Business Incubation Policy in Japan
Out of the thousands of years of Japanese history, the modern and industrialized economic era spans only the last 150 years. During this short history, there have been two peaks of industrial prosperity.The first peak was in the heavy industry period, which was attained through government policy and form the modern foundation of the nation. The second peak was in the high tech industry period led by private companies under the management of excellent entrepreneurs, industries such as chemical and electronics applied manufacturing prospered. However, these prosperous days named “the bubble economy” came to a sudden end in 1990’s. After this event, the ‘business incubation’ concept was vigorously studied and applied by the Japanese government, which lead to the formation of the Japan Association of New Business Incubation Organization (JANBO) in 1999.
JANBO was established as a control center for nationwide business incubation activities. Since its inception, more than 600 incubation managers were trained by its training institute and were stationed at 200 business incubation facilities and programs. JANBO’s activities came to an end when the Japanese regulation that supported the business incubation growth in the country expired in 2009. The Japan Business Incubation Association (JBIA), a private organization, was then established in 2008 by hundreds of incubation managers to replace JANBO since the activities that JANBO provided were indispensable for the fundamental infrastructure of the nation’s economy. Recently, due to the drastic worldwide depression, JBIA, in addition to its existing tasks, has also developed new policies to facilitate the creation of self-employed businesses.
The brief industrial history and the business incubation in Japan
It was only 150 years ago when the modern nation of Japan was born with its first national constitution after thousands of years of ancient customs. However, compared to industrialized nations, the first half of the Japanese modern industrial era was still at a level similar to those of developing nations. After World War II, approximately 70 years ago, industries with advanced technology started to prosper including electronics applied manufacturing and chemical industry based on technologies and know-how from the conventional heavy industry. The Japanese economy boomed tremendously during this period supported by numerous export oriented manufacturing companies. Japan then attained the second peak of its national industrial prosperity so called “the bubble economy,” behind which were diligent, hardworking workers and cheap labor cost. However, the bubble economy came to the sudden end in 1990’s. Although Japan is still keeping the second largest GDP in the world, the burst of the bubble economy has caused more than two decades of a serious economic hardship in the country.
Rapidly increasing unemployment rate after the bubble economy burst triggered the Japanese government to establish a new temporary regulation to start business incubation activities following the success of business incubation activities in the U.S. This marked the beginning of the business incubation history in Japan, and it was the very first attempt of Japanese Government to stimulate
economies by creating industries through cultivating entrepreneurs. The temporary regulation served to unite industry-supporting organizations scattered throughout the country and created “a one stop service office” in each prefecture. This one stop service system is called an “industrial platform,” which became an important infrastructure for creating new industries. The Japan Association of New Business Incubation Organization (JANBO) was established at that time as the central agency of these platforms in 1999.One of JANBO’s missions was to utilize the past experiences of similar business incubation attempts and train incubation managers. JANBO established a training institute for incubation managers. It also organized numerous symposiums to educate the public about business incubation, published educational journals related to business incubation, and gave recognition to individuals and organizations with superior achievement in the business incubation field from 1999 to 2009.
As a result of these activities, JANBO achieved to create a strong network of 50 industrial platforms and 200 business incubators, who were trained by 600 industry creation professionals called “incubation managers.” In addition to these domestic activities, JANBO also played an important role in organizing and networking in Asian countries through the Asian Association of Business Incubation (AABI).However, due to the expiration of the temporary business incubation legislation,JANBO ceased its activities at the end of March 2009.
The Japan Business Incubation Association (JBIA)
Whoever once involved in the business incubation industry understands the strong necessity of having a business incubation association. The success of the National Business Incubation Association (NBIA) in the U.S. and similar organizations in other countries have taught us the critical role that business incubation associations play as a national strategic body as well as an information control agency. In response to the demand for establishing a new association to take over the role played by JANBO, 200 active incubation managers trained by JANBO joined forces and formed a new association called the Japan Business Incubation Association (JBIA) in June 2008. It was established prior to JANBO’s termination in order to provide undisrupted business incubation services in Japan. JBIA officially succeeded all the roles that JANBO played in the business incubation field, despite the fact that JBIA was an organization independent from any government sectors. Currently JBIA is the only business incubation association in Japan.
JBIA was formed by the “bottom up” method by a large number of individuals who know business incubation thoroughly and have strong connections with each other On the contrary, JANBO was formed by the ”top down” method by the Japanese government, and its initial members were business incubation related public parties, not individuals, who had no knowledge of business incubation at that time. In addition, JBIA is an organization specialized in business incubation as opposed to JANBO, which was an organizing party of the industrial platforms and business incubation was one part of its numerous activities. Establishment of JBIA finally allowed Japan to possess a real business incubation capability with necessary supporting organizations, professionals and infrastructures.
The features of the business incubation environment in JAPAN
Careful consideration must be given when designing and promoting specific business incubation in a different country because often situations vary greatly from one region to another and from time to time. The well-known Batavia Industrial Center in Batavia, New York, USA was the origin of business incubation and served as a model for the current business incubation activities. However, employing the exact same approach would not be effective to conduct business incubation activities in Japan or any other countries. The aspects of Japan’s economic features that need to be considered when promoting business incubation in Japan include:
・Japan is definitely not an industrially developing country, but it has not been a so-called ‘mature country’ in the past few decades, either.
・Japan has the second largest number of big firms listed in Fortune Top 500.
・Japan has a superior, useful industrial infrastructure called “industrial platforms”which offer services and support to SME and entrepreneurs such as financing, consultation, and facilities.
・The unemployment rate in Japan is 5.5% in average as of September 2009.
・The Japanese government has an adequate budget for technology development and for bankruptcy prevention of SMEs.
・Japan has an extremely low entrepreneur rate among 40 surveyed countries by the Babson college, U.S.A. (Japan has never been a country where entrepreneurs are widely respected and sought out.)
By considering the above features and comparing with other countries, Japan is definitely not facing economic poverty at this moment, which probably resulted in the rather sluggish business incubation activities in Japan and the termination of JAMBO in a very short period of time. However, the country also has a huge national debt and a serious top-heavy population problem, which will cause a gradual decline in the quality of life in Japan.
The JBIA business incubation policy
Japan’s manufacturing industries, which lead the prosperous days in past decades is losing its competitive edge due to high labor costs. Many of the manufacturing companies have already shifted their mass producing factories to Asian countries which offer much cheaper labor. This has caused bankruptcy of many domestic small subcontracting manufacturers. However, the big, mighty firms will likelysurvive with their highly competitive technologies and large capital, while a gradual reduction in the number of employees is expected.In September 2009, a new political party won the national election and caused a dramatic change in Japanese government. This historical event is worth being called the first political revolution in the 140 years of the modern Japanese history The new government is expected to cut a large portion of its budget for unnecessary construction of roads and facilities, which used to be artificially created by politicians to support the income of people in rural areas.
The change of industries, the change in the population structure and the political power shift described above all point toward the fact that Japan is already entering into the ‘mature country’ time. Facing these serious issues, JBIA has created anew policy, which incorporates the following aspects:
1. More emphasis should be placed on business incubation of small self-employed businesses in rural areas, rather than technology oriented business incubation in urban areas, which requires bigger budget and a longer time frame. The rural areas will inevitably require more assistance because their unemployment rate is expected to rise as Japan becomes more of a ‘mature country.’ Moreover, the large to mid-sized existing firms are competitive enough to survive and will likely
2. Business incubation activities for the service industry which does not require large facilities and space should expand into the private sector. The private sector is much more flexible than the public sector in terms of offering various services competitively.
3. A more strategic approach should be employed to educate individuals involved in business incubation:
1) Incubation managers need to be taught the latest marketing knowledge and skill sets so that they can offer more effective advice to entrepreneurial candidates The advice should focus on how to create a lasting business that will succeed and survive in the coming decades, rather than simply teaching general knowledge of business operation and growth.
2) Local government officials need to be educated so that they will be capable to design and create strategic business development plans to stimulate local economies. Traditionally, local government officials were merely trained just to carry out the projects assigned by the national government. The new skills and knowledge of establishing feasible, practical business development plans are strongly needed.
3) Latest knowledge and importance of business incubation need to be further spread and taught continuously to individuals related to the industry including government officials and entrepreneurs.Most Japanese people are still not familiar with the concept and the term of “business incubation.” The application and function of business incubation in Japan has improved significantly over the last 20 years through continuous efforts of modifying and reforming the original American business incubation concept. We will need to continuously educate and spread the latest business incubation knowledge and its importance because in order to survive and overcome the current recession and economic changes that will be brought by becoming a “mature country,” business incubation and incubation mangers are indispensable to Japan’s economy.