Japan’s Coevolutionary Dynamism between Innovation and Institutional Systems: Hybrid Management Fusing East and West

Contrary to its long-lasting economic stagnation during the “lost decade” in the 1990s, Japan is expected to “flying again.” This anticipation can largely be attributed to the activation of Japan's indigenous virtuous cycle between technological innovation and economic development. Despite many handicaps, Japan achieved a conspicuous technological advancement and subsequent productivity increase by devoting technology substitution for constrained production factors such as labor in the 1960s and energy in the 1970s. Such efforts enabled Japan to improve its institutional systems essential for its technological innovation, which in turn induced further innovation. Thus Japan constructed a sophisticated coevolutionary dynamism between innovation and institutional systems. However, its economic stagnation in an information society in the 1990s demonstrates that this dynamism may stagnate if institutional systems cannot adapt to innovations. Noteworthy surge in new innovation in recent years in leading edge activities of Japan's certain high-technology firms can be attributed to the coevolution between indigenous strength developed in an industrial society and effects of the cumulative learning from their competitors in an information society. This coevolution emerges as hybrid management by fusing “east” (indigenous strength) and “west” (learning from and corresponding to digital economy) leading to Japan's firms being more resilient against ubiquitous economy where seamless, on demand and open-sourcing are essential requirements. Empirical analysis is focused on the elucidation of the coevolutionary domestication leading the noted hybrid management fusing east and west.