An Innovation in Incremental Institutional Change: A Hybrid Form of Start-Up Incubation System Emerged in the Japanese Institutional Transitions

Abstract:     
In the past two decades, Japan has implemented a variety of policy changes and system refinements in order to catch up the other high performing economies, most notably the United States. Consequently, many of the initiatives are designed to challenge the institutional underpinnings of the Japanese form of capitalism such as main bank finance, lifetime employment, and cross-share holdings.

How these changes influenced the way in which startups born and grow in Japanese institutional environment? This paper highlights the key characteristics of Japanese labor and finance market for startups, and describe how three successful startups found the way they incubate new businesses.

By analyzing these case examples, this paper argues the “hybrid nature” of their business incubation strategy. This paper analyzes how these successful startups managed the difficult institutional environment, and invented what this paper call as a hybrid form of startup incubation system.

Further, the cases highlight the fact that the organizational diversity increases in the process of incremental institutional change from coordinated market economy to liberal market economy. Moreover, they illustrate the links between the behavior of individual entrepreneurs and the formal/informal social system of a country, and show how institutional entrepreneurs influence the national system, emphasizing the role of individual firms in the process of institutional innovation.

Keywords: Coordinated Market Economy, Japan, institutional environment, Institutional Change

JEL Classification: P51

working papers series