Alternatives to Hierarchy in Japan: Business Networks and Civic Entrepreneurship

Abstract

Japan has often been described as a ‘network society’. Business networks are said to succeed as alternatives to markets and hierarchies by fostering cooperation and competition among members. Interpretations of existing business networks in Japan are biased toward the central state and big business, while failing to examine underlying power asymmetries, which have been masked by assumptions of ‘trusting’ relations between large firms and small. In essence, in Japan most networks are in fact hierarchies. High-technology small- and medium-sized firms that have de-linked and formed some kind of alternative (non-hierarchical) inter-firm interaction (network) type are much more innovative in terms of R&D output and new product creation than their ‘linked’ (ie to hierarchical production structures, or keiretsu) counterparts. In other words, de-linking, not firm location, is what matters. That said, there exist more independent firms in Kyoto, coupled with a sense of ‘civic entrepreneurship’. This civic-minded independent entrepreneurship dynamic leads to innovative outcomes, more so than in other regions in this study. I examine three local business networks: Kyoto's ‘Kiseiren’, Osaka's ‘TOPS Higashi Osaka’ and Tokyo's ‘O-net’. The most successful networks are enterprise-initiated and independent of state and big business. Emerging network forms are proving to be an important alternative to hierarchy in Japan.