Small and Medium Enterprises in Japan: Surviving the Long-Term Recession

Shuji Uchikawa
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Shuji Uchikawa: Asian Development Bank Institute

No 169, ADBI Working Papers from Asian Development Bank Institute

Abstract: The relationship between large enterprises (LEs) and small and medium enterprises (SMEs) in Japan has undergone major changes during the long-term recession since 1991. While SMEs still play the important role of supplying parts and components to LEs through subcontracting, many LEs have started to reduce the number of their suppliers and the components they use in manufacturing. While efficient SMEs selected by LEs were able to expand their businesses, inefficient SMEs lost customers. The regression results in this study suggest that the decrease in number of establishments—specifically, the exit of inefficient SMEs—might improve total factor productivity growth rates. The traditional business model of being dependent on certain LEs and doing business within the cluster is not functioning as well as it used to. Heavy dependence on certain industries and highly segmented and specialized production processes prevent the clusters from adjusting to the new business environment. Some SMEs are still able to create new business by taking advantage of more flexible divisions of labor. SME policies must encourage diversification and collaboration that cut across traditional industry groupings to form a flexible division of labor.

Keywords: japan sme recession; japan sme restructuring (search for similar items in EconPapers)
JEL-codes: L60 O14 O25 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2009-11-27
New Economics Papers: this item is included in nep-ent and nep-sbm
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