Japan is building a culture to foster start-ups

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Japanese corporations are evolving and adopting a “start-up culture” to boost their business creativity and their country’s economic prospects, research shows.

“We can see that over the past 15 years or so, changes to the overall Japanese political economic context as it undergoes gradual but substantive reform over the past couple decades have created a far more vibrant start-up ecosystem in Japan than most people—both inside and outside Japan—realize,” says research associate Kenji Kushida of Stanford University’s Walter H. Shorenstein Asia-Pacific Research Center.

Kushida writes in a new research paper that, over the past decade, Japan has undertaken significant reforms that are now bearing fruit—reforms ranging from monetary and fiscal policy designed to encourage private investment to a range of regulations surrounding corporate law, university organization, labor mobility, and financial market reforms.

As a result—and combined with changes and challenges facing Japan’s large company sector—the country’s people are embracing a “vibrant start-up ecosystem,” Kushida says. He is optimistic that such a transformation can occur in a country where stability and corporate loyalty—not necessarily innovation or creativity—have long been dominant social and business values.

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Now, large Japanese firms are adjusting to performance crises and uncertain futures. As a result, the Japanese people are learning that with economic opportunity—the kind that startups promise—there also comes the risk of failure.

“A generational shift is accompanying social normative changes that are becoming more supportive of entrepreneurship and high-growth startups. Entrepreneurs and high-growth startups are celebrated in the popular media and in major events more than ever before,” Kushida writes.

Visits to Silicon Valley

The influence of California’s Silicon Valley is a factor. For instance, Japanese Prime Minister Shinzo Abe spoke last year at Stanford about how his country is learning the lessons of Silicon Valley and trying to build networks into the region. So Japan is likely to see an increase in the quality and quantity of high-growth startups, according to Kushida.

He says, “The current relationship between Japan and Silicon Valley is one in which Japanese firms, ranging from large firms to startups, are looking for ways to actively harness Silicon Valley. Large firms are trying by becoming investors in Silicon Valley venture capital firms, setting up their own venture capital arms, setting up branches in the valley, and trying to engage in ‘open’ innovation by entering into tie-ups and attempting to acquire select valley startups.”

A small but growing number of Japanese entrepreneurs visited Silicon Valley either to start their own companies or to grow firms that were started in Japan, Kushida says.

Start-ups need ‘joiners’ as well as founders

Still, Japan’s tech sector is a long way from what one finds in Silicon Valley, where many of the world’s most “disruptive” and game-changing firms are located. He writes, “When compared to Silicon Valley, the ecosystem is still small in scale, but so is virtually every other startup ecosystem.”

A growing flow of Japanese entrepreneurs and CEOs is coming to Silicon Valley to get more of a sense of how things work, Kushida says.

Kushida says that if current estimates hold, Japan should expect successful startups, all supported by a “stronger ecosystem of startup-related players, combined with more open large firms.”

These large firms, he says, will spin off entrepreneurs who leave to launch other new companies, which will accelerate the startup cycle in Japan.

Build a following

Key challenges facing Japan’s startup culture, Kushida says, are the need for more entrepreneurial role models and the “overall lack of experience in creating followers.” On the latter, he explains that while Japan has excelled at producing tech products for use in its own markets, it would benefit by getting other firms and parts of the world to adopt its products and services.

“Think of the negotiations that Apple undertook with telecom carriers around the world to roll out the iPhone worldwide, or how Google is continually negotiating with governments such as those in the European Union to allow its services to be adopted broadly,” he says.

Kushida’s paper appears in the Asian Research Policy journal.

Source: Stanford University