William Tsutsui in Japan

Dedman College Dean William M. Tsutsui is blogging about his experiences in Japan after the tsunami and earthquake that shook the country Friday, March 11, 2011. An expert on Japan’s economic history, Tsutsui returned Sunday, March 13, from visiting the country as a member of the Japanese American Leadership Delegation.

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Fostering entrepreneurship and innovation

One of the major topics of discussion on our trip to Japan was entrepreneurship. Japan’s economy has been in a seemingly endless funk for the past two decades, and many voices have suggested that the best way for the nation to break out of its general economic lethargy is to stimulate entrepreneurs and the process of innovation.

Japan today is not a particularly entrepreneurial place. The economy is dominated by large corporations, the hand of government in industrial and financial affairs is heavy, and the education system is geared more to producing conformist company men (and women) than to encouraging enterprising free thinkers. The well-respected Global Entrepreneurship Monitor, for example, consistently ranks Japan among the least entrepreneurial nations on earth. A tongue-in-cheek article in The New York Times once hypothesized that the dearth of garages in the crowded Japanese islands gave would-be entrepreneurs no place to tinker with new inventions.

Many argue that there are deep cultural elements behind Japan’s anemic entrepreneurialism. Japan, some say, is a collective culture, where emphasis on the group overwhelms the kind of muscular individualism necessary for entrepreneurial success. The old Japanese saying “The nail that sticks up gets hammered down” is regularly trotted out to provide evidence for this interpretation. Others stress the profound risk-aversion of Japanese society. Japan, it is often said, is the most highly insured nation on the planet, and no responsible mother would want her son to pass up a safe office job at a major corporation for a roll-of-the-dice career in innovation and entrepreneurship.

There are also structural issues conditioning the environment for entrepreneurialism in Japan. The tax and legal systems do not encourage entrepreneurial daring. Venture capital is scarce in Japan: some say it is because all the money has surged into hyper-entrepreneurial China; others argue that the stunted culture of innovation and risk-taking in Japan simply scares away the investors. When you ask Japanese business leaders and academics about entrepreneurship education, now increasingly common even at the K-12 level in the United States, all that one gets in return are blank stares.

Arguing nature versus nurture as the cause of Japan’s pallid entrepreneur spirit doesn’t end up being very productive, however. One certainty is that Japan has historically been a pretty darned entrepreneurial place. In the late 19th and early 20th centuries, many of the firms that now constitute Japan’s gold-plated corporate establishment were founded by go-for-broke home-grown entrepreneurs: the Mitsubishi empire, Toyota, and most of Japan’s banks began as textbook cases of vigorous, creative entrepreneurship. Even in the mid-20th century, when Japan’s hierarchical corporate economy began to gel, entrepreneurs were plentiful and many achieved outstanding success: Honda Soichiro turned a small engine shop into one of the world’s dominant car makers; Matsushita Konosuke’s drive and daring built Panasonic; and Morita Akio and Ibuka Masaru made Sony (started in a run-down shed in 1946) a household name worldwide. There have been success stories even in recent years, when the Japanese economic establishment has seemed the most fossilized: Son Masayoshi’s SoftBank and Mikitani Hiroshi’s Rakuten are just two prominent examples.

There are certainly glimmers of hope today for Japanese entrepreneurialism. Efforts from the grassroots to create incubators and networks of innovation on the local or regional level are beginning to show some results. Some large mainstream companies have been trying to loosen up and encourage “intrapreneurship,” entrepreneurial initiatives within established firms, as a growth strategy. And there are a series of new collaborations between the United States and Japan around entrepreneurship and innovation now under way, including a recent joint workshop on the topic at Stanford University and a promising partnership between Hawaii and Okinawa around green energy. Much of the pressure for these new cooperative endeavors comes from John Roos, the American ambassador to Japan and a former Silicon Valley entrepreneur. Roos and his wife, Susie, were both passionate on the topic of entrepreneurship in Japan when we met with them this week at the U.S. Embassy in Tokyo.

What makes me optimistic about Japanese entrepreneurship is not the new initiatives and partnerships under way, or even the success stories of enterprising and innovative young risk-takers. Instead, what assures me that Japan has the spark and the spirit to break new ground entrepreneurially is the incredible creativity and energy of Japanese popular culture. That the hyperactive minds and imaginations of the creators of anime and manga, video games and cult movies have flourished in straight-laced, hammer-down-that-nail Japan is evidence aplenty that there is the vision and capacity for entrepreneurship on a grand scale in the nation today. When this creative, constructive, free-wheeling style reaches its full potential, Japan’s economy may be a force to reckon with once again.

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