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Asia @ RMIT

Asia @ RMIT. Firm Innovativeness in Japanese SMEs. SME Management and Growth. Innovate or Evaporate: Lessons from Japanese SMEs. Research Background…. Owned & operated various start-ups in Japan over the past 20 years

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Asia @ RMIT

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  1. Asia @ RMIT Firm Innovativeness in Japanese SMEs

  2. SME Management and Growth Innovate or Evaporate: Lessons from Japanese SMEs

  3. Research Background… • Owned & operated various start-ups in Japan over the past 20 years • Presently Partner & President of a diversified trading company established in 1992, that employs 528 people

  4. The Lost Decade • Over the past century Japan has achieved a rate of growth only matched by the United States (average 3.6% annually), outpacing other notable performers in Canada (3.5%), Sweden (3.2%) and Australia (3.2%)

  5. The Lost Decade • Japan’s economic growth plunged from an average 5.1% in the 1970s to • 4.1% over the 1980s to • less than 0.96% over the past ten years (Jorgenson & Motohashi 2003; OECD 2003)

  6. The Lost Decade • Unemployment has risen to over 5% • Population is ageing decreasing by 0.5% p.a. which reduces growth by 0.3% p.a. (IMF, 2004) • Average CPI over Lost Decade -0.4% (i.e. deflation) • Resulting in a lack of consumer and business spending

  7. The Lost Decade • In a 10 year period (1991-2001) Japan has gone from owning over 40% of world market capitalisation to just 10% • (NPLs) - Japan is now the most indebted industrialised country with public debt running at an unsustainable 139.9% of GDP (US 62.1%)

  8. The Lost Decade • World Competitiveness Yearbook - (International Institute for Management Development) - assesses a nation’s competitiveness on the basis of: • economic performance • government efficiency • business efficiency • level of infrastructure

  9. The Lost Decade • 1991 - Japan was ranked No. 1 • by 2008, Japan was ranked 24th

  10. Hence… • The need to innovate or evaporate • Particularly for SMEs – a nation’s economic shock absorbers • 81% of the total workforce (public and private); 99.5% of all enterprises; 51% of total annual exports

  11. Research Objective… • Research sponsored by East Kanto Association of Management • ‘What are the underlying components of firm innovativeness?’

  12. Method… • Multi-method exploratory research design (i.e. no a-priori assumptions made : • Meta-analysis of literature produced over 120 variables used to measure innovativeness • Pilot test reduced this to 60 • Questionnaire development (translated, reverse translated, pilot tested)

  13. Sample • Peak association representing SMEs in the Kanto region of Japan • 2,235 members • Sampling frame consistent with population in terms of firm sizes & industry spread (as per Chuso Kigyo Hakusho)

  14. Response Rate… • 1,868 were returned at a response rate of 83.6% • 16 considered unusable due to missing data • 1,852 resulting in an effective response rate of 82.9% (Kaiser’s measure of sampling adequacy 0.882)

  15. Analysis… • Data screened for any violations • PCA using varimax rotation conducted following Tabachnick and Fidell’s (2001) guidelines • The PCA accounted for 78.4% of the variance with 12 components extracted (eigenvalues >1). Loadings ranged from 0.414 to 0.915

  16. Analysis… • Item to total scale alpha was 0.858 (>0.60 & 0.80 reliability level) • Individual component reliabilities computed – ranged from 0.762 to 0.898 • Go to pdf.

  17. Component Interpretation Components grouped in terms of: • Firm-Centric Factors • Enviro-Engagement Factors • Enviro-Adaptation Factors

  18. Key Insights… • Firm innovativeness is complex and multi-dimensional • Managers must actively work towards developing and nurturing firm-centric and firm-exterus climates for innovative activity to occur.

  19. Firm-centric… • Prominence of trust, support, participation and reward/recognition • This is the scaffold or frame that supports creativity and innovativeness

  20. Firm-exterus… • Regional systems of innovativeness • Creation and development of heterogeneous knowledge networks of both formal and informal nature, especially in combination with the enabling effects of resource and infrastructure agglomeration found in diverse and dense milieu • Cost & risk reduction

  21. Final word… • SME managers must understand that the need to innovate is not optional, it is essential – the innovate or evaporate thesis! • Theoretically, uni-dimensional examinations of innovativeness will result in skewed understandings. We need to develop our knowledge from multi-dimensional perspectives

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