NIRA Research Report 970100
A Study on How Venture Business Should be Supported
--A Study of the Role Played by the Public Sector in the Pre-inauguration Period and in the Early Stage of Post-inauguration Period--
As Japan remains mired in the economic stagnation that ensued from the bursting of its bubble economy, cultivation of industries that will revitalize Japan has become an urgent issue. At present, however, the image of such industries is murky. Hence, in this study, we attempt to discover in so-called venture businesses the buds of industries that will bolster vitality in the future.
Including the present, there have been three "boom" periods in Japan in which intense interest has been focused on venture businesses. The particularly great expectations placed on venture businesses in recent years are largely attributable to the situation in the U.S. In the U.S., the prosperity of venture businesses is credited with being a driving force behind economic vitalization. Moreover, much attention is focused on the roles and functions of NASDAQ and venture capitalists. The U.S. system of venture-business incubation, however, is rooted in a culture and climate of highly mobile human resources, willingness to allow the failed to rise again, and utmost respect for entrepreneurs. Clearly,Japan cannot simply implement the U.S. system. Still, a generalization of the U.S. concerning the framework that spawns start-up companies provides a valuable framework for considering Japan's problems.
Accordingly, in this study we view mentors, patrons, venture capitalists, and the public sector as the main tiers of venture assistance. Taking into account these tiers' respective roles and interrelation in the U.S., we primarily discuss problems of assistance in Japan. Underlying our discussion is the recognition, based on historical precedent, that in Japan the public sector in particular will as always play a key role.
We examined in some detail five cases of Japanese venture businesses according to which assistance tier they received assistance from before and after their start-up. On the basis of this examination and other information we collected, the following points can be identified as problems of the assistance tiers: (1) the assistance tiers are scanty; (2) there is little interchange among assistance tiers; (3) the assistance tiers are held in low esteem; and (4) the function of universities and public research institutions is inadequate. In each of these respects, Japan stands in stark contrast to the U.S. Further, there are also problems on the side of entrepreneurs and company management. These include (1) a common tendency to not include a business plan within the scope of one's vision (this is also an issue of ability to convince others of the value of one's business); (2) a lack of capability in cooperating with others; and (3) the low regard society has for entrepreneurs.
While these problems are largely attributable to cultural and climatic differences related to business, they also go beyond such differences and indicate points that should be addressed through a distinctly Japanese approach.
We can summarize how venture-business assistance should henceforth be approached as follows.
(1) As a fundamental policy, it is essential to create an environment conducive to entrepreneurial challenge. In concrete terms, what is needed is an environment in which the existence of parties that furnish assistance is known, management know-how is easy to obtain, and so forth.
(2) There should be a cognizance that the primary assistance provider is a mentor prior to start-up, a patron in the period right after start-up, and a venture capitalist in the stage in which rapid growth is achieved.
(3) In Japan, the public sector's role is, as always, crucial. But that role includes establishing a system that facilitates the activities of every assistance tier as a network involved in every stage of venture businesses' development. What is important as a first step is to support the commercialization of technologies or ideas whose outcome is still unknown and to produce a successful result even once. In short, we can say that the periods before and after start-up in particular are the domain of public-sector assistance.
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