Institutions, Industrial Upgrading, and Economic Performance in Japan

Institutions, Industrial Upgrading, and Economic Performance in Japan

The ‘Flying Geese’ Paradigm of Catch-up Growth

New Horizons in International Business series

Terutomo Ozawa

Terutomo Ozawa examines Japan’s once celebrated post-war economic success from a new perspective. He applies a ‘flying geese’ model of industrial upgrading in a country that is still catching-up, to explore the rise, fall and rebound of Japanese industry with its evolving institutions and policies.

Chapter 5: Knowledge-Driven Stage – and Logic – of Catch-up Growth

Terutomo Ozawa

Subjects: asian studies, asian business, asian economics, business and management, asia business, international business, economics and finance, asian economics, international business, international economics


5.1. ‘CREATED’ RESOURCES As early as the 1960s, the Japanese government launched major efforts to scale the ladder of industrial upgrading toward the next rung of knowledgedriven growth (the ‘Schumpeterian’ phase). It seeded new growth industries through a variety of measures, such as stepped-up efforts to acquire cuttingedge technology from overseas under license, setting up cooperative research programs between government and industry, and cajoling those foreign multinationals (for example, IBM) then already operating in Japan to disseminate new technology to local firms. Government–industry research collaboration in particular was instrumental in enabling Japan to emerge as a dominant producer of high-quality semiconductors (microchips) before long. Semiconductors were considered so vital that they came to be regarded as ‘sangyo no kome’ (the rice/staple of industry) in Japan. No effort was, therefore, spared to develop through industrial policy semiconductor electronics, simultaneously with the domestic computer industry that needed the semiconductors. Both of these would become the key foundations for knowledge-driven, high-tech industries. (In fact, Japan’s semiconductor industry would celebrate its coming of age in the early 1980s with its dominance in the field of LSI semiconductors surpassing the United States.) In the meantime, consumer electronics, which was developed by Japanese entrepreneurs practically without any help from the government, spearheaded the growth of Japan’s electronics production and exports. Early on, transistor radios and television sets were the major initiators of this industry in the late 1950s and the early 1960s. They served as catapults for a host of related electronics goods. Japan’s consumer...

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