The socio-political foundations of regional innovation systems

The aim of this book has been to resolve the puzzle as to why – irrespective of national-level efforts – “clusters” of new product and new business creation persist. Ikeda Manufacturing of Ota Ward in Tokyo and Samco International of Kyoto – the entrepreneurial stories with which this book began – represent the regional variations in Japan's national innovation system (NIS), as the number of other cases throughout the book also illustrate.

Through examining entrepreneurs, firms, and the socio-political characteristics of the regions within which these enterprises are embedded, I have attempted to provide insights into the people and institutions behind the emergence and sustenance of communities of innovative firms in Japan and elsewhere. At the core of these innovative regions are civic entrepreneurs, embedded within certain informal institutional arrangements, including innovative coalitions of local stakeholders.

This book is first and foremost a firm-level case study based analysis of high technology entrepreneurial firms. As such, chapter 2 starts off by laying out the institutional barriers as well as opportunities posed by the so-called “trust-based relational contracting system,” or “production pyramid” in Japan. The vertically integrated production system, visualized in the pyramid model in figures 1.1–1.4, came to dominate market interaction in Japan in the last half of the twentieth century.

The impact on business activity, at all levels, of interlocking institutional hierarchies in production, finance, licensing, and so forth are partly to blame for the lackluster performance of the Japanese economy since the early 1990s.