The politics of innovation: High-technology small and medium-sized enterprises in Japan

Japan is often characterized as an economy of big corporations and conglomerates like NEC or Sony. In reality, the fabric of the Japanese economy is woven not with these large conglomerates but primarily with small and medium sized enterprises (SMEs). Facing increasingly internationalized production structures, traditional relations between large corporations and small subcontractors are unraveling. The dissertation is based on extensive field research with owners and managers of 43 high technology SMEs in three industrial regions in Japan.; A variety of what I call "intermediating hierarchies" between the state and private sector serve the exclusive interests of the central state and big business in Japan, including the Ministry of Finance controlled financial system, vertically integrated keiretsu production structures and the patent system. These hierarchies are part and parcel of Japan's system of so-called "flexible rigidities" or "flexible specialization." Further, these hierarchies have become significant barriers to innovation in small and medium sized enterprises.; I argue that the most innovative small and medium sized high technology enterprises have survived and prospered by de-linking from intermediating hierarchies and forming what I call "enabling institutions." Enabling institutions, firm-initiate cooperative ties often assisted informally by local governments, are an important support for firms struggling to be independent and innovative. I examine two enabling institutions in this dissertation: autonomous business associations and horizontal business networks. The central state has proven ineffective and even inimical to the development of enabling institutions. This finding stands in contrast to standard explanations of Japan's industrial policy toward enterprises, particularly in high technology industries.; This approach challenges other explanations which have attributed the resilience to changes in the global economy of certain communities of firms and the economies in which they are embedded to the shift from Fordist production to 'flexible specialization.' This research is aimed at contributing to the emerging literature in comparative political economy on such embedded enterprises.