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The landscape within which Japanese companies innovate stands altered by
events of the past two decades. Buffeted and metamorphosed by the forces of a severe
asset value shock followed by a decade of economic malaise, then a decade of growth,
and now the recent financial crisis, Japanese firms are transforming their innovation
strategies because the institutional basis of those strategies seems to be altered by new
economic realities. Even though the basis of the strategies, and perhaps the strategies
themselves, are changing, Japan is maintaining its level of innovation according to recent
data. Small companies seem to be increasingly part of recent innovation. So we ask,
how is the level maintained given that the strategies that created Japan's acknowledged
industrial innovativeness seem to be transformed by events?

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Entrepreneurs and entrepreneurship played a critical role in transforming Japan’s telecommunications sector. Between the mid-1990s and mid-2000s, in a sector long dominated by a stable set of large actors with well-established patterns of interaction, entrepreneurs introduced new technologies, new business models, and new norms of interaction. The subsequent transformation of Japan’s telecommunications sector was dramatic, providing consumers with not only fast and sophisticated services but also low prices and an entire new ecosystem of mobile content—a considerable departure from Japan’s long track record of being known as producer- rather than consumer-oriented, with consumers enjoying high-end services and products, but at high prices. Yet, these transformative entrepreneurs were not acting in a vacuum. Regulatory shifts in telecommunications were critical in providing opportunities for entrepreneurs, while simultaneously protecting them from large incumbent firms. These regulatory shifts were driven by the political dynamics of the 1990s as Japan struggled through its post-bubble economic malaise and political changes.

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Social Science Japan Journal
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Kenji E. Kushida
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How do new industries emerge? The aim of this paper is to provide an answer to this question by focusing on the knowledge dimension of this process. We first argue that there is a sectoral bias of research which has equalized new industry emergence with only a selection of new industries, especially the software and biotechnology industry. In this paper, we focus on the service robot industry. We analyze its institutional properties, its knowledge properties, and the role of collaborations. We find that the emergence of service robot industry is, contrary to biotechnology and software, triggered by established technical leaders, and less by new firms. Using Japanese patent data, we also show that the service robot industry, while being a new industry, possesses cumulative characteristics. As the emergence of this industry matches to the characteristics of Japan’s institutional and knowledge regime we essentially argue that the popular association of certain institutional paths with a lack of innovativeness is erroneous. We conclude that industry emergence in intrapreneurial regimes seems to be distinctive from entrepreneurial regimes.

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There is a large literature on innovation and the importance of a node and a network as
important to creating an environment for such innovation. Most of the analysis of this
system has been in high technology industries, and in the products and technologies that
it creates. However, there is no reason why we can’t analyze innovation in less leading
edge industries and products, and in the development or organizational structures rather
than products. This paper tries to illustrate the potential of this type of innovation
institutions by looking at structures for business relationships as the innovation, and
consciously chooses two very low technology industries (Japanese trading company
relationships in textiles and steel) to illustrate the potential usefulness of innovation
system concepts in less conventional venues.

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Venture capital investment has become globalized in the business landscape. Scholars
have reported an increasing globalization trend in the VC industry, as measured by VC
investment across national borders (Wright et al., 2005). Aylward (1998) found that Asian
countries/economies (e.g., Singapore, Hong Kong, and India) largely sourced their venture funds internationally. Baygan (2000) demonstrated that European countries experienced increases of cross-border VC flow. Aizenman & Kendall (2008) found that the number/volume of VC deals with international participation has increased in recent years. Finally, according to the Deloitte Touche Tohmatsu 2009 Global Venture Capital Survey, 52% of VCs already invest outside their home countries (Deloitte, 2009). Researchers also examine mechanisms behind this globalization trend: Guler & Guillen (2010) analyze the influence of recipient countries’ institutions on U.S. VC firms’ international investment decision. Aizenman & Kendall analyze the determinants of global VC flow using the gravity model framework. My two studies, both of which examine determinants and patterns of VC investment globalization, are positioned in this stream of research.

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As the world reacts to the death of Kim Jong Il, Stanford’s Gi-Wook Shin talks about the transition of power in North Korea. He discusses what’s in store for relations between Pyongyang and Washington, and what to expect of what is perhaps Kim’s most troubling legacy: his nuclear weapons program.

Shin is a senior fellow at Stanford's Freeman Spogli Institute for International Studies, and director of FSI's Shorenstein Asia-Pacific Research Center and its Korean Studies Program. The sociology professor is also the Tong Yang, Korea Foundation, and Korea Stanford Alumni Chair of Korean Studies.

Kim Jong Il’s son, Jong Un, is set to take over North Korea’s leadership. What do we know about him, and what can we expect from his leadership?

Unlike his father, who had been groomed as a successor for many years, Kim Jong Un was designated as a successor only recently. As a result, it is questionable whether he is ready to take over the failing regime. Kim Jong Il’s death was not entirely unexpected, but still came sooner than many experts had thought.

Jong Un is only 28 years old without much experience in politics and governance and has not yet been able to consolidate his power. Although his status as a new leader is not likely to be challenged, it won’t be easy at all to establish himself as a strong leader like his father, let alone like his grandfather, Kim Il Song. 

In the years to come, his in-laws—such as Jang Seong Taek—will play an important role behind Kim. The military will also be a key player in the post-Kim Jong Il era.

You were in South Korea when Kim Jong Il died. What was the mood and reaction to the news?

People were taken by surprise but there was no panic. The government is handling the situation well, while many citizens wonder what will happen to North Korea with the passing of Kim Jong Il.

How can the United States deal with this transition in power? Will there be any change in relations between Washington and Pyongyang?

Representatives of North Korea and the U.S. recently met in Beijing to discuss food aid and nuclear issues. There was some optimism with the prospect to improve the bilateral relations. However, any direct talks between the two countries to discuss major issues will be on hold for a while as the northern regime mourns the loss of its leader and focuses on internal stability. The U.S. should pay keen attention to the transitional process and needs to support a smooth transition in power. That should entail close collaboration with neighboring countries, especially South Korea and China. And it should include providing food aid that the U.S. has been considering.

How does Kim Jong Il's death fit in with other key political transitions happening throughout the world in the coming year?

There is a great deal of uncertainty on the Korean peninsula. Besides this transition in power in North Korea, there will also be power transitions in China and Russia next year. And there will also be presidential elections in the U.S., South Korea, and Taiwan in 2012. Japan may have a new prime minister too, adding more uncertainty to the situation. 

On the other hand, uncertainty does not necessarily mean a crisis—it is unlikely that the North will provoke tensions on the peninsula. The coming year is a very important one for North Korea as it celebrates itself as a “mighty, prosperous nation.” But it faces many challenges.

I don’t expect any significant change in inter-Korean relations until perhaps 2013, when South Korea elects a new administration and North Korea is stabilized with a new political leadership. 

What does Kim Jong Il’s death mean for North Korea’s nuclear program?

North Korea has nuclear weapons and an enriched uranium program that could produce nuclear bombs. Very few expect the North to give up its nuclear bombs. Added uncertainty over the transition of power and heightened concern about regime survival will only increase the value that North Korea sees in possessing nuclear weapons. 

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People read an extra edition of a newspaper reporting the death of North Korean leader Kim Jong Il in Seoul.
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The past year unfolded with Japan’s unprecedented triple disaster and closed with U.S. Secretary of State Hillary Clinton’s historic trip to Myanmar. Moving into 2012, Europe’s economy creaks along uncertainly and China gears up for a major leadership change. In an interview with the Ukranian magazine Glavred, political science professor Phillip Lipscy discusses landmark Asian economic and political events of 2011, and what they could mean in the coming year.

What was the most significant event in terms of Asia’s economy in 2011?

The March 11 Great Tohoku earthquake and tsunami: Besides the tragic loss of life and property, the disaster disrupted global supply chains and plunged the Japanese economy into a recession. The nuclear meltdown in Fukushima also led many countries to question the future of nuclear energy—this will have long-lasting consequences for global energy markets and efforts to deal with climate change.

What was the most significant political event?

Signs of political opening in Burma/Myanmar could have profound consequences not only for that country but for the rest of Asia as well. Hillary Clinton became the first U.S. Secretary of State to visit the country in 50 years. Aung San Suu Kyi has been released from detention and the National League for Democracy has re-registered as a political party. If this leads to democratization, it will be remembered as an important turning point.

What new policy and economic trends appeared in 2011? Which of them will continue into the coming year?

There seems to be a subtle shift in views towards China's economy. Chinese government officials are deeply concerned about the "middle income trap." China has reached a level of development where many countries saw their economic growth slow down sharply. Rising incomes are eroding China's advantage in low-cost manufacturing. There is much talk of multinational companies relocating their operations to even cheaper countries, such as Vietnam. This is an important transition for China, and it will remain an important issue in coming years.

In terms of people, who do you feel was the most notable, and who was
the most disappointing this past year?


The people of Japan, who responded with remarkable perseverance, order, and discipline to such a tragic natural disaster.  

The most disappointing were the political leaders of Japan, who could not set aside
their differences and come together for the sake of their country.

Will China continue to spread its influence in 2012, and might any countries oppose this process?

China is now the second largest economy in the world and an important military power. It is inevitable that China will rise in international stature and influence. However, Chinese leaders also face some important challenges—rising inequality, an overheated housing market, and bad loans in its financial system. The focus of international attention should be on integrating China into the world order as a peaceful, responsible stakeholder—not on confrontation.

What impact could the economic crisis in Europe have on the economics and international policy of the Asia-Pacific region?

If the financial crisis in Europe is mismanaged, nobody will escape the consequences. Europe is a crucial export market for Asian countries, and European financial institutions are major lenders to emerging economies in the region. Equally as important, repeated financial crises and political mismanagement in the United States, Japan, and Europe could begin to undermine perceptions of democratic government and capitalism.

What will be most important event in Asia next year?

China's leadership transition, particularly given the many immediate challenges the country faces.

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U.S. Secretary of State Hillary Clinton visits Aung San Suu Kyi at her house in Rangoon, Myanmar, Dec. 2011.
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Information technology (IT) is one of the transformative forces in the world today. As an engine of innovation and growth, it has transformed the economic structure in a wide range of areas, and it has reorganized social activities in ways not yet completely understood. IT also raises critical policy issues, particularly around the role of information privacy, security, and networks. Japan’s IT sector has experienced major shifts in its regulatory and industry structure as it developed cutting-edge services but became isolated from global markets.

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