A Vision of the Japanese Innovation System and How It Works

Martin Fransman

in Visions of Innovation

Published in print May 1999 | ISBN: 9780198289357
Published online November 2003 | e-ISBN: 9780191596261 | DOI:

Series: Japan Business and Economics Series

 A Vision of the Japanese Innovation System and How It Works

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The chapter begins with a summary of the innovation process in Japanese companies, paying particular attention to several distinctive Japanese forms of organization, such as the lifetime employment system (referred to in the Japanese context as the assumption of no exit) and the importance of committed shareholders; the effects of these forms of organization on the innovation process are examined. The influence of the Japanese government on the innovation process is then analysed, and it is argued that while the ‘engine’ of innovation is located in Japanese companies, organs of the Japanese government have played an important supportive role in facilitating the innovation process. Attention is then turned to the part played by the Ministry of International Trade and Industry (MITI). While it has often been argued that MITI is the most important organ of the Japanese government in terms of impact on the process of industrial innovation, MITI's expenditure on research and development (R&D) is dwarfed by that of the Ministry of Education and the Science and Technology Agency; this paradox is explained in terms of MITI's location at the centre of a vast information processing network. Finally, attention is turned briefly to the role of universities in the Japanese Innovation System, and it is argued that although Japanese universities are often weaker than their leading counterparts in the other major industrialized countries (in terms of their contribution to frontier research), the Japanese university system nevertheless makes an important contribution to the innovation process.

Keywords: companies; firms; government; innovation; Japan; Japanese Ministry of International Trade and Industry; lifetime employment; organization; research and development; shareholders; universities

Chapter.  5352 words. 

Subjects: Microeconomics

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