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Paper short abstract

Since 2000, Japan's Start-up ecosystem has changed dramatically. We analyze structural reforms related to financing startups, attracting entrepreneurs/labor, universities' roles in creating new companies, large firms' relations with new firms, and state policies targeting a healthier ecosystem.

Paper long abstract

Over the last 15 years, Japanese leaders have strongly encouraged entrepreneurship, venture capital, and a greater role for universities in creating new firms and technology. They have embarked on many reforms to create a more vibrant ecosystem for startups, which are deemed critical to economic growth and job creation. This paper analyzes structural reforms in five key parts of the Start-up Ecosystem: finance, entrepreneurial talent/labor, universities, large firms, and the government.

The finance section analyzes venture capital firms—who runs them, where they get money from, and how much and in what type of firm they invest. It investigates legal changes, such as stock options, limited liability partnerships, and preferred shares, that make creating and investing in new companies more attractive.

Other reforms are decreasing major obstacles to entrepreneurship. These include reducing personal guarantees and stock buyback clauses that lead entrepreneurs to lose their personal assets if they fail. Changes in bankruptcy and employment laws, and attitudes toward failure and wealth, have also reduced disincentives. Many large companies' fragility also makes entrepreneurship more attractive.

Legal changes have transformed the role of national universities in the start-up ecosystem. Professors, once civil servants unable to earn extra pay, can now consult for and create new firms, boosting start-ups and technology transfer.

Large firms have long played a key role in Japan's National Innovation System, but reliance on closed innovation within their groups meant they, if anything, discouraged start-ups. Large companies are gradually shifting toward open innovation, acquiring new firms, and purchasing from new companies, thereby creating a healthier ecosystem.

Government reforms go beyond those mentioned above. As part of its "Third Arrow", Prime Minister Abe's Administration is creating huge venture capital funds at top universities, negotiating with banks to reduce personal guarantees, providing greater angel tax benefits, and linking Japanese entrepreneurs with Silicon Valley. Dozens of other government programs fund, educate, and train entrepreneurs and startups, and encourage large companies shift toward open innovation.

We assess these structural reforms since the late 1990s, and how and to what degree they are contributing to the emergence of a healthy Start-up Ecosystem in Japan.

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Paper short abstract

This paper provides insights on how the commitment balance in the six mutual relations between companies, institutional investors, workers/consumers, and government can be sustained in the long run and how the country should tackle some of the unbalanced relations.

Paper long abstract

In the aftermath of the bubble economy of the late 1980s, corporations have been racing to streamline their balance sheets and to maximise their short-term profits in Japan. The fundamental problem was that this happened collectively, creating a fallacy of composition at the macro scale and sparking a vicious cycle of low growth and deflation. Such behaviours can be found not only in corporations but also among institutional investors.

Hypothesis in this paper is that commitment balance between the major constituents should be maintained for sustaining healthy corporate activities in Japan. The four major parties, namely corporations, institutional investors, workers/consumers, who are employed by corporations, and government, who collects tax from the rest of these three sectors, are considered as important constitutors in a modern society. The ideal optimal balance in this paper is defined as a condition that each party can maintain mutual interests with the rest of the three counterparts. As a measure to investigate the balances of interests, the following three factors are taken into consideration: information symmetry, willingness to engage, and sustainability of the relations. By organising the analysis in the matrix format, it provides insights on how the commitment balance in the six mutual relations between companies, institutional investors, consumers, and government can be sustained in the long run and how the country should tackle some of the unbalanced relations.

As for methodology, it relies mostly on literature reviews on company-investor relations and multi stakeholder approach, as well as analyses on recent policy measures in the related field, such as releasing integrated corporate information, the governance and stewardship codes, and institutionalising companies' integrated reports.

This paper attempts to sum up and find remaining issues from the results in the author's recent analyses on fallacy of composition of corporate activities, integrated reports, stewardship codes, and employer-employee relations.

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Paper short abstract

By analyzing the CRD, a database on Japanese small businesses financial data, we clarified how the Japanese small businesses have been affected by the Lehman Shock and Abenomics, an economic policy package implemented by the Abe Administration.

Paper long abstract

As in other major industrial countries, small businesses in Japan (firms either with 1-300 employees or with capital less than \300 million) play an important role in her economic activities. Their business conditions are showing the sign of improvement, but they still face a number of challenges and thus their revitalization remains one of the most important policy issues in Japan. But their business performances have not been well analyzed due to the lack of database on their financial results especially in those with less than 20 employees accounting for 85% of them. We overcome this difficulty by using the database named as the Credit Risk Database (CRD) on small businesses financial data managed by CRD Association in Tokyo, Japan.

In this paper we try to clarify how the Japanese small businesses have been affected by the Lehman Shock and Abenomics, an economic policy package implemented by the Abe Administration, to pin point the policy agenda that are urgently required, and to depict the typical character of Japanese small businesses by analyzing the CRD. And we have found the following three facts. First, small businesses in Japan have managed to overcome the adverse effects of the Lehman Shock through cost reductions but their recovery is not strong enough to clear the pre-Lehman Shock performance. Second, Abenomics have contributed to support the recovery of Japanese small businesses but its effect remains to be mild. Third, in the midst of the Lehman Shock two different types of financial behavior were observed in the Japanese small businesses; small firms with employees of less than 10 piled up the cash holdings by increasing the long-term borrowings and maintained such cash positions, while other firms continued to reduce borrowings.