I loved every aspect of Japan during my brief visit last fall — except one big thing. It hardly has any entrepreneurship. As someone who extols the virtues of entrepreneurship not only as a personal life path but as an ingredient to a country’s overall economic success, Japan has always been the glaring counter-example. The world’s second largest economy, and little to no entrepreneurial activity (relative to other rich nations).
In January I blogged HBR’s "Breakthrough Ideas for 2007" which proffered that "Entrepreneurial Japan" may no longer be an oxymoron.
In last week’s Economist, there was a special report on Japan, including a helpful update on entrepreneurial activity there. Summary: "Not invented here" is still the right label, but there are signs the tide may be changing:
One sign of progress is the higher turnover of new firms. Between 1997 and 2004 an average of 99 new companies a year were listed in Japan, up from 26 a year in 1981-89 and 36 a year in 1990-96. The number of delistings also rose, from four or five a year in the 1980s and early 1990s to an average of 41 a year in 1997-2004. This is due in part to the rise of second-tier stockmarkets such as Mothers in Tokyo and Hercules in Osaka, and the loosening of listing requirements on JASDAQ, which has made it easier for start-ups to go public. Mr Hori notes that there were 747 IPOs in Japan between 2001 and 2005, compared with 617 in America.
The slightly more flexible labour market has made it easier for start-ups to attract skilled workers. “Things are changing—people are coming out of big firms to join us,” says Mr Masuda, whose firm has hired engineers from JVC, Canon and other electronics giants. He says start-ups also offer more opportunities and better prospects to Chinese and South Korean engineering students in Japan: “We evaluate people for their skills, not their skins and eyes.”
The report neglected to mention that the Japanese edition of My Start-Up Life is coming out early next year, which hopefully will help the cause!
Not sure that the number of IPOs is a valid way to measure entrepreneurship. Also, certain industries in Japan have a much higher concentration of family-owned companies than in the U.S., such as the distribution industry. Government regulation has restricted the expansion of large publicly traded distribution companies, which in part has supported entrepreneurship in this industry. Lastly, there is now a large expatriate community of Japanese entrepreneurs doing business outside Japan. These expatriates are not factored into the analysis, although they may be evidence of the difficulty of being an entrepreneur in Japan.
There are so many reasons for this, too. It’s not like Japan is the only place that has this “problem”, either. New Zealand is a country where, if anything, you’ll find “lifestyle” entrepreneurs. Not everyone has the capitalist mindset (go make money, companies, etc) like we do.