The Productivity and Human Capital in the Japanese Software Industry: The View of Service Innovation

Problem statement: It has been pointed out the weak competitiveness of Japanese software industry. The industrial characteristic of the software industry in Japan is the subcontract system. There are numerous pieces of anecdotal evidence suggesting that the Japanese software industry suffers from low productivity growth on a par with that of other non-manufacturers particularly those in the services sector. In addition, there are not enough empirical studies of the productivity in the Japanese software industry. Approach: We analyze the productivity of the Japanese software industry in the view of the hierarchy structure and we investigate the effect to adopt the Information Technology Engineers Examination for the acquirement of knowledge of software development by using Cobb-Douglas Production Function. Results: Our main result is that the human capital measured by the Information Technology Engineers Examination for the acquirement of knowledge of software development, has the positive correlation with the productivity in the subcontractor companies, but not in the contractor companies. Conclusion/Recommendations: Our estimation result implies that the accumulation of the human capital is helpful to raise the productivity in subcontractor and it will bring the higher productivity in the software industry as the whole in Japan.