Twenty years ago, with George Bush Sr. in command of the country, the US was gripped with almost a national hysteria about Japan.
The hottest read in business and government circles was Trading Places: How We Are Giving Our Future to Japan and How to Reclaim It, by Clyde Prestowitcz. Meanwhile, on the fiction best-selling list, was Michael Crichton’s Rising Sun, about a Japanese attempt to destroy the American computer industry. Toyota cars were winning quality awards while GM cars dropped parts in the street. Venture capital firms were talking about adopting keiretsu structures.
Flash forward to 2008, when Japan’s competitiveness is wilting from dynamic economies elsewhere in the region including Taiwan, Singapore, Hong Kong, South Korea, and, of course, mainland China.
What’s gone wrong?
In a recent Op-Ed in The Japan Times, Andrei Hagiu and Robert Dujarric opine that Japan’s hierarchical corporate structure has stifled innovation. Hagiu is a Harvard Business School professor and Dujarric heads the Institute of Contemporary Japanese Studies at Temple University Japan.
Here’s how they see it:
To stay ahead of China, Japan needs to develop players who innovate at the top of the value chain — providers of things like software, content and services. But these sectors are the country’s Achilles’ heel, as exemplified by the absence of Japanese companies internationally in these fields as well as consulting, advertising and media. Unless it changes course, Japan could be crushed between the anvil of China’s manufacturing clout and the hammer of Western companies’ prowess in services.
Ironically, Prestowitcz saw keiretsu, the creation of interlocking partnerships between top companies and vendors, as a way that Japan could lock in economic growth. But Hagiu and Dujarric argue that the rigidness of keiretsu is actually holding the country back. “This practice can stifle entrepreneurship by creating a kind of planned economy within the keiretsu that fails to transmit market signals.”
If you do business in Japan or just have an interest in the country, this is a good piece from which to ponder its economic future.
