Competition, Innovation, and Growth in Japan PDF
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Yuji Honjo Editor Competition, Innovation, and Growth in Japan Competition, Innovation, and Growth in Japan Yuji Honjo Editor Competition, Innovation, and Growth in Japan 123 Editor YujiHonjo FacultyofCommerce ChuoUniversity Hachioji,Tokyo,Japan ISBN978-981-10-3862-4 ISBN978-981-10-3863-1 (eBook) DOI10.1007/978-981-10-3863-1 LibraryofCongressControlNumber:2017939912 ©SpringerNatureSingaporePteLtd.2017 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpartof thematerialisconcerned,specificallytherightsoftranslation,reprinting,reuseofillustrations,recitation, broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionorinformation storageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilarmethodology nowknownorhereafterdeveloped. Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant protectivelawsandregulationsandthereforefreeforgeneraluse. Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformationinthisbook arebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor theeditorsgiveawarranty,expressorimplied,withrespecttothematerialcontainedhereinorforany errorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardtojurisdictional claimsinpublishedmapsandinstitutionalaffiliations. Printedonacid-freepaper ThisSpringerimprintispublishedbySpringerNature TheregisteredcompanyisSpringerNatureSingaporePteLtd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Preface IfIhaveseenfurther,itisbystandingontheshouldersofgiants. FromaletterfromIsaacNewtontoRobertHooke Theroleofabookistoconveythehistoryoflessonslearnedfrompredecessors. Without exception, authors have learned through books written by those with experience and knowledge. Authors’ learned lessons can be passed on to future generationsthroughnewlypublishedbooksjustascultureispassedonandinherited fromancestors.Thisprocessisessentialtothedevelopmentofresearchfields. Threebooks—TheTheoryofGrowthinaCorporateEconomy,GrowthThrough Competition, Competition Through Growth,and Technology and IndustrialDevel- opmentinJapan,writtenbyProfessorHiroyukiOdagiri,co-authorofthisbook— havehadasignificantimpactonthefieldofbusinessandeconomicsinJapan.The first book emphasizes firm behavior in the economy while targeting the growth of the national economy. The second book discusses the relationship between competitionandgrowthbyhighlightingtheresourcesofthefirm,andthethirdbook introducesinnovationsinJapanfromtheperspectiveofJapanesetechnologicaland economichistoryusingsixindustrialcasestudies.Thesethreebooksofferwisdom represented by three essential economic concepts—competition, innovation, and growth.Thisbookisanattempttoachievetheinterplayofcompetition,innovation, andgrowthbasedonthethreeconceptsdebatedinthethreebooks. Inmanyplaces,theinterplayofcomponentscanoftengeneratefurthercreative works.Jazzmusicisanexample.Theinterplayofvariousmusicinstrumentssuch as base, drums, and piano (or trumpet or saxophone) can create new artificial works. Each instrument represents a different sound source, but one instrument’s soundencouragesthatofanotherinstrumenttocreateanextraordinarysound.The interplayofsoundsgenerateschangesinstandards,whichthenbecomeestablished jazzsoundstoberecreatedinotherworks. This book is for scholars and students and elucidates the importance of the three concepts—competition, innovation, and growth—by providing cases and empiricalstudiesonfirmsandindustriesfromdifferentauthors.Whilecompetition, innovation, and growth are variable components in the economy, the interplay of v vi Preface competition, innovation, and growth can also play a significant role in stimulating the economy. Such interplay is expected to reverse the trajectory of former strong economiesthatarenowstagnating,suchasthatofJapan. Thisresearchprojectwasmadepossiblethroughtheeffortsofmanypeople.On behalf of all the participants in this project, I would like to express sincere thanks to Professor Noriyuki Doi for his devotion to reviewing preliminary manuscripts, hisattendanceatresearchworkshopstogiveconstructiveadviceforeverychapter, and his encouragement throughout the endeavor. In these workshops, each author also received comments and suggestions from other project members. Therefore, althougheachchapterisbasedonanauthor’sindividualcontribution,theresulting bookisthefruitofourcollectiveefforts.Additionally,Iacknowledgethefinancial support received from the Japan Society for the Promotion of Science (JSPS) (Grant-in-AidforScientificResearch(B),No.26285060).Lastbutnotleast,Ithank JunoKawakamiofSpringerforherconstantencouragementandpatience.Iwishher allthebest. Hachioji,Japan YujiHonjo Spring2017 Contents 1 Introduction................................................................. 1 YujiHonjo 2 Competition Policy and Innovation: An Introduction withIllustrativeCasesfromJapan ....................................... 9 HiroyukiOdagiri 3 AnEmpiricalAnalysisoftheDeterminantsofCollusion.............. 31 MasatoNishiwaki 4 Is Domestic Competition Beneficial for International Competitiveness? An Empirical Analysis of Japanese ManufacturingIndustries ................................................. 57 MasatoshiKato 5 MeasuringInnovationinFirms........................................... 77 KentaIkeuchi 6 OrganizationalDesignandHumanResourceManagement ofR&DActivities........................................................... 99 ShokoHaneda 7 R&DAlliancesandtheStateofMarketCompetition.................. 121 TomokoIwasa 8 High-TechStart-UpsinJapan:TheCaseoftheBiotechnology Industry...................................................................... 149 YujiHonjo 9 E-commerceandEmploymentGrowthinJapan:AnEmpirical AnalysisBasedontheEstablishmentandEnterpriseCensus......... 177 HyeogUgKwon 10 MarketReactiontoCross-BorderAcquisitionsbyJapaneseFirms.. 201 TakujiSaito vii viii Contents 11 Entry of Foreign Multinational Firms and Productivity GrowthofDomesticFirms:TheCaseforJapaneseFirms ............ 225 KeikoIto 12 TheStagnationofGrowthMomentuminJapanandAsian NIEs:FromthePerspectiveofForeignDirectInvestment............. 251 Hsiao-ChienTsui Chapter 1 Introduction YujiHonjo Abstract This chapter provides an overview of this book, which presents three importantconceptsofcompetition,innovation,andgrowth.Usinguniquecasesand dataforfirmsandindustries,thisbookoffersacomprehensivelydiscussiononthese threeimportantthemesinJapanandothercountries. Keywords Competition • Growth • Innovation • Japan 1.1 Three ConceptsDerivedfromthe StagnantEconomy SharpandHonHaiPrecisionIndustry(alsoknownasFoxconn)heldboardmeetings onMarch30,2016,andbothannouncedthattheyhadfinalizedadealthatwillsee the Taiwanese electronics contract manufacturer purchase the struggling Japanese electronics company for about 389 billion yen (3.47 billion US dollars) in newly issued equity shares.1 Sharp had emerged in the market by developing various innovative products, such as a mechanical pencil with a metallic shaft (widely known as the “sharp pencil” in Japan), and then continuing to develop creative consumerelectronics,suchasaliquid-crystaldisplaytelevision.However,because of massive deficits, Sharp needed capital and was forced to restructure. Sanyo Electric was another major electronics firm in Japan that was developing creative electrical products, such as a rechargeable battery, but it was forced into a merger withPanasonicbecauseofpoorperformance. 1Formoredetails,seetheNikkeiAsianReviewwebsite. http://asia.nikkei.com/magazine/20150604-Cast-away/Business/Sharp-at-the-beck-and-call-of- lenders[accessedonAugust26,2016]. http://asia.nikkei.com/Business/Deals/Sharp-Foxconn-finalize-merger-deal [accessed on August 26,2016]. Y.Honjo((cid:2)) FacultyofCommerce,ChuoUniversity,742-1Higashinakano,Hachioji,Tokyo192-0393,Japan e-mail:[email protected] ©SpringerNatureSingaporePteLtd.2017 1 Y.Honjo(ed.),Competition,Innovation,andGrowthinJapan, DOI10.1007/978-981-10-3863-1_1 2 Y.Honjo Many industries, particularly in the manufacturing sector, rapidly expanded in Japan after World War II. The development of these industries was underpinned by firms’ successful activities including innovations. During a period of rapid growth, Japanese firms expanded and gained market share while competing with domestic and foreign rivals. At the same time, a substantial number of creative products developed by Japanese firms emerged and dominated the market. For instance,alow-costmotorcycledevelopedbyHondaexploredanewsmall-engine motorcycle market. Additionally, many electronics products, such as a transistor radio and a portable audio player, were developed by Sony. Moreover, some so- called blockbusters—for example, candesartan (Blopress®), developed by Takeda Pharmaceutical, and donepezil (Aricept®), developed by Eisai—were introduced worldwideasnewchemicalcompoundsinthepharmaceuticalindustry. However, many industries stagnated during the so-called lost few decades after the collapse of the bubble economy. As Japanese firms’ innovations became inactive, the firms gradually lost global competitiveness in industries. During the lost few decades, creative innovations in Japan have seemed less visible in the market.Althoughmanylargeestablishedfirmshaveglobalbrandrecognition,some cannolongeradapttochangesinthebusinessenvironment.Eventually,firmsthat have lost global competitiveness, including Sharp and Sanyo Electric, are obliged toreorganizeandrestructure.Basedonthesehistoricalcases,itisquitelikelythat reducedcompetitivenessissignificantlyassociatedwithinactiveinnovations,which mayresultinstagnantgrowthinindustries. This book consists of three parts, each addressing one of the three concepts: competition (Part I), innovation (Part II), and growth (Part III). We consider that competition,innovation,andgrowthareindispensabletotheeconomyandthatthese three concepts play a vital role in an economy’s ability to climb out of stagnation and achieve economic recovery. Figure 1.1 illustrates the outline of discussions in thisbook,whichwillbeintroducedinthefollowingsubsections.AsFig.1.1shows, thisbookhighlightscompetition,innovation,andgrowth,anddiscussessubjectsin eachchapterwhileconsideringtheinteractionbetweenthem. Competition, innovation, and growth have been investigated in the literature, and the interaction between them has been debated since the days of Schumpeter (Schumpeter 1934, 1942). While “creative destruction,” advocated by Joseph Schumpeter,extinguishesthepreferredpositionsofexistingfirmsandproducts,and thejobsanddreamsofunsuccessfulentrepreneursandresearchers,competitionand innovation are considered to simultaneously induce growth in industries. Odagiri (1992),forexample,arguedthatcompetitionisenhancedbygrowthpreference,and competition, in turn,makes growth feasible.Odagiri also emphasized thatthe two key concepts of growth preference (maximization) and competition become com- plementary.AghionandHowitt(1992)proposedamodeofeconomicgrowthbased on Schumpeter’s process of creative destruction and showed that growth results exclusively from technological progress, which in turn results from competition
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