Decomposition analysis of entrepreneurial activities in Japan: An international comparison

Abstract

Entrepreneurship is critical to economic development because it promotes economic growth. Start-ups require a healthy entrepreneurial ecosystem to succeed, but being the world’s third-largest economy, Japan does not have a satisfactory level of entrepreneurship. The objective of this study was to find the magnitude of the gap in entrepreneurial activities in Japan compared with other similar economies and to find the significant entrepreneurial attitudes for this gap. Therefore, this study used Global Entrepreneurship Monitor data from 2001–2018 and applied the Oaxaca-Blinder decomposition method. Three outcome variables have been used for measuring the entrepreneurial activities: Entrepreneurship, Investment, and Future Intention of Entrepreneurship and the entrepreneurial activity gap has been decomposed in terms of four entrepreneurial attitudes (Network, Opportunity, Confidence, and Fear of Failure) in Japan. The results show that Confidence shares most of the part (50–60%) of the explained portion of the Entrepreneurship gap in Japan compared to other countries. For the investment gap in Japan, Confidence and Network explain most of the gap (about 60–70%), whereas Confidence and Opportunity are the most responsible (85–90%) for the gap in future business intention in Japan. This study is the first attempt to identify the entrepreneurial attitudes behind the entrepreneurial gap in Japan and provides important policy implications to enhance entrepreneurial activities in Japan as well as in other similar economies for sustainable economic development.