With unemployment figures reaching their highest level in the post-World War II era, the Japanese economy shows no sign of a Silicon Valley-like resurgence that could give hope to the unemployed or to "zombie" corporations that have no customers for their products and no growth.
There are a number of reasons for this. First, Japanese themselves dislike the risk factors for Japanese startups: The Stanford University Program on Japanese Entrepreneurship bleakly reports that Japanese venture capital investment is $3 billion a year, on average, in venture funding, for about 3,000 investment deals annually whereas U.S. investors pour out 10 times that amount for startups.
Second, the startups that receive venture funding lack "hit" products or management skills to succeed: According to a 2009 Japan Venture Enterprise Center report, venture firms' initial public offerings (IPO) dwindled significantly in the past seven years. In 2002 there were 86 IPOs of Japanese startups; in 2004 the number rose to 155, but by 2007 the number was 107, and then sank to 42 in 2008. In contrast, in one September week five IPOs were launched on the U.S. Nasdaq.
Third, even vaunted Japanese research and patents do not guarantee commercial success. The Japan Venture Enterprise Center report noted that a 2002 plan projected 1,000 startups spun out from Japanese university research. This utopian idea began with approximately 200 firms. In two years, this figure rose to 252, yet by 2006 the startups fell to 181 with an alarming 47 failures. By 2007 the number was 94 with 63 gone bust.
This grim situation should set off alarm bells in the Japanese government. Prime Minister Yukio Hatoyama could push emergency legislation, ranging from better corporate tax treatment for investors and startups, more favorable individual income tax treatment of stock options, easier patent commercialization at universities, a network of venture incubators and entrepreneurship programs.
Would all the above legislative steps transform the Japanese economy? If one looks deeper into the success factors for Silicon Valley it is clear that immigration also plays a significant role.
Former Intel CEO Andrew Grove and entrepreneur Sabeer Bhatia (who sold his Hotmail startup to Microsoft for $400 million in 1997) share similar origins: birth and life abroad — Hungary and India, respectively — then immigration to the U.S. and success in Silicon Valley.
In a series of reports, University of California at Berkeley researcher AnnaLee Saxenian highlights not only the famous founders of Yahoo! and Google, who have immigrant roots (Taiwan, Russia), but the overall immigrant-charged impact on California's economy. The 1990 census revealed immigrants accounted for 32 percent of California's scientific and engineering workforce.
Two-thirds of these immigrants were from Asia, the majority of Chinese and Indian descent. By 1998 Chinese and Indian engineers were at the top quarter of Silicon Valley's high-tech businesses, and their companies collectively accounted for more than $16.8 billion in sales and over 58,000 jobs. Chinese and Indian CEOs were leading 13 percent of the Silicon Valley technology companies that were started between 1980 and 1984, and 29 percent of those that were started between 1995 and 1998.
This economic renaissance catalyst was the U.S. Immigration Act of 1965, known as the Hart-Celler Act, the immigration equivalent to the Bayh-Dole Act that resulted in startups based on commercialization of patents at U.S. universities. Before this act the U.S. government limited immigrants by mandating small quotas according to country of origin. By contrast, Hart-Celler rules allowed immigration based on both technical skills and family ties to citizens — criteria that is favorable for Taiwanese and Indian immigrants.
If the Japanese government's goal is new business/job creation, the answer lies not in keeping zombie companies alive but in exploring ways to improve Japan technological, entrepreneurial and management skills; exploit global networks for marketing new products; and prepare hundreds of startups for IPO. Some may be home runs, creating millions of new jobs in new industries.
Currently, one of three graduate students in engineering and science at Japanese universities is non-Japanese, mostly from China and Southeast Asia. Unfortunately, they rarely remain in Japan after graduation. The reality is that in Japan no immigration policy exists to allow highly skilled non-Japanese to come to Japan and stay there to create new businesses and jobs.
Harvard Business School professor Tarun Khanna's aptly titled 2008 book "Billions of Entrepreneurs: How China and India are Reshaping Their Futures — and Yours" reveals when both societies "awakened" to entrepreneurs' value to economic growth in those two countries.
Prime Minister Yukio Hatoyama, a Stanford University Ph.D. with extensive ties to Silicon Valley, should awaken Japan and lead a new risk-taking Japanese society with new citizens and new jobs in the depopulated prefectures from Aomori to Tottori to Yamaguchi to Miyazaki. Immigrant entrepreneurs can be attracted to such places — now shunned by Japanese business — if they are given the right incentives, including citizenship.
Ray K. Tsuchiyama consults with startups and multinationals regarding branding, sales and innovation. He has held executive positions at the Massachusetts Institute of Technology, Analog Devices, and AOL/Time Warner.
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There are a number of reasons for this. First, Japanese themselves dislike the risk factors for Japanese startups: The Stanford University Program on Japanese Entrepreneurship bleakly reports that Japanese venture capital investment is $3 billion a year, on average, in venture funding, for about 3,000 investment deals annually whereas U.S. investors pour out 10 times that amount for startups.
Second, the startups that receive venture funding lack "hit" products or management skills to succeed: According to a 2009 Japan Venture Enterprise Center report, venture firms' initial public offerings (IPO) dwindled significantly in the past seven years. In 2002 there were 86 IPOs of Japanese startups; in 2004 the number rose to 155, but by 2007 the number was 107, and then sank to 42 in 2008. In contrast, in one September week five IPOs were launched on the U.S. Nasdaq.
Third, even vaunted Japanese research and patents do not guarantee commercial success. The Japan Venture Enterprise Center report noted that a 2002 plan projected 1,000 startups spun out from Japanese university research. This utopian idea began with approximately 200 firms. In two years, this figure rose to 252, yet by 2006 the startups fell to 181 with an alarming 47 failures. By 2007 the number was 94 with 63 gone bust.
This grim situation should set off alarm bells in the Japanese government. Prime Minister Yukio Hatoyama could push emergency legislation, ranging from better corporate tax treatment for investors and startups, more favorable individual income tax treatment of stock options, easier patent commercialization at universities, a network of venture incubators and entrepreneurship programs.
Would all the above legislative steps transform the Japanese economy? If one looks deeper into the success factors for Silicon Valley it is clear that immigration also plays a significant role.
Former Intel CEO Andrew Grove and entrepreneur Sabeer Bhatia (who sold his Hotmail startup to Microsoft for $400 million in 1997) share similar origins: birth and life abroad — Hungary and India, respectively — then immigration to the U.S. and success in Silicon Valley.
In a series of reports, University of California at Berkeley researcher AnnaLee Saxenian highlights not only the famous founders of Yahoo! and Google, who have immigrant roots (Taiwan, Russia), but the overall immigrant-charged impact on California's economy. The 1990 census revealed immigrants accounted for 32 percent of California's scientific and engineering workforce.
Two-thirds of these immigrants were from Asia, the majority of Chinese and Indian descent. By 1998 Chinese and Indian engineers were at the top quarter of Silicon Valley's high-tech businesses, and their companies collectively accounted for more than $16.8 billion in sales and over 58,000 jobs. Chinese and Indian CEOs were leading 13 percent of the Silicon Valley technology companies that were started between 1980 and 1984, and 29 percent of those that were started between 1995 and 1998.
This economic renaissance catalyst was the U.S. Immigration Act of 1965, known as the Hart-Celler Act, the immigration equivalent to the Bayh-Dole Act that resulted in startups based on commercialization of patents at U.S. universities. Before this act the U.S. government limited immigrants by mandating small quotas according to country of origin. By contrast, Hart-Celler rules allowed immigration based on both technical skills and family ties to citizens — criteria that is favorable for Taiwanese and Indian immigrants.
If the Japanese government's goal is new business/job creation, the answer lies not in keeping zombie companies alive but in exploring ways to improve Japan technological, entrepreneurial and management skills; exploit global networks for marketing new products; and prepare hundreds of startups for IPO. Some may be home runs, creating millions of new jobs in new industries.
Currently, one of three graduate students in engineering and science at Japanese universities is non-Japanese, mostly from China and Southeast Asia. Unfortunately, they rarely remain in Japan after graduation. The reality is that in Japan no immigration policy exists to allow highly skilled non-Japanese to come to Japan and stay there to create new businesses and jobs.
Harvard Business School professor Tarun Khanna's aptly titled 2008 book "Billions of Entrepreneurs: How China and India are Reshaping Their Futures — and Yours" reveals when both societies "awakened" to entrepreneurs' value to economic growth in those two countries.
Prime Minister Yukio Hatoyama, a Stanford University Ph.D. with extensive ties to Silicon Valley, should awaken Japan and lead a new risk-taking Japanese society with new citizens and new jobs in the depopulated prefectures from Aomori to Tottori to Yamaguchi to Miyazaki. Immigrant entrepreneurs can be attracted to such places — now shunned by Japanese business — if they are given the right incentives, including citizenship.
We welcome your opinions. Click to send a message to the editor.
Language study
The Japanese-Language Proficiency Test
Upgrade your nihongo before the next proficiency test
Business
Business support in Tokyo for foreign affiliated firms
Guidance and info from the Tokyo Metropolitan Government
Transportation
Tokyo Transfer Guide
Metro resource for fares, travel time and transfers
Here's your resource for locating the educational institutions and curriculum best suited to you and your goals.
Find apartment and homes that best suit your lifestyle, income and time frame in Japan.
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