Japanese political economy in the IT revolution era: Developmentalism and the software industry

The purpose of this research is to examine why information technology has become one of important issues in the current international relations and political economy and how political economic institutions of a nation could help the development of the IT industries and infrastructure or might hinder the development. The theoretical goal of my study is to develop a theory of institutional inertia and adjustment with the case study of Japan's computer software sector development. My case study of Japan's government-led strategy and industrial policy to catch up with the US hegemony called Wintelism illustrates that institutional fitness in the past could change into institutional inertia in the current New Economy. Unlike the cases of endogenous technological innovation based on its own institutional assets of political economy, when a new technological innovation is exogenously introduced to a nation, the industrial and economic governance system of the nation usually needs to adjust its political economic institutions in order to adopt the newly introduced technological innovation. Without the adjustment, it becomes much harder to internalize the technological advance in the economy and society. My theory of institutional inertia and adjustment points up an urgent need of institutional adjustment in order for the developmental state to cope with the current IT revolution, to build an information-intensive society, and to compete with foreign rivals in the international market. As clarified in the e-Japan Strategy, the Japanese political economic institutions must be adjusted to more suitable ones for IT sector development. If not, Japan will continue to fall behind in competition in the increasing profit business of software and will not complete its goal of informatization.