The Japanese global leadership challenge: what it means for the rest of the world

The rise of the modern Japanese economy in general and of Japanese multinational corporations (MNCs) in particular has been well documented. However, as the Japanese economy has struggled and as emerging markets including China have taken off, interest in Japanese multinational firms has slid. This is unfortunate, because the relative failure of Japanese MNCs to adapt to a more complex, global marketplace can provide lessons for the rest of the world, particularly MNCs from emerging markets. The purpose of this work is to examine why Japanese firms succeeded first at home and then in exports, but overall failed to move successfully into international operations and globalization. This work is informed by examining the relative performance of Japanese firms on several databases, such as the Fortune Global 500 and United Nations Conference on Trade and Development (UNCTAD), and through in-depth case studies -- one of which we share here. Our research found that many of the factors that helped Japanese firms succeed at home and with exports became stumbling blocks as they set up operations overseas and later tried to globally integrate their increasingly complex worldwide operations. Specifically, their efforts to transplant into foreign operations methods that worked domestically and with exports created huge unanticipated negative consequences. In particular, the reliance of Japanese firms on home-country expatriates combined with their failure to identify and develop local talent or to promote non-Japanese leadership talent to regional and global positions severely hurts their ability to globalize their operations and grow their non-Japanese revenue, especially when compared to North American and European multinational firms. We review the huge challenges this posed not only on Japanese affiliates in general but on the people at senior leadership positions at home and abroad in particular. Understanding the psychology of both Japanese and foreign managers is critical to gaining insights into how and why so many Japanese multinational firms derailed over the past decade. We review not only the conditions that led to the failure of so many Japanese firms, but also the actions they need to take to regain their place on the global stage. Finally, our research offers a cautionary tale for multinational firms from emerging markets such as Brazil, Russia, India and China. Many firms from these countries are in situations that are similar to those of Japan 30 years ago. Failure to learn the lessons from the Japanese global leadership challenge could increase the chances that in not learning from history they are doomed to repeat it.