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Explaining Japan's Kūdōka [hollowing out]: a case of government and strategic failure?

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  • David Bailey

Abstract

The proposition that Japan is undergoing ‘kudoka’ (a hollowing out process) is examined before exploring explanations for the process. The paper finds much of relevance in the ‘government failure’ approach, whereby the export success of certain sectors combined with import protection for other sectors has produced a trade imbalance, continual yen appreciation, a rising cost base, outward foreign direct investment and hollowing out. However this analysis is incomplete in ignoring the central role of Japanese transnationals in the process. Taking into account the latter via a ‘strategic failure’ approach renders a more complete view of the nature of the hollowing out phenomenon, and how and why government failed. A policy framework to counter such strategic failure is set out, involving a mix of careful deregulation and policies to diffuse strategic decision-making and to reinvigorate declining clusters of small firms.

Suggested Citation

  • David Bailey, 2003. "Explaining Japan's Kūdōka [hollowing out]: a case of government and strategic failure?," Asia Pacific Business Review, Taylor & Francis Journals, vol. 10(1), pages 1-20, October.
  • Handle: RePEc:taf:apbizr:v:10:y:2003:i:1:p:1-20
    DOI: 10.1080/13602380412331288780
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    Cited by:

    1. Jonathan Morris & Rick Delbridge & Takahiro Endo, 2018. "The Layering of Meso‐Level Institutional Effects on Employment Systems in Japan," British Journal of Industrial Relations, London School of Economics, vol. 56(3), pages 603-630, September.
    2. Fiorenza Belussi & Lisa De Propris, 2013. "They are industrial districts, but not as we know them!," Chapters, in: Frank Giarratani & Geoffrey J.D. Hewings & Philip McCann (ed.), Handbook of Industry Studies and Economic Geography, chapter 20, pages 479-492, Edward Elgar Publishing.

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