Daniel Suchenski 蛋蛋的西游记 a story of Sustainability: USA & Japan A Study in Entrepreneurship and Invention

http://www.siliconvalleywatcher.com/mt/archives/2008/06/tokyo_diary_day_3.php

“New business start-ups in Japan were down by 65% in 2001. In addition, recent surveys in Japan indicate that only about 1% of the population is interested in starting their own business, compared to the world leader in entrepreneurship (U.S.), which had an 8% rate. Given the understanding that entrepreneurship is the foundation and backbone of any economy, what can your government do to spark and multiply entrepreneurship?”[1]

Introduction

Thomas A. Garrett, an economist for the Federal Reserve Bank of St. Louis stated in an article from 2005 that “The entrepreneurial spirit is alive and well in the United States.”[2] His conclusion was part of a study that revealed that the U.S. population is quite entrepreneurial when compared with that of other countries. According to the study “More than 70 percent of Americans would prefer being an entrepreneur to working for someone else. This compares with 46 percent of adults in Western Europe and 58 percent of adults in Canada.”[3] Another study on entrepreneurial activity from 2002 found that, of “36 countries studied, the United States was in the top third in entrepreneurial activity and was the entrepreneurial leader when compared with Japan, Canada and Western Europe.”[4] It could be argued that this propensity for entrepreneurism has been the corner stone of American growth over the years.

Given the relationship between entrepreneurship and economic growth and development, “what policies should government—be it local, state or federal-pursue to foster entrepreneurship? There are many such policies, each of which fits into one of two categories: active policies and passive policies. Active policies include targeted tax breaks and targeted subsidies. As a result, these policies are often aimed at specific forms of businesses or entrepreneurs. Passive policies, however, include laws and regulations designed to lower the cost of doing business and provide a business atmosphere that encourages entrepreneurship.”[5]

Entrepreneurship

Ms. Jeanne Holden, writing for the US department of State states that, to some, “the entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for profit. Others emphasize the entrepreneur’s role as an innovator who markets his innovation. Still other economists say that entrepreneurs develop new goods or processes that the market demands and are not currently being supplied.”[6] Published on the US embassy in Tokyo’s website, Ms. Holden goes on to explain that, despite the precise definition of the ‘entrepreneur’, most economists agree that entrepreneurship is a “necessary ingredient for stimulating economic growth and employment opportunities in all societies. In the developing world, successful small businesses are the primary engines of job creation, income growth, and poverty reduction. Therefore, government support for entrepreneurship is a crucial strategy for economic development.”[7]

As the Business and Industry Advisory Committee to the Organization for Economic Cooperation and Development (OECD) said in 2003, “Policies to foster entrepreneurship are essential to job creation and economic growth.”[8] Government officials can provide “incentives that encourage entrepreneurs to risk attempting new ventures. Among these are laws to enforce property rights and to encourage a competitive market system.”[9] In addition to government incentives, there are cultural and societal incentives that can be looked at and perhaps changed to create a more accommodating environment. For example, “a community that accords the highest status to those at the top of hierarchical organizations or those with professional expertise may discourage entrepreneurship. A culture or policy that accords high status to the “self-made” individual is more likely to encourage entrepreneurship.”[10]

Importance of Government Policies

According to the Principles of Entrepreneurship, “entrepreneurial activity leads to economic growth and helps to reduce poverty, create a middle class, and foster stability. It is in the interest of all governments to implement policies to foster entrepreneurship and reap the benefits of its activity.”[11] Echoing Mr. Garrett’s assessment that, ‘passive policies promote entrepreneurship most broadly’, Ms. Holden explains that among the most “successful strategies for encouraging entrepreneurship and small business are changes in tax policy, regulatory policy, access to capital, and the legal protection of property rights.”[12]

Tax Policy

“Governments use taxes to raise money. But taxes increase the cost of the activity taxed, discouraging it somewhat. Therefore, policymakers need to balance the goals of raising revenue and promoting entrepreneurship. Corporate tax rate reductions, tax credits for investment or education, and tax deductions for businesses are all proven methods for encouraging business growth.”[13]

Regulatory Policy

"The simpler and more expedited the regulatory process, the greater the likelihood of small business expansion," says Steve Strauss, a lawyer and author, who specializes in entrepreneurship.[14] Reducing the “cost of compliance with government regulations is also helpful. Governments can, for example, provide one-stop service centers where entrepreneurs can find assistance and allow electronic filing and storage of forms.”[15]

Access to Capital

According to Strauss, “the first policy necessary to promote small-business development is one that assists would-be entrepreneurs find the money they need to get started.”[16] There are required “procedures and fees as well as the initial costs of the new enterprise itself. Therefore, the most important activity a government can undertake is to assist potential entrepreneurs with finding money for start-ups. In the United States, the Small Business Administration (SBA) helps entrepreneurs get funds. The SBA is a federal agency whose main function is guaranteeing loans. Banks and other lenders that participate in SBA programs often relax strict loan requirements because the government has promised repayment if the borrower defaults. This policy makes many loans available for risky new businesses. Legal Protection of Property Rights: Small business can thrive where there is respect for individual property rights and a legal system to protect those rights. Without property rights, there is little incentive to create or invest.

For entrepreneurship to flourish, the law needs to protect intellectual property. If innovations are not legally protected through patents, copyrights, and trademarks, entrepreneurs are unlikely to engage in the risks necessary to invent new products or new methods.”[17] According to the World Bank report, "Doing Business 2007: How to Reform," new technologies are adopted more quickly when courts are efficient. "The reason is that most innovations take place in new businesses-which unlike large firms do not have the clout to resolve disputes outside the courts."[18]

Creating an Entrepreneurial Culture

Creating an entrepreneurial culture, and by proxy, a small business economy is not easy. Having said that, “there are many things that go into creating a successful small-business economy, but surely a significant one is a collection of entrepreneurs willing to start new businesses. For that to occur, citizens must be able to learn business skills. There are several ways in which governments can assist them in doing this:”[19]

“Offer financial incentives for the creation of business incubators. These usually provide new businesses with an inexpensive space in which to get started and services - such as a copier and a fax machine - which most new businesses couldn't otherwise afford. Often business incubators are associated with colleges, and professors offer their expertise.”[20]
“Use the Internet. The SBA has online tutorials that teach business skills and ideas to anyone with Internet access…[21] Any government that wishes to promote small and medium-sized enterprises should consider doing something similar.”[22]
“Enhance the status of entrepreneurs and businessmen in the society. Governments might create local or national award programs that honor entrepreneurs and call on business leaders to serve on relevant commissions or panels.”[23]

Intellectual Property

Strauss has a great deal to say about the importance of intellectual property rights as it relates to business and specifically the entrepreneur. According to Strauss, any government that wants to “encourage small business needs to produce laws that protect the innovations of entrepreneurs. Innovation is at the very heart of small-business growth, but if innovations are not legally protected, entrepreneurs will be unlikely to engage in the risks necessary to invent new solutions to societal problems. Accordingly, policies that protect patents, copyrights, and trademarks are critical if small business is to flourish.”[24]

Protecting intellectual property is “a practical business decision. The time and money invested in perfecting an idea might be wasted if others could copy it. Competitors could charge a lower price because they did not incur the startup costs. The purpose of intellectual property law is to encourage innovation by giving creators time to profit from their new ideas and to recover development costs. Intellectual property rights can be bought, sold, licensed, or given away freely. Some businesses have made millions of dollars by licensing or selling their patents or trademarks. Every entrepreneur should be aware of intellectual property rights in order to protect these assets in a world of global markets.”[25] Some main forms of intellectual property rights include:

Patents

“A patent grants an inventor the right to exclude others from making, using, offering for sale, or selling an invention for a fixed period of time - in most countries, for up to 20 years. When the time period ends, the patent goes into the public domain and anyone may use it.”[26]

Copyright

“Copyrights protect original creative works of authors, composers, and others. In general, a copyright does not protect the idea itself, but only the form in which it appears - from sound recordings to books, computer programs, or architecture. The owner of copyrighted material has the exclusive right to reproduce the work, prepare derivative works, distribute copies of the work, or perform or display the work publicly.”[27]

Trade Secrets

Trade secrets consist of knowledge that is kept secret in order to gain an advantage in business. "Customer lists, sources of supply of scarce materials, or sources of supply with faster delivery or lower prices may be trade secrets," explains Joseph S. Iandiorio, the founding partner of Iandiorio and Teska, an intellectual property law firm. "Certainly, secret processes, formulas, techniques, manufacturing know-how, advertising schemes, marketing programs, and business plans are all protectable."[28]

Trademarks

“A trademark protects a symbol, word, or design, used individually or in combination, to indicate the source of goods and to distinguish them from goods produced by others. For example, Apple Computer uses a picture of an apple with a bite out of it and the symbol, which means registered trademark. A service mark similarly identifies the source of a service. Trademarks and service marks give a business the right to prevent others from using a confusingly similar mark.

In most countries, trademarks must be registered to be enforceable and renewed to remain in force. However, they can be renewed endlessly. Consumers use marks to find a specific firm's goods that they see as particularly desirable - for example, Barbie dolls or Toyota automobiles. Unlike copyrights or patents, which expire, many business's trademarks become more valuable over time.”[29]

Finding Human Resources

Writing the article ‘The Japanese Entrepreneur: Making the Desert Bloom’, authors Feigenbaum and Brunner, state that “startups can only grow as quickly as they can recruit skilled people”.[30] Inc.com’s Issie Lapowsky says that “At a start-up, you need employees that are in it for the long haul and fit your unique culture.”[31] Toward that end, she suggests the importance of face-to-face interactions/networking as well as taking full advantage of the offerings that the internet has. Jarie Bolander, writing for The Daily MBA, has a more in-depth explanation for how companies can attract, motivate and maintain startup talent. According to Bolander, the things that are important for attracting talent are: interesting work, competitive salary, competitive benefits, talented management, other high quality talent, and a flexible work environment.[32] For motivating talent in startups Bolander suggests: meaningful work, freedom to create, realistic expectations, clear goals and objectives, flexibility.[33] Finally, for retention, Bolander stresses the importance for management to: provide open communication, treating talent the same, be flexible within reason, looking out for needs beyond the company, being open to suggestions.[34] The writers for the Stanford article on Japanese entrepreneurship add that “human resources are as essential to startups as financial resources, yet the Japanese entrepreneurial habitat does not provide startups with the human resources that 33 they need. The problems are twofold: the university system does not equip graduates with practical skills, and most professionals prefer to work for large companies.”[35]

Finding Financial Resources

Gaston Arevalo, Daniel Kovacs and Cristian Schreiner, writing for Duke University on entrepreneurship in Japan, state that “the venture capital environment in Japan is in its early stages. No solid core of angels providing seed funding to start-ups. However some have emerged to support the next generation of entrepreneurs (examples: Isao Okawa, Masaya Nakamura, Testuro Funai). The increase of independent capital firms are expected to expand investments to promising young companies. Foreign venture capitalists are beginning to enter Japan (ex. Goldman Sachs, J.P Morgan, Kyocera) The Japanese monetary system, bank structure and services provided by security firms are slowly more favorable for the entrepreneur.”[36] The writers for Duke University suggest that the Japanese government should continue “efforts to create a more favorable environment for new businesses. Reinforce stock market (exit for VC firms). Banks forced to write off bad loans to end banking crisis and provide cash for start ups. Tax cuts that favor entrepreneurship and new business creation. Creation of new local entrepreneurial districts – incubators. Reduction in governmental red tape in starting a business. Transition to a new economy to encourage growth. Continue elementary, secondary and university curriculum reforms”[37] The writers for the Stanford article on Japanese entrepreneurship agree with those of Duke and add that,

“In the USA, VCs play a prominent role in almost every story about startups. VCs invest large amounts of money, generally millions of dollars, in a small number of startups. The VCs take large equity stakes in their portfolio companies and, by the second or third round of financing, the founder has usually been reduced to a minority shareholder. One or more seats on the Board of Directors are occupied by VCs. Using their power on the Board and their close relationship with the entrepreneur, they play an active role in shaping the startup’s development. Determined to protect their investment, VCs will not hesitate to fire a CEO or insist upon other dramatic changes. The financial backing and active management participation of VCs with aggressive financial goals helps US startups to grow rapidly.

The Japanese venture capital sector has not yet matured sufficiently to support leading edge startups. Compared to the USA, there is less venture capital available in Japan. The mechanisms that VCs use to liquidate their investments are not well developed, causing VCs to avoid early stage investments vital to leading edge startups. Venture capital funds are structured in ways that discourage risk taking and staffed with talent from conservative financial firms, who have been trained to avoid risk and have little or no experience with startups and high technology.”[38]

The Problem with Japan

According to a NY Times article dated January 27, 2011, many young Japanese are encountering ‘generational roadblocks’. Forced to work “so-called irregular worker, kept on a temporary staff contract with little of the job security and half the salary of the “regular” employees, most of them workers in their late 40s or older.”[39] The article goes on to say that “As this fading economic superpower rapidly grays, it desperately needs to increase productivity and unleash the entrepreneurial energies of its shrinking number of younger people. But Japan seems to be doing just the opposite. This has contributed to weak growth and mounting pension obligations, major reasons Standard & Poor’s downgraded Japan’s sovereign debt rating on Thursday. “There is a feeling among young generations that no matter how hard we try, we can’t get ahead,” said Shigeyuki Jo, 36, co-author of “The Truth of Generational Inequalities.” “Every avenue seems to be blocked, like we’re butting our heads against a wall.” An aging population is clogging the nation’s economy with the vested interests of older generations, young people and social experts warn, making an already hierarchical society even more rigid and conservative. The result is that Japan is holding back and marginalizing its youth at a time when it actually needs them to help create the new products, companies and industries that a mature economy requires to grow. A nation that produced Sony, Toyota and Honda has failed in recent decades to nurture young entrepreneurs, and the game-changing companies that they can create, like Google or Apple — each started by entrepreneurs in their 20s.”[40] Additionally, the writers for Duke University point out some glaring cultural roadblocks to Japanese entrepreneurial success. These include: “Cultural fear of failure still has a strong influence. Risk aversion permeates the Japanese society. Small business failure is not viewed as a learning experience. Top graduates see high risks, and not high returns from working at startups. Social pressure from parents is high for work at famous big companies.”[41]

Managing Entrepreneurial Risks

For entrepreneurship to thrive in a society, “entrepreneurial risks must be shared. Creating a leading-edge startup involves more risk—both financial and personal—than most individuals or small groups of people can tolerate on their own. To make the risk bearable, many other players in the entrepreneurial habitat need to help bear the risk. Risk-sharing takes many forms: supporting a friend or family member who wants to start a company, choosing to take a job with a startup instead of a large company, hiring a failed entrepreneur, leaving a large company to become the CEO of a startup, investing early in startups, buying innovative products from startups, providing professional services to startups in exchange for stock options. Risk-sharing is actually a certain kind of risk-taking, in which some of the risks faced by entrepreneurs and startups are assumed by other habitat players.

Because the NIMBY attitude toward startup businesses is so strong in Japan, risk sharing by habitat players is unlikely to occur spontaneously. The “invisible hand” that guides individual decision making is conditioned by the decision maker’s model of his world—his assumptions and attitudes—and is moved by self-interest. Therefore, it is necessary for governments at the national and prefectural level to change the entrepreneurial habitat in many ways, changing the “rules of the game,” so that attitudes, assumptions, and perceptions of self-interest will change. In the next chapter, we offer suggestions for creating working models of how to alter the entrepreneurial habitat.

The key to entrepreneurial success is not simply taking more risks, but taking the right kinds of risks. Risk must be managed. Managing risk means evaluating the risks and potential benefits of different possible actions and choosing the action that maximizes risk-adjusted rate of return. Information technology purchasing provides one example. US companies hired IT specialists who could evaluate IT investments and gave them considerable authority over purchasing decisions. During most of the 1980s and the early 1990s, this approach seems to have enabled US firms to effectively manage the risks of adopting new IT technologies. At the end of the 1990s, risk management gave way to excessive risk-taking, as US companies overestimated the potential rewards from IT products and overspent. Japanese companies, at the other extreme, hired expensive system integration companies, an approach that avoided risk rather than managing it.

Effective risk management requires the existence and use of skilled professionals capable of gauging risks and potential payoffs. At present, Japan has many professional risk avoiders and few risk managers. To develop professionals skilled in the management of entrepreneurial risks, the entrepreneurial habitat must motivate individuals to take intelligent risks. In Japan, a culture of risk aversion has produced many skilled risk avoiders. A culture of risk management will produce skilled risk managers. To encourage risk-taking, the stigma of failure must be eliminated. Failures must be analyzed and learned from. Entrepreneurs who have failed must be given a second chance through mid-career hiring. Only those cultures that respect failure can live on the leading edge.”[42]

Application of Entrepreneurial Strategies and Techniques

Writing for MIT’s Entrepreneurial Review, Jia-Chuan Kwok questions Where are All the Entrepreneurs Gone in Japan? “For a nation that once boasted the likes of Sony, Toyota and Mitsubishi as its entrepreneurial heralds, Japan’s entrepreneurial record in the new millennium is surprisingly sparse. Indeed, entrepreneurs in Japan have become the exception rather than the norm. Common problems faced by aspiring entrepreneurs include the lack of venture capital, labyrinthine government regulations, and the dominance of large companies. Yet for all these factors, it takes two hands to clap – you need both an environment conducive to startups as well as people who aspire to be entrepreneurs.”[43]

The Japanese government has worked very hard to incentivize entrepreneurship. Indeed, “Toyo University professor Takehiko Yasuda has detailed an extensive list of policy responses initiated since the early 2000s, including the removal of minimum capital requirements for limited liability companies and new startup loan programs to act as a quasi-state venture capitalist.[44] Part of the government initiative attempts to encourage the private sector to “open up venture capital to promising startups. Yet these measures have led to few appreciable results. Robert Eberhart, a fellow at Stanford University (and expert on entrepreneurship in Japan), estimated the annual number of venture capital deals made in Japan to be half that of the US, at only a quarter of the average deal size (US$1 .9m v US$ 7.1 million per deal).[45]

While the location of the Japanese entrepreneur may be in question, that has not always been the case. There have been notable internationally successful Japanese entrepreneurs. Evan Carmichael has written extensively on one such Japanese entrepreneur, Akio Morito. “There is no secret ingredient or hidden formula responsible for the success of the best Japanese companies,” said Morita. “We all learn by imitating, as children, as students, as novices in the world of business. And then we grow up and learn to blend our innate abilities with the rules or principles we have learned.”[46]

“Whether it was his innate abilities or the rules he had learned, Morita was able to translate that into not only his own success, but also Japan’s. He helped put his country back on the map, while building his own reputation across the world. Indeed, in 1998, a Harris survey revealed that Sony was ranked the number one brand name by American consumers, ahead of Coca-Cola and General Electric.”[47] Carmichael lists five factors that lead to Morito’s success. These are:

Observation

“Morita hated market research. Instead, he believed in the power of simple observation. What were people out on the streets doing? What were they wearing? What were they listening to? How could Sony create something that would improve their experience? That was how Morita came up with his creative and innovative product ideas, from practical inspection and intuition.”[48]

Marketing

“Morita wanted his company to be a player on the global stage, and he marketed it accordingly. From creating a business name that would be easy to remember in every language, to ensuring his products had consistent names across the board, Morita strove to create a strong global corporation.”[49]

Management

““The key factor in industry is creativity,” said Morita. “There are three creativities: creativity in technology, in product planning, and in marketing. To have any one of these without the others is self defeating in business.” According to Morita, it was management’s main responsibility to inspire this creativity. He did this by treating his staff as equals, providing challenging work, and creating a familial and safe working environment.”[50]

Fearless

“When it came to both his home and work lives, Morita flew in the face of thousands of years of Japanese tradition. He risked everything on a small startup with a friend. He even dared to challenge the global superpower, America. When it came to his beliefs, Morita was never afraid to speak his mind.”[51]

Innovation

“At Sony, roughly six percent of sales have always been invested back into research and development. Morita wanted his company to always be at the cutting edge of the industry. Even where that meant a market had not yet been established, Morita was willing to take the risk that the demand was out there, and that he would find it.”[52]

Realizing Entrepreneurial Values

As a plan for realizing the goals of the Japanese government, ‘innovation 25' was introduced. Proposed in 2007 and established by, the then prime minister, Abe. “In order to realize the Abe Cabinet’s new national image for Japan, known as “Beautiful Country”, it is essential to maintain dynamic economic growth in the face of a declining population and an ageing society. It is critical to empower Japan’s economy through innovation and an open attitude. Noting that continuous innovation will drive growth and lead sustainable development for our common future, the Abe Cabinet pledged to formulate and execute a long-term strategy initiative for Japan, called “Innovation 25”, with a view toward year 2025.”[53]

Educational Solutions

According to the authors of the Duke report, there are four important reasons to teach about entrepreneurial efforts in Japan. These are:

Essential to promote starting a business as a professional alternative to younger generations.
Promote a culture of innovation and risk taking.
Eliminate some concerns that might exist about fear of failure when starting a business.
Put pressure on government to create programs to aid young Japanese entrepreneurs.[54]

Other implications or need for updates in the Japanese education system include:

Universities are less industry oriented in Japan (especially than in the U.S).
Entrepreneurship Education is not viewed as desirable as other professions like engineering.
Japanese universities are less well positioned to train students to start up their own businesses.
One historical explanation: anti business feelings that arose among students and faculty as a result of the left wing movements in Japan of the 1960’s and 1970’s.[55]

5 Ways Japan can Arrest the Fall

Everyone seems to be concerned about the recent trends and general stagnation coming out of Japan. Even Korea’s JoongAng Daily compiled a list of 5 ways Japan can ‘arrest the fall’. Published in December of 2010, the recommendations include:

“One: taxes. Raising them would be economic suicide in the current global environment, and yet it often dominates the discourse in Tokyo. So much energy goes into debating whether to increase consumption taxes to pay down Japan’s massive debt. Little goes into questioning how doing so would make things worse. Japan needs to increase wealth and get consumers to spend more. Increasing taxes on consumption for already over-taxed households is economic suicide. It didn’t work in the late 1990s and it won’t work now. Lower taxes are the way to go, and Kan falls short. It’s an incision, not a serious tax cut. Supply-side economics is a discredited dogma. Yet Japan needs to empower small to mid-sized companies to create new economic energy and jobs. Tax cuts could be paid for by halting wasteful public works projects.

Two: get serious about trade. South Korea is gushing over its hard-won free-trade agreement with the U.S. Why can’t Japan do the same? The nation’s agriculture-industrial complex would be a place to start. Farmers are lavished with generous government subsidies and more political leverage than their modest share of gross domestic product warrants. Nor is the strong yen the problem - it’s Japan’s protection of domestic inefficiencies. Kan’s Democratic Party of Japan needs to think about the rest of the country’s 126 million people, not just narrow special-interest groups. In the age of China, it has no choice. Japan can continue fighting an unwinnable war against globalization or welcome the benefits that come with freer trade.

Three: speak more English. It’s no coincidence that two of Japan’s most innovative companies, clothing chain Fast Retailing Co. and Internet shopping mall Rakuten Inc., are pushing the world’s business language on employees. As the population shrinks and a strong yen swells companies’ buying power for overseas acquisitions, better international communication is crucial. So is wooing top-quality talent. Ask any hedge-fund adviser or economist why they aren’t flocking to Tokyo and language is almost certain to come up. For an economy that has peaked, becoming a more hospitable place for those Harvard M.B.A.s and other talent is vital. The best way to take advantage of a changing world is to speak its language.

Four: tap the aging population. On recent trips to China I’ve been amazed by all the 60-something Japanese you run into there, all gainfully employed. While it’s hard to quantify, a recent Asahi Shimbun article tells the tale of IAT (China) Auto Technology Co., an automobile design and development company. About 40 Japanese engineers who used to work for names like Isuzu Motors Ltd. and Mitsubishi Motors Corp. are playing a central role in developing China’s assault on auto makers, Asahi reported. Japan should do more to benefit from what Nicholas Smith, director of equity research at MF Global in Tokyo, calls “perfect demographics.” Japan has a surplus of skilled retirees and women to drive economic growth. It’s not doing enough to harness either strength. A nation with a declining birth rate and aging workforce needs to do with what it has.

Five: get hip to immigration. An obvious way to take advantage of Asia’s growth is relaxing immigration rules. Foreigners made up just 1.7 percent of Japan’s population in 2009. That compares with 25 percent in Australia and 14 percent in the U.S. as of 2008, based on Organization for Economic Cooperation and Development statistics.
The U.S. is far more entrepreneurial than Japan and boasts higher productivity. Australia is one of the only major economies to steer around the global crisis. In both cases, diverse, vibrant and flexible labor forces served their economies well. Kan wants to double the number of skilled foreign workers by 2020. Japan needs to go much further than attracting the Harvard set. It needs to welcome loads of low-wage workers, too. Just like the corporate tax plan, this does show that Japan is evolving. The trouble is, it’s doing so too glacially to make much of a difference.”[56]

Special Entrepreneurial Zones

The writers for Stanford have a possible solution for Japan to realize new entrepreneurial ventures and by proxy stay abreast of innovation. According to the authors, “vibrant entrepreneurial activity can make the difference between a region that declines and a region that prospers. In the preceding chapters, we saw that Japan’s entrepreneurial habitat functions poorly. What can a region do to redesign the habitat and promote the growth of new companies? To regions struggling with this problem, we propose a special kind of zone that we call a “special entrepreneurial zone” (SEZ).”[57] The real advantage of these proposed SEZ zones is that “Within the SEZ, carefully engineered policies compensate for the problems that hinder entrepreneurship elsewhere. Business conditions and government regulations are specially designed to be favorable to leading-edge startups.”[58]

“Creating an SEZ requires the participation of all major players in the entrepreneurial habitat. The SEZ must be a joint effort of a region’s governments, companies, and universities. Also essential is the participation of venture capitalists, law firms, consultancies, accounting firms, technology licensing offices, industrial design firms, and others whose services are indispensable to startups. Multilateral initiatives are never easy to implement, but we believe that the importance of entrepreneurship to a region’s economic future will provide a strong motivation for major regional players to cooperate.”[59]

“Recently, there has been considerable interest in the idea of special economic zones in Japan. However, these special economic zones are very different from the SEZ that we are proposing. Japan’s planned special economic zones cover a full range of economic activity, while our SEZ is narrowly focused on promoting entrepreneurship and small leading-edge startup companies. Furthermore, the zones that are being discussed by the national and prefectural governments generally make relatively small changes over broad areas—an entire city or prefecture. Our SEZ, by contrast, makes profound adjustments within a narrowly circumscribed area. We believe that such concentrated efforts will be necessary to stimulate behavior markedly different from the status quo.”[60]

Conclusion

In conclusion, there are numerous avenues for Japan to take to realize the economic and societal benefits of entrepreneurism. Some of these changes may be easier than others. While it is clear that “closer ties between university and industry and promotion of entrepreneurship” is important, universities may also directly take up the call.[61] According to the report by Duke University, “new faculty policies appear to be promoting professor led start-up companies.”[62] This assessment is made due to the fact that “more student and junior faculty are now appearing on patent application.”[63] While educational ventures could well end up being a source of growth for Japan right now the education system is an obstacle. Other obstacles include: educating / managing investors, market access often poor for any new company (exit strategies), conflicting attitudes towards youth and women, exclusion of product development people from initial product planning, and promising entrepreneurs might opt to pursue their business idea outside of Japan.[64] Now is the time and “now is the opportunity to unlock the enormous strengths in talent, technology, and the desire to contribute that resides in the spirit of the many would be entrepreneurs in Japan. I have met many young Japanese at Time 24, in Bit Valley, at universities, and at conferences such as the recent Asia Technology Initiative Conference held in Tokyo. They have the talent and the spirit for entrepreneurship. They are a national treasure that needs to be unlocked;”[65] only time will tell if these treasures will see the light of day.

Daniel Suchenski 蛋蛋的西游记 a story of Sustainability

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Wednesday, June 8, 2011

USA & Japan A Study in Entrepreneurship and Invention

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