The politics of innovation in Japan: retention capacity, leakage, and lock-in in the national innovation system

Apostolos Vetsikas

The Japanese Political Economy, 2026, vol. 52, issue 1, 140-167

Abstract: Japan occupies a foundational place in national innovation systems (NISs) research. Yet post-bubble stagnation, shifting corporate governance, labor-market dualization under aging, and renewed industrial policy amid digital, green, and geopolitical pressures raise a political-economy puzzle: how do capitalist institutions shape an innovation system’s capacity to reproduce, diffuse, and renew productive capabilities over time? We specify an evolutionary mechanism—variation, selection, and retention (VSR)—that links familiar NIS inventories to system evolution. We argue that outcomes hinge on retention capacity: replication infrastructures that store and transmit routines, skills, standards, and investment horizons so innovations diffuse, scale, and cumulate. Defining retention narrowly clarifies two failure modes: under-retention produces leakage and recurrent pilotism, while over-retention produces lock-in and delayed reorientation during paradigm shifts. These failure modes can coexist across different institutional layers, producing simultaneous volatility and inertia. We develop a typology of five retention mechanisms (organizational routines, skills pipelines, inter-firm diffusion architectures, standards/infrastructures, and policy–financial memory) and derive propositions about how changing selection environments reconfigure them. Using Japan as an interpretive case, we offer a stylized periodization and highlight the policy challenge of building “reorientable retention”.

Date: 2026
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DOI: 10.1080/2329194X.2026.2636817

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