Japan Corporate Mindset Stuck in Analog Mode

New Technological Regimes Need New Business Institutions

Different technological regimes give rise to—and require—different business institutions. When the circumstances change, so must the institutions. If not, then yesterday’s strengths become today’s weaknesses. Superstar trend-setters like Sony or Sears devolve into also-rans or outright failures, and a country’s economic growth erodes. This, unfortunately, is Japan’s plight: a failure of its business institutions to make the needed adjustments from the analog era to the today’s digital world. Among thirty-four rich countries, Japan ranked a dismal twenty-fifth in overall digital competitiveness in 2020, according to the IMD World Competitiveness Center. To be sure, Japanese companies spend plenty on information and communications technology. Their problem is that they get less bang for the yen. Japan ranks fifty-sixth among all countries in “business agility,” which measures how well they use ICT.

Beyond that, Japan suffers from a huge “digital divide” between large companies and small and medium-sized enterprises.

This article analyzes the problem, while this one makes suggestions as to what Tokyo should do in Japanese and English.