Performance of Japanese Medium-sized Firms (Japanese)

YoungGak Kim

Policy Discussion Papers (Japanese) from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: In recent years, many countries have begun to actively engage in policies that encourage and support the growth of small and medium-sized firms to become “medium-sized firms†and, in the future, “large firms†(Korea Institute for Advancement of Technology, 2024). However, there are still few studies on these recently-defined medium-sized firms. This paper provides an overview of the presence and performance of medium-sized Japanese firms. It examines their characteristics and contribution to the economy based on questionnaire information from the Basic Survey of Japanese Business Structure and Activities conducted by the Ministry of Economy, Trade and Industry (METI), Japan. The main findings are as follows. (1) The presence of independent medium-sized firms is shrinking in terms of the number of firms and employees. Subsidiary midsize-sized firms are expanding in number of firms and employees. (2) Subsidiary medium-sized firms are more efficient and productive due to the management resources provided by the parent company, but they face challenges in terms of innovation. On the other hand, independent medium-sized firms are more efficient and have better labor and total factor productivity (TFP) than SMEs but are less productive than subsidiary medium-sized firms. On the other hand, they are superior with respect to innovation, including R&D and patents. (3) There is little transition between the sizes of small, medium, and large firms. In recent years, the shrinkage of medium-sized firms to small and medium-sized firms is due to the reduction in the amount of capital. When small firms transition to medium-sized firms, especially independent medium-sized firms, innovation activity increases. (4) Medium-sized firms have high productivity and productivity growth rates, although their weight (about 20% within the Basic Survey of Business Activities) is small. (5) The contribution of medium-sized firms to labor productivity growth and wage growth is substantial. It should be noted that the small and medium-sized enterprises referred to in this paper are limited to those covered by the Basic Survey of Japanese Business Structure and Activities (those with 50 or more employees and capital or investment amounts of 30 million yen or more).

Pages: 51 pages
Date: 2024-12
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