The Business Scenario of Japan and Its National Innovation System - Term Paper Example

?Business environment of Japan Table of Contents Introduction 3 Business environment in Japan 3 National Innovation System (NIS) 4 Government component of the NIS 4 Finance component of the NIS 6 Scientific and Technological institution/Education components of the NIS 7 Industry component of NIS 8 Conclusion 9 Reference List 10 Introduction Economic growth driven by innovation is a sustained growth process and it involves the entire economy in the path of growth. This is because this growth process involves the activities which bring in actual changes in the production processes in the economy. It is not merely a rise in GDP due to higher value of exports on account of appreciation of currency. Various academic researchers and business personnel have made researches to explain the cause of tumultuous success enjoyed by Japanese enterprises over the last few decades. In order to drive this growth, National Innovation System (NIS) plays a very important role. Innovation is one of the key drives that have led Japanese business corporations to this state of success. This paper presents a detailed study of the activities of NIS which helps to evaluate its impact on the business environment of the country. Business environment in Japan The Japanese business environment has been reflecting huge success during the late 1980s. The success of Japanese business enterprises is affected by the formation of the enterprise to a large extent. Three main types of companies can be recognized in Japan under Japan’s commercial code and another form of company is separately recognized under the Yugen Gaisha Law. Therefore, four different forms of a business company exist in Japan. These are Go-mei Gaisha (or commercial partnership), Go-shi Gaisha (or limited partnership), Kabushiki Kaisha (or general corporation) and finally Yugen Gaisha (or limited liability corporation) (Japanlaw, n.d.). These forms of Japanese business are one of the most captivating models of modern business environment. According to various scholars, the most important and influential aspect of Japanese business, which also affects its society, is that Japanese business enterprises have the ability to produce high quality goods at low cost and therefore, can sell them at a lower price than the other competitors operating in the international market. Cheap exports made by Japan include particularly electronic devices, cars and computers (Japan-guide, 2013). This characteristic of Japanese business corporations is imparted by the human resource of these organizations. Human resource is considered a very important aspect in Japan. Hence, companies dedicate attention towards maintaining good human resource management system and employees provide the commitment of sustaining a long-term relationship with their respective corporations. Strong industrial relationship is one of the main factors that affect the performance of Japanese business firms in international context (Asetuc, 2003). This leads to improvement in the skills and employees might utilize their potential to the fullest extent for the growth of their organization. With globalization, Japan has been increasingly participating in the global business scenario. Japan is known on the global platform for its cheap exports. Japan mainly imports agricultural or intermediate goods, such as, culinary materials, wood, oil and other raw materials. Since the manufactured goods (imported) yield higher price than the raw materials imported by Japan (that requires lesser payments), Japan has a trade surplus. However, globalization makes the manufacturing units all around the world more cost efficient (Gu?jonsson, 2009). Thus, Japanese firms are currently facing intense competition in the global front. National Innovation System (NIS) Government component of the NIS The National Innovation System (or NIS) refers to the system of flow of information as well as the rapid transfer of technological knowhow amongst people residing in different parts of a country. It has been recognized by the Japanese government that smooth flow of information is a critical factor at the level of innovation which has been undergone by the country’s enterprises. The rapid economic growth rate in Japan has resulted from an increase in productivity of land, labour, capital and innovativeness of an economy. However, since the Japanese labour force of the Japanese economy is aging, rate of productivity is falling over the past two decades (Ishii and Scissors, 2013). In order to fight this declining rate of productivity, the country has to improve its technological competitiveness. In this respect, the government plays an important role in Japan. For achieving higher levels of business, manufacturing industries have to go through several grand innovations. In this path of innovation, the government of Japan takes an active position by providing financial aid and advice to the firms that are moving in the path of innovation. Several policy changes have been made to bring nationwide innovation in the business sector of the economy. The government has identified eight sectors that require special technological support and has framed policies to support them. NIS programs have been launched to fund research expenses of the private enterprises by varying proportions. Special public bodies have been appointed for promoting the outcomes of these researches and enable them to receive patents filings over their results (Kose, 2013). The government component of the NIS is to give special attention in the energy industry, nanotechnology industry and life science industry. It has also made special providence to develop intellectual property infrastructure for supporting sustainable development of these industries (Stenberg, 2004). Yet, growth rate of Japanese economy has slacked over the last two decades since most of the government policies are directed towards achieving short term growth in GDP. Hence, the policies overlook the issues that might arise in the longer prospective and does not provide any solution to these issues. Additionally, the government is making huge investment of capital in many sectors simultaneously, all of which are not responding simultaneously with notable innovations (PWC, 2010). Finance component of the NIS The creation of an innovation prone environment in an economy greatly depends on two factors; availability of credit and financial support of the national government. In Japan, the monetary policies are expansionary and credit conditions are relaxed. Hence, financial condition in the country is supportive and encouraging investors to make investments. Yet, certain factors impede the development of the private industrial sector in the economy. One of the major drawbacks is the weak infrastructure of the small and medium sized enterprises (SMEs) in the country. Although credit facilities are available in large amounts, these are not adequately utilised by the private investors. Besides, there is an established market tradition in Japan that the business enterprise is generally risk averse. Therefore, access to credit facilities by private entrepreneurs is difficult to a certain degree. The NIS helps these enterprises to make knowledge based advancements. Investments are being made in improving the know ledge base of the employees of the SMEs in Japan through highly interactive programs and professional training (JFC, n.d.). This leads to higher levels of knowledge based innovations, although the firms might face the lack of infrastructural competitiveness with the advanced bigger firms (OECD, 1997). The NIS also facilitates the firms to get financial support by entering into treaties with other private firms or the government, such as, joint venture with private firms or public-private partnerships. Therefore, private innovation is supported by public financial aid. The role of government-affiliated financial institutions is expanding fast and it is aimed at interfering into the financial condition of the economy so as to boost private investment (OECD, 1997). The government supports various research institutes and private enterprises to enable them to act towards the improvement of the business environment within the country. Scientific and Technological institution/Education components of the NIS Various historical perspectives might be found in the development of the NIS. In Japan, the background of NIS lies in the needs of the policy makers and the necessities of modern innovation. After the Second World War, “a linear model of science and technology push” (Feinson, 2013, p.4) can be recognised in Japan. The governed has begun taking advices from science councils in providing innovation related advices to the business enterprises. The NIS is responsible for the educational pattern in the country. Innovation cannot take birth in the industries if the skill of innovative mind set is not developed among the employees since a tender age. Hence, the path of innovation can be traced back to the universities in which individuals are trained at traditional knowledge. Several NIS projects are launched by the OECD that makes efforts to continuously improve and upgrade the system of education in the country. Various research institutes are also funded by the government and they advices on meeting the needs of the society so that the outcome of research can be utilised for the growth of the economy. The NIS projects stress on the needs of the economy so that the domestic policies can be adjusted and used as instruments for developing a new paradigm of technological innovation. This innovation would be based on intensive exploitation of accessible knowledge bases (Feinson, 2013). The links between educational and research institutes and innovation in the different sectors in the economy are promoted and further strengthened. Industry component of NIS Japan is one of the economies that have held the top position in the world in terms of innovation and competitiveness. Producers in the country can manufacture high technology goods at a lower cost compared to the cost incurred by its competitors. However, with advancement of technology and globalization, there has been steep rise in competition in the international business platform. Hence, various NIS projects are devoted towards maintaining the country’s position in terms of cost effectiveness and quality. In order to offer better quality goods or advanced products at a lower cost than competitors, producers have to invent new methods of production. Some of the sectors in the country are more advanced than the other sectors, since these sectors receive private and public support for making innovation. The consumer electronics sector is highly developed. In recent years, brands such as Sony and Panasonic are facing steep competition from international brands such as Samsung and Apple. It leads to further innovation in this sector. On the other hand, the software industry in Japan is comparatively less developed in comparison to their hardware industry. It is an emerging industry in the country and requires major innovative push (Hu, 2012). Besides, there is huge scope for innovation in the agricultural sector, which lies vacant. This sector lacks innovation in a number of countries, such as, Japan which has the appropriate geographical condition for production of rice, but, it lacks enough technologically advanced methods for the facilitating the production of higher varieties and better quality of the grain (Braun, 2013). This also requires the development of heavy industries and the chemical industry for the development of high-end machineries and processes, such as, tractors and fertilizers and various forms of natural stimulants for better agricultural production. Therefore, the industries that reflect high growth potential in the country and deserve the attention of NIS are software industry, heavy industry and chemicals industry. Conclusion This paper presents an elaborate discussion of the business scenario of Japan and also an in-depth insight about the innovative characteristic of these industries. The discussion reveals that the NIS ensures that all institutions and commercial enterprises within the country are equally affected by the information transfer. This encourages firms to make higher levels of investment in R&D and formulate modern and technologically advanced ideas (Goto, 2000). This study helps to identify the level of technological advancement of different sectors in the economy. It has been found that the hardware industry is most developed while the software industry lacks innovation. Heavy industries in the country also do not enjoy high level of originality. Investment in Japan is highly recommendable since there is good prospect of innovation in various sectors of the economy. Investment would further promote innovation in Japanese business environment. NIS already has several strategies to help smooth flow of information and quick transfer of technical knowledge. The government component of NIS ensures that innovation activities receive public support. However, this support is directed particularly towards those industries which already reflect good innovation. Investment strategies should currently be directed towards boosting those sectors in which innovation is lacking. Not only the urban areas, but also the rural areas should be covered by the NIS programs so as to make the program nationally successful. Training should be imparted to the employees so that they might be encouraged to bring forth innovative ideas for further progress. This would improve the level of productivity of various sectors and allow them to become the forerunners of the overall economic advancement of the country. Reference List Asetuc, 2003. Establishment of the Japanese Industrial Relations. [pdf] ASEAN Services Employees Trade Union Council. 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The Importance of IP in Innovation, Promotion and its Exploitation; Japan’s Case. [pdf] WIPO. Available at: < http://www.wipo.int/edocs/mdocs/mdocs/en/wipo_ip_dar_13/wipo_ip_dar_13_a_kose.pdf > [Accessed 30 October 2013]. OECD, 1997. National Innovation Systems. [pdf] OECD. Available at: < http://www.oecd.org/science/inno/2101733.pdf > [Accessed 30 October 2013]. PWC, 2010. Innovation: Government’s Many Roles in Fostering Innovation. [pdf] PWC. Available at: < http://www.pwc.com/gx/en/technology/pdf/How-governments-foster-innovation.pdf > [Accessed 30 October 2013]. Stenberg, L., 2004. Government Research and Innovation Policies in Japan. [pdf] ITPS. Available at: < www.innovation.lv/ino2/publications/japan.pdf > [Accessed 30 October 2013]. Read More