Japan's Becoming More Entrepreneurial?

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The New York Times today had an interesting story about "start-up salons" popping up in Tokyo. These salons are apparently acting as social lubricants to build a network of entrepreneurs in Japan.

Of course, there are still many issues in Japan (and much of the rest of the world) with fostering new ventures. As the article notes:

With its economy sluggish and its population graying, the country slipped to No. 25 in the most recent ranking of global innovation by the United Nations, falling out of the top 20 for the first time since the survey began in 2007.


More than ever, many innovations seem incremental or just plain odd. A $4,500 “networked” washing machine released by Panasonic in August that can be operated remotely via smartphone was greeted with derision in the Japanese blogosphere. “Has Panasonic lost its way?” one blogger asked.

I think that these sorts of "underground" communities are crucial in the early stages of a new start-up ecosystem. The connections that are formed will be crucial in the future, but even more importantly, they provide the moral support and camaraderie that will help the community face the tough challenges that will invariably come.

However, I think we need to be careful about being too excited about small changes. The article notes that a start-up incubator "[...] received close to 100 applications during its latest round this year." This is in the third largest economy in the world, with more than 100 million people.

Let's be clear here. Building networks is really important, but policy change is what is going to allow any start-up ecosystem to grow. Tax policy, business regulations, competition policy, immigration are just some of the areas that government has to get right in order to facilitate new venture formation. It might be the case that these social networks can lobby the government and encourage these policies, but I believe that is likely to be unrealistic.

So where should countries like Japan go? I think there are a couple of different avenues. First, there is a tremendous need for established figures in the economy to help support new businesses. Japanese business leaders (even a handful!) can take the lead and attract significantly more attention to this nascent movement. Second, the Japanese government can lower the costs of starting new businesses, and also ensure that a level of competition exists within the labor market and procurement policies. Furthermore, there is definitely a need for more entrepreneurial activity in Japanese universities.

These are low-hanging fruit. No one needs to act as a "trust-buster", trying to break up all of the large Japanese companies that currently dominate the technology sector. Nor do we need all policies to be completely replaced. But, steps in the right way can act as a lubricant itself - creating its own force to encourage further reforms and more entrepreneurship. It is about momentum, and hopefully these start-up salons are a great first step.