at the national

level could somehow be done at the regional level.56

For a country with a 2000 year old history where a whole array of region-specific industries has

emerged, the thinking needed regional level solutions, not national ones. Also, Japan’s national level

plan was plucked right out of a Michael Porter book without consideration that the model may not be

similar across national boundaries. Porter’s Diamond Model calls for increasing productivity, increasing

capacity for innovation, and stimulating new business formation by ensuring that the availability of

various factor input conditions, supporting industries, and demand conditions all interact to create an

environment conductive to innovation and cooperation with local firms.57 The problem was that METI’s

plan was less organic than Porter’s and instead almost seemed to go out of its way in picking winners

and losers. Rather than stimulate new business formations across the board, METI’s plan wholly

focused on high-tech industries, negligibly incorporating traditional industries that are so crucial in

creating the conditions for interaction that creates the conductive innovations that Porter speaks of.58

METI’s Cluster Plan fell short on the most critical factors of Porter’s Diamond Model, mainly that it

should have been more regionally initiated with more ‘local led context’.59 However, a regionally

54 Ibid p.9355 Ibid p.9356 Ibid p.5757 Ibid p.10258 Ibid p.10459 Ibid p.105

initiated Cluster Plan has drawn some criticism in the manufacturing region of northern Italy too as

global competition seems to be weakening the benefits of being in a cluster. So is it an anachronistic

model?

For Porter, a firm’s geographical proximity, their close competition with each other and the

growth of specialized suppliers and production networks around them make a winning combination.60

Globalization, however, has made this winning model less certain that may explain why METI’s original

Cluster Plan failed. “More open trade and improved transport links may mean that bunching together in

a cluster no longer offers such a strong defense against foreign rivals”, particularly from the low-cost

competition eroding at Japan’s profit margins from China, South Korea, and India as the benefit they get

from being bunched in a cluster seems to be weakening.61

How Japan’s companies compete in the future will depend less on being in a cluster than

designing smart products and defending their brands. A recent report from Intesa Sanpaolo, a bank,

notes how competition is forcing firms to innovate, improve quality, and define their brands and should

not look to the government to protect their business with the help from regional authorities, as many in

Japan might hope they do.62 Britain’s large manufacturing clusters withered and died while the decline

of Italy’s clusters look just as terminal. What everyone can agree on is that successful clusters in the

future will look very different from those in the past.63

Kyoto Model

And so, Japan’s national approach to innovation has thus taken on a regional perspective in

recent years owing to the success of regions like Kyoto.64 Thinking back to Samco, we can understand

60 “Clusters Flustered” The Economist Vol 399 Number 8729 p.7061 Ibid p.7062 Ibid63 Ibid64 Ibata-Arens, Kathryn “Innovation and Entrepreneurship in Japan p.51

why their success was only possible in Kyoto, where the most innovative firms, mainly those outside

Tokyo, were able to thrive because they were least likely to have any sort of keiretsu link. In Tokyo,

because of government protection, companies were not engaged as heavily in R&D, held few patents,

and were producing goods at the low value-added level – essentially, it was becoming an innovation

failure falling behind the United State, Western Europe, and IT shops in India, and especially China.

Samco, as previously mentioned, broke away from the keiretsu chain by linking instead with

international ties, collaborating on R&D and hiring 10% of its workforce from overseas.65 Rather than

have 70% of its total sales go to one keiretsu link, Samco set an unorthodox rule to have no more than

10% of its sales go to one client.66 Of course, this could not have been possible without Kyoto’s support

to provide Samco the leverage to escape the keiretsu.

As previously mentioned the Kyoto Model works partly due to the absence of keiretsu groups

and as a result of this, production and trading relations between firms tend to be fluid and horizontal.67

Secondly, a lack of main banks encourages “pocket-money” finance from regional banks and venture

capitalists.68 This informal system of finance, according to Ibata-Arens, spreads the risk across a wide

community of investors and prevents firms from becoming beholden to the large national banks.69 It

also leads to financial independence and autonomy, allowing Kyoto-based firms to avoid being at the

mercy of the slow-payment behavior of the large national banks and keiretsu buyers.70 As a result, Kyoto

entrepreneurs are viewed as being fiercely independent compared to their Tokyo piers that are bound

by considerations of maintaining good in-group relations.71 Ultimately, though, with more money on the

balance sheet, more cash can pour into R&D to facilitate the continuous upgrading of products.

65 Ibid p.4066 Ibid p.4167 Ibid p.14868 Ibid p.14869 Ibid p.14870 Ibid p.15071 Ibid p.153

Also in Kyoto, inter-firm networks facilitate the flow of information and these active networks

provide a forum for the forging of collaborate manufacturing relations between Kyoto firms and firms

outside their locales and even outside Japan, which is a different approach from the rest of the country

where there intends to be a lack of horizontal, inter-industry personal networks.72 For example, the

Kyoto Liaison Council for Small and Medium-Sized Products of Manufacturing and Metal was formed

through the initiatives of local firms with the infrastructural support from the Kyoto regional

government.73 In the past, METI had thrown together groups without thinking of the organizational

goals, which led to less robust buyer’s groups. Kyoto’s buyer’s group also meets to discuss a number of

issues effecting the regions, including strategies of overcoming recessionary economics, legislation to

end slow payments of debt by big firms to make the region more competitive and fair, new product

development, training of technicians, the role of SMEs in a global economy, and, of course, tax issues.74

To sum, these firm-initiated business networks provide a critically important context for the exchange of

information about management techniques and the market. Lastly, in Kyoto, firm managers, local

government officials, academics, and community leaders all work hand-in-glove in broad innovative

coalitions that know how to leverage resources from the government while avoiding the worst effects of

bureaucratic oversight.

Kyoto’s regional government SME Center has been helpful over the years in allowing Kyoto-

based firms to benefit from METI-sponsored research program and acts as a model go-between in

obtaining R&D funds from the government.75 Tokyo’s next Cluster Plan thus shifted to a regional-

initiated policy where its goals were more robust, where process improvements to existing technology

would no longer suffice and the government needed to provide incentives for new production

72 Ibid p.14873 Ibid p.12874 Ibid p.12975 Ibid p.42

innovation.76 Tokyo’s new model also focused on expanding the value chain of clusters by emphasizing

not only the need for technological developments, but also for marketing, management, and finance.77

Lastly, METI’s new plan would focus on identifying existing agglomerations of firm-level potential rather

than just create new clusters in green and brown field investments in areas that did not already have a

critical mass of entrepreneurs and innovators.78 The long-term, 25-30 year commitment is a major

improvement from its predecessor.

China: Fledgling Entrepreneurship Across the Sea

China is often held up as an object lesson in state-directed capitalism yet it is now becoming

clear that much of the success of the state’s double-digit growth rate is as much owed to a myriad of

smaller, privately held firms that are more efficiently whirring the economy.79 China’s state-controlled

entities, which are climbing the world’s league tables in every industry from banking to oil, are not

particularly profitable with a return on equity of just 4%.80 Compare that with a nearly 14% return on

equity in China’s private sector and one can see why the government is beginning to foster

entrepreneurship by providing private companies with finance and legal forbearance.81 Since these

measures were put into place over a decade ago, the number of registered private businesses in China

grew by more than 30% and according to official government statistics there are now 43m companies in

China, 93% of them private, employing 92% of the country’s workers.82 What is significant about China’s

robust private sector is that for a state-directed country, much of China’s success comes from

businesses that thrive in large part because they operate outside state control, much as how Japan’s

76 Ibid p.10577 Ibid p.10578 Ibid p.10579 “Let a Million Flowers Bloom” The Economist Vol 398 Number 8724 p.7980 Ibid 81 Ibid82 Ibid p.80

most innovate companies thrive outside the keiretsus, which to many in Japan can feel like a state-

controlled enterprise.

In Kyoto, Samco developed a reputation for being fiercely independent mainly because it did not

have access to the financing that large firms within the keiretsu block in Tokyo enjoyed and had to rely

on venture capitalists, foreigners, and small local banks instead. As we have learned, this too came as a

blessing as Samco also did not have to play by their rules and heed to their conditions, especially during

periods of economic downturn. As is too the case in China, some of the most successful and innovative

private firms are geographically far from Beijing, making them independent and meager in the extreme

to succeed and also rely on smaller regional players to finance their growing ventures.83 Currently in

China, loans to small and medium-sized enterprises comprise less that 4% of the total made by three of

the country’s four largest banks whose total lending is dominated by the state’s large conglomerates.84

As in Kyoto, a few other smaller institutions have begun to emerge to fill the gap. For example,

Zhejiang Tailong Commercial Bank, a privately owned lender, has grown at a rate of more than 40% a

year making smaller loads to regional entrepreneurs.85 However, a shadow banking system has

emerged as well charging interest rates anywhere from 10% to 214% not necessarily by businesses

seeking to pursue illegal activity but for firms wishing to keep their patents and ideas proprietary as

opposed to having to be handed over to the state.86 The prospect of expropriation and shakedowns by

the government undermines the willingness of the entrepreneurs to make the long-term investment

needed to develop brands, novel products and capable middle-management that China needs to

overtake Japan and raises questions about how Chinese enterprises will evolve. It also raises questions

as to how much China’s success will continue to be embraced by Japan.

83 Ibid84 Ibid85 Ibid86 Ibid

Japan as Number Three, Four, Five…

Five years ago China’s economy was half as big as Japan’s. In 2010 it has overtaken its ancient

rival. With China’s population being ten times larger than Japan’s, this moment always seemed destined

to arrive; however, it is still surprising to Japan as to how quickly it came.87 Although Japan has made

substantial reforms in corporate governance, financial openness and deregulation, many of the features

of Japanese capitalism that attributed to two lost decades still persist and worse may follow as the

economy still continues to grow at a mere 1% into its third decade.88 Yoko Ishikura, a business professor

at Hitotsubashi University, fears that Japanese bosses have become too complacent to compete against

emerging Chinese firms. According to Ishikura, “They are either too afraid to face the reality of the

power shift or they want to stick to old, familiar models.”89 And these old and familiar models

misallocate resources and guarantee that fresh capital goes to “the losers of yesteryear”.90

Because these struggling companies of old rarely die, mainly as a result of the government

keeping the cost of capital low to help stragglers, new companies are not forming as quickly as they are

in China or in the United States.91 Also, in the wake of the gloomy milestone of being the third largest

economy in the world, Japan is failing to get the best out of its human capital. For one, certain cultural

traits are holding businesses back.92 Respect for seniority means that promotions go to the older, not the

most able forcing young executives who are superbly literate though admonish themselves from

speaking up and refrain from undoing their predecessor’s mistakes.93 Most staggering of all, only 14% of

young Japanese entering the workforce actually want to be entrepreneurs, while the more risk-averse

87 “Watching China Whizz By” The Economist August 21st, 2010 p.5288 Ibid89 Ibid90 Ibid91 Ibid92 Ibid93 Ibid

who wish to seek safe lifetime employment rose to an all-time high of 57%.94 This should be a grave

concern for the economy of Japan, considering the percentage of those wishing to establish their own

firm compared to those wishing to work for the same company until retirement was even as early as

2003.

At a time when understanding foreign cultures and norms are ever more important to compete

in the 21st century, Japan’s youth are even becoming less globalized than their competitors. Since 2000

the number of Chinese and Indians studying in America has doubled, whereas the number of Japanese

studying abroad has dropped by a third.95 Across Japanese industries managers are having a difficult

time getting the young to take overseas posts, leaving to question the future global outreach of

Japanese firms while Japanese diplomats are preferring to stay at home, likewise questioning the future

of Japanese power projection.96 Lastly, among rich countries on English tests, the Japanese score the

lowest.97 “This needn’t be a problem” says Takatoshi Ito of the University of Tokyo, “except that as an

export- dependent economy, Japan’s life blood is its relations with other countries” and nowhere is that

relationship waning more than with China.98

In December of 2010, during a minor territorial dispute, China was accused of suspending

shipments of rare earths – 17 elements that are highly costly and time-consuming to extract – to Japan

entirely.99 Japan imports more rare earths than any other country for use of manufacturing electronics,

chemicals, and high-tech car parts, so naturally when China, accounting for 97% of global production,

cut its quota by 35%, which sparked fear in the country that a disruption in supply could paralyze the

economy.100 However, although Japan is traditionally cautious and slow to change, this event displayed

94 Ibid95 Ibid96 Ibid97 Ibid98 Ibid99 “Rare Action” The Economist Vol 398 Issue 8717 p.74100 Ibid

that the country can move quickly when sufficiently provoked and perhaps alleviate some fears across

the country that Japan cannot tackle its biggest problems. The big trading houses such as Mitsubishi

and Sumitomo are already securing alternative supplies with the help of state financing and other

companies such as TDK and Toshiba are working to reduce or eliminate the rare-earth elements needed

in devices.101 The government has aggressively worked hand-in-glove with the private sector by

earmarking $1 billion to secure supplies and fund university research such as robotic deep-sea mining.102

Despite all the efforts, however, Japan will remain dependent on Chinese rare earths for some time,

leaving older bureaucrats misty-eyed for the glory days when Japan was the economic power to fear.103

Opportunities for Growth

However, for Japan to succeed in the 21st century, they must look toward China with a more

ambitious outlook for opportunity than one flaunt with trepidation. Since the two countries normalized

relations in 1972, trade has been robust. In the past ten years alone, according to METI’s statistics,

sales of goods to China have tripled and Japanese firms entering China continue to have a lot to offer

their neighbor, including an emphasis on quality, trusted products and a strong service culture.104 Also,

the idea for moving more into China is that Japan can shift more of its low-end production abroad while

pursuing sophisticated high-tech manufacturing at home to capitalize on high margin products further

up on the value curve in products ranging from electrical components, specialist chemicals, and

precision-machinery parts.105 Japanese firms already do 30% of their manufacturing overseas – twice as

much as in the early 1990s – and the trend is continuing upward, especially as the yen recently hit a 15-

year high on a nominal basis.106

101 Ibid102 Ibid103 Ibid104 “Friends and Neighbours” The Economist November 20th, 2010105 “Leaving Home” The Economist November 20th, 2010 p.73106 Ibid

The government, though, is not likely to intervene. Even as the yen continues to flirt with levels

against the dollar that spark talk of more intervention to damp its rise, Japan seems likely to hold its fire

because of other positive factors gained from a high yen.107 While the dollar is just back above ¥80, the

yen remains weaker against most other currencies, including against those of its biggest trade partners,

such as the euro zone, China, and South Korea and Taiwan.108 Another factor is oil, which even after last

week's plunge remains substantially higher than six months ago.109 A stronger yen benefits Japan by

giving it more buying power for oil, which is priced in dollars.110 In the wake of Japan’s nuclear

moratorium, cheaper energy cost should offset pains suffered in other areas.

But it’s not just the strong yen that is dampening the mood in Japan. As Satoshi Ozawa,

Toyota’s chief financial officer recently stated, “We want to keep domestic production, but we are

quickly losing competitiveness.”111 Today, Toyota already produces 58% of its vehicles abroad and the

trend will most likely continue as the yen continues to further strengthen against the dollar and many

other Japanese firms from Toshiba to Yamaha Motors are increasing their foreign-made share of

production.112 Some argue, especially the bureaucrats, which Japanese firms will lose quality and control

if moved overseas; however, three-quarters of Japanese-owned foreign plants are at the same technical

level as domestic so this argument hardly holds water.113

A whole host of other long-term factors that are forcing Japanese firms to move production

abroad are at play as well. One is proximity to consumers in fast growing China. In 2001, just 40% of

Japanese companies’ overseas production in Asia actually went to Asian consumers with most being

107 Frangos, Alex “Japan Unlikely to Get in Yen’s Way” WSJ.com Taken on May 10th, 2011108 Ibid109 Ibid110 Ibid111 Ibid112 Ibid113 Ibid p.74

either sent back to Japan or shipped out to American and European markets.114 Today, that number is

closer to 62% and will continue to increase as Chinese wealth rises, which will increase consumer

demand for electronics, cars, and other high-end manufactured goods.115

Increase in Chinese wealth can also spur trade and tourism and can come as a boom to a town

like Nagasaki, which is one of the closest Japanese cities to China. After years of a brain drain,

population loss, and a manufacturing exodus to Osaka and Tokyo following the Second World War,

Nagasaki can look to overseas revenues to make up for domestic ones.116 Takamitsu Sato, president of

the Nagasaki Economic Research Institute, is already drawing up plans with local officials of doubling the

number of foreign students to 3,000; turning the old shipyard into a tourist site; and bolstering sales of

kamaboko, a rubbery fishcake.117 But the bold measures to encourage foreign direct investment and

skilled immigrants to come to Nagasaki may take years, according to Mr. Sato, because there is “not the

right environment” to attract newcomers.118

It is undeniable that Japan must look abroad since its own markets are shrinking and many other

prefectures will take note of Nagasaki’s decentralization strategy. With enough support, the prefecture

of Nagoya too looks to create a regional block to draw investment and jobs away from Tokyo and help

reshape government to cope with an ageing society.119 They plan to cut local taxes by 10%, slash salaries

for elected officials, and shed overlapping public services.120 Tokyo sees this all as autocratic rule, yet

the proposals are quite popular and cutting into the DPJ’s support. One thing the DSJ and its opposition

can agree on though is that the best way spur innovation and entrepreneurship is by tackling the tax

114 “Leaving Home” The Economist November 20th, 2010 p.73115 Ibid116 “The Alarm Bells of Nagasaki” The Economist Volume 398 Number 8716 p.44117 Ibid118 Ibid119 “Maverick as Hell” The Economist Volume 398 Number 8720 p.48-49120 Ibid

rate; without structural reform from the government, Japan’s high corporate tax rate will continue to

push producers overseas no matter if there is high demand for their goods or not.

Japan’s corporate tax rate is 41%, making in the highest level among the G20 countries and

almost twice that of neighboring South Korea.121 Such high corporate tax rates increase profit margins

of overseas subsidiaries making it harder for firms to continue to do business at home and also more

difficult for companies to hold cash for future R&D, where the government should be boosting a tax

credit for investment in research and innovation. However, the government is hearing the cacophony of

complaints that Japanese firms can’t compete and in December of 2010 Prime Minister Kan promised to

slash five percentage points off the tax in the 2011 budget although some still say that even with the

cuts the rates are still too high.122 Also, to encourage foreign companies to set up regional headquarters

and research facilities in Japan, a key factor in fostering domestic employment, the trade ministry is

proposing the combined national and local tax on foreign firms to between 20% and 29% for five

years.123 This, of course, comes as a welcoming sign for foreign firms wishing to set up an outfit in Japan

who otherwise felt discriminated against in favor of domestic competitors.

Hit the Road, ジャック(Jack)

To increase export content and foster job creation at home, the government is also stepping up

its economic diplomacy by putting its politicians on the road to work hand-in-glove with the private

sector. In January of 2011, ministers have pitched high-speed trains in Florida and boasted about a

water-treatment facility in Saudi Arabia all with the help of a state-backed lender, The Japan Bank for

International Co-operation, which is ready at the helm to open the financing spigot should the deals go

through.124 Such efforts already seem to be paying off as Vietnam has said it will turn to Japanese

121 “Leaving Home” The Economist November 20th, 2010 p.73122 “Over Here!” The Economist January 15th, 2011 p.75123 Ibid124 Ibid

technology for the second phase of its nuclear program and Turkey is in talks to conclude a nuclear-

power contract as well.125 Without heavy lobbying from the Japanese government, both these deals may

likely have gone to South Korea, who too has strong government backing.

Another pressing issue hurting competition is the absence of any free-trade agreements, which

Japan has been apprehensive from joining in the past as their politicians attempted to protect their

manufacturers at home, most notably in their agriculture industry, while sacrificing vast market share

abroad. Because of operations moving overseas to take advantage of free-trade agreements, Japan lost

over $420 billion in domestic production and over one million jobs in 2008, according to Dai-ichi Life

Research Institute, and their automobile industry has especially been hit hard.126 For example, Suzuki,

the largest foreign carmaker in India, pays roughly 12% tariffs on parts imported from Japan.127 South

Korea, on the other hand, has raced ahead in seeking free-trade agreements with its trading partners

and has seen its prestige grow.128 Hyundai, Suzuki’s South Korean competitor, recently signed a FTA with

India and pays tariffs of just 1-5%.129 Without a FTA with India, partially due to the Japanese

governments ineptitude to act, Osamu Suzuki, the Japanese company’s boss, feels “handicapped” and

rightly so.130 It’s also not clear if the government even has the clout to push through joining a regional

free-trade agreement even if it felt so inclined too, further worrying the business community in Japan

that the toughest initiatives will again be passed on to another administration.131 The main obstacle to

any FTA has been Japan’s Agricultural Co-operatives, which has lobbied relentlessly to prevent Japan

from joining the Trans Pacific Partnership.132

125 Ibid126 “Leaving Home” The Economist November 20th, 2010 p.73127 Ibid128 “Paddies vs Prius” The Economist November 13th, 2011 p.48129 “Leaving Home” The Economist November 20th, 2010 p.73130 Ibid131 “Over Here!” The Economist January 15th, 2011 p.75132 “Paddies vs Prius” The Economist November 13th, 2011 p.48

Bureaucracy with a Capital B

Japan’s farmers are a protected class and benefit from tariffs on rice as high as 778% and those

on butter reach 482%, naturally then they create a ruckus against any reform.133 Thanks to these tariffs,

the Japanese pay nearly twice as much on their food as other OECD countries and their farming sector is

stagnant and unproductive.134 The government has tried to buy off ageing farmers and shifted subsidies

to income support for individuals as opposed to price supports, yet a small amount of farmers holds the

rest of the economy hostage by putting any FTA out to grass.135 Regardless, the fact that some action has

taken place against the JA counts as a positive sign that reform is inevitable, albeit slow coming.136 Yet

this does not tell the story of all Japanese farmers, many of whom are very innovative and

entrepreneurial in spirit.

Hideaki Shinpuku, President of Shinpuku Sieka, uses cloud computing to improve his farms

efficiency and last year alone raised his cabbage output by 12%.137 The Cloud Computing service

developed by Japanese technology firm Fujitsu Ltd allows for Mr. Shinpuku to handle 60 different fruits

on 247 acres of land using sensors that collect readings on temperature, soil, and moisture levels as well

as recommendations as to when to start planting and what crops might be well-suited to a specific

field.138 Clearly, such daily observations may have taken scores of laborers in the past and is an incredible

gain in productivity and efficiency considering Mr. Shinpuku can now cover most of the work himself. A

whole range of other innovations come with Fujitsu’s cloud computing technology as well. For example,

online cameras can call up footage from the field and workers can also send pictures from their mobile

phone on potential problems.139 GPS trackers on employees ensure they are not taking an indirect route

133 Ibid134 Ibid135 Ibid136 “Over Here!” The Economist January 15th, 2011 p.75137 Wakabayaslli, Daisuke “Japanese Farmers Look to the Cloud” The Wall Street Journal January 18, 2011 B5138 Ibid139 Ibid

or squandering time by being idle.140 The aim of this system is to bring the concepts of lean

manufacturing and continual improvement, or kaizen, to farming that may over time make Japanese

farms so profitable and efficient that domestic farmers may welcome foreign competition and gradually

be less apprehensive against the removal of high tariffs.141

Green Shoots

Japan’s eco-industrial policy has been radically changed since the disaster at Fukushima Dai-ichi

wiped out a quarter of the power generating capacity of Tokyo and the government is now earmarking

more funds from its “21 Key National Strategy Projects” by front loading relief spending with providing

incentives for energy saving technologies and clean energy promotion . A green industrial policy, it

hopes, would “not only help a bit with the power shortage bust also boost Japan’s struggling renewable

firms”, which have lost the market lead against rival firms in America and low-cost makers in South

Korea and China142 Scale is the main culprit to Japan’s renewable firm’s malaise in profitability and the

government hopes to spur demand for Japanese built solar panels by actually paying businesses and

homeowners for their excess capacity to feed energy into the grid.143 And firms see opportunity outside

a nudge from the government. To leverage existing R&D already poured into battery technology for

electric cars, Toshiba and Panasonic are rolling out big, rechargeable batteries for the home that would

draw energy from the grid overnight and then be used to reduce peak daytime demand for power.144 To

meet the expected demand that might come with a further government subsidy, Toshiba is hurrying to

release the battery and expects delivery in two years’ time.

140 Ibid141 Ibid142 “A Cloud with Green Lining” The Economist Vol 399 Number 8731 p.70143 Ibid 144 Ibid

However, Japan’s foreign rivals are also eager to join the market, given the scale of Japan’s post-

quake crisis, and they see the potential benefits that might flow in their direction from the extra

Japanese spending on green-energy devices. Japan’s potentially subsidized firms will not be incubated,

as Japan’s incentive programs will make it easier for the foreign rivals to demand similar treatment from

their governments.145 Regardless of the outcome for Japan’s green-energy sector, what’s clear is that

such energy saving schemes will be insufficient to compensate for the lost generating capacity.146 In the

current post-reconstruction plan, only $49m is reserved for publicity to urge Japanese to conserve

energy and even less for advising small businesses on conservation.147

Seize the Moment or Face Another Lost Decade

The natural disaster that struck Japan in March of 2011 will always be a day that resounds in

Japan’s national character. As Japan begins forging a road map for recovery from its worst postwar

disaster, it will be important for Japan to shed the legacy of the 1980s bubble to avoid a third “lost

decade” of stagflation and deflation.148 Key to this result, of course, is whether the nation’s companies

end an aversion to borrowing and begin taking on debt to propel domestic investment and wage

gains.149 For two decades now, Japan’s political system has become too polarized to produce any

compromise to further push the national agenda.150 According to Malcolm Gladwell, author of The

Tipping Point, “The only time you can get things done is in moments of genuine crisis and catastrophes –

there’s a small opportunity to do an extraordinary amount.”151 In Japan, a country whose politics were

145 Ibid146 Ibid147 Ibid148 Anstey, Christopher “Japan Urged to ‘Seize This Moment’ or Face Another Lost Decade” Taken from Bloomberg.com149 Ibid150 “Flailing” The Economist Vol 399 Number 8729 p.46151 Anstey, Christopher “Japan Urged to ‘Seize This Moment’ or Face Another Lost Decade” Taken from Bloomberg.com

deadlocked and sluggish for years is hoping to seize this moment to accomplish everything it must less

such efforts quickly become stultified.

All is not lost, however, as some would think. On April 26th, the two leaders of Mr. Kan’s new

Reconstruction Design Council laid out their early thoughts on how to rebuild Tohoku, the shattered

north-eastern region of Japan’s main island.152 As the government has learned from previous innovation

efforts for letting initiatives take on a more regional role, they want to let locals play the main role in

reshaping their communities; rebuild ways that suit elderly residents; and limit the influence of the

government in Tokyo, which over centralizes decision-making.153 Japan’s usual way of doing business

need not apply here and the devastated north-east could also become a test bed for opening up the

economy.

Red tape and high business costs are already halting efforts in the region as a lot of barriers to

trade are preventing raw goods from nearby neighboring countries from entering the market. A way to

speed up the revival of Tohoku would be to turn the region into a special economic zone, similar to

Shenzhen in China.154 Once the immediate disaster relief is over, the first thing Tohoku will need is more

young people and it can do so by opening the flood gates to immigration. For years, Japan, xenophobic

in nature, has refused to have a serious debate on the subject. Letting foreigners to work or set up

businesses would bring in fresh capital and new ideas.155 As discussed earlier, lowering taxes would also

help. A special, low rate for Tokohu could encourage firms to rebuild in, or move to, the stricken area.156

If the aforementioned accelerates the region’s recovery, the Japanese might ask themselves: why not

make the whole country a low tax, bureaucracy free-zone?157

152 “Rebuilding Japan or Ruining It” The Economist Volume 399 Number 8731 p.43153 Ibid154 “A Good Place to Start” The Economist Volume 399 Number 8730 p.69155 Ibid156 Ibid157 Ibid

Conclusion

The new-Japan companies succeed by resisting old practices. As we have learned, they must

eschew the “main bank” system that keeps firms closely tied with their lenders and dissolve the keiretsu

system that keeps business interactions within family-like groups.158 Businesses need to bring more

women and old people into jobs to counter the decline in the working-age population. 159 Without such

radical change, half the nation’s talent will continue to be squandered. In Japan today, only 8% of

managers are female compared with 40% in America and 20% in China.160 There are more women on

corporate boards in Kuwait than in Tokyo and women are paid only as much as 60% - 70% of their male

counterpart’s salary for the same job.161 This, of course, needs to change and it needs to change now.

Japan also need to go beyond the concept of monozukuri – the well-honed skill of making things

– to shikake zukuri – the creation of products that attract demand by telling a new story, as Sony once

did with the Walkman. The story of the entrepreneur is the narrative of individuals who stake out new

business territory of their own. These entrepreneurs identify and capitalize on structural holes or

process needs.162 They tend to possess personality traits that clash with the bureaucratic managerial

types in large corporations in the capital city and academic institutions often far removed from reality.163

What we have learned though is that once they succeed in business, their success stories lead to

emulate within their regions and attracts a whole host of new comers and next-generation

entrepreneurs eager to take risk and seek their fortunes.164 In Japan, the national government should be

charged with promoting growth and sustainable development and must be responsive to local efforts

158 “New Against Old” The Economist Vol 398 Number 8720 p.72159 “An Old Problem“ The Economist Vol 398 Number 8720

160 “Watching China Whizz By” The Economist161 Ibid162 Ibata-Arens, Kathryn “Innovation and Entrepreneurship in Japan” p.165163 Ibid164 Ibid

and eschew from often misguided and wasteful national efforts.165 Doing such will provide incentives for

greater research, development, and manufacturing collaboration among firms in Japan and better

prepare them for the challenges facing the industrial world in the second decade of the 21 st century and

beyond.

Notes

“A Cloud with Green Lining” The Economist Vol 399 Number 8731

“A Good Place to Start” The Economist Vol 399 Number 8730

“An Old Problem” The Economist Vol 398 Number 8720

“Clusters Flustered” The Economist Vol 399 Number 8729

“Flailing” The Economist Vol 399 Number 8729

“Friends and Neighbours” The Economist November 20th, 2010

“Leaving Home” The Economist November 20th, 2010

“Let a Million Flowers Bloom” The Economist Vol 398 Number 8724

“Maverick as Hell” The Economist Vol 398 Number 8720

165 Ibid p. 203

“New Against Old” The Economist Vol 398 Number 8720

“Over Here!” The Economist January 15th, 2011

“Paddies vs Prius” The Economist November 13th, 2011

“Rare Action” The Economist Vol 398 Issue 8717

“Rebuilding Japan or Ruining It” The Economist Vol 399 Number 8731

“The Alarm Bells of Nagasaki” The Economist Vol 398 Number 8716

“Watching China Whizz By” The Economist August 21st, 2010

Anstey, Christopher “Japan Urged to ‘Seize This Moment’ or Face Another Lost Decade” Taken from Bloomberg.com

Domain, Edward “Flyover Geeks: Building an Entrepreneurial Community in Chicago” Taken from Chicagobusiness.com

Frangos, Alex “Japan Unlikely to Get in Yen’s Way” Taken from WSJ.com on May 10th, 2011

Glaeser, Edward Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier New York: The Penguin Press 2011

Ibata-Arens, Kathryn Innovation and Entrepreneurship in Japan: Politics, Organizations, and High Technology Firms Cambridge University Press 2009

Johnson, Nicholas “Google and Cisco to Join White House Effort for Entrepreneurs” as taken from Bloomberg News on April 20, 2011

Wakabayaslli, Daisuke “Japanese Farmers Look to the Cloud” The Wall Street Journal January 18, 2011 B5

Zielenziger, Michael Shutting Out the Sun: How Japan Created Its Own Lost Generation New York: Vintage Books 2006