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Soft policies and hard competition: Government, industry, and user impacts on the development of Japan's software industry

Rapp, William V.

The paper analyzes the development and structure of the Japan's software industry, focusing particular attention on the failure of government support policies to nurture an internationally competitive industry and the success of foreign software producers in the Japanese market. The research adopts an evolutionary approach to explain Japan's problems in building a competitive software industry except in games, challenging the validity of standard explanations such as cultural disadvantage and failure to adopt best practice. The pattern of development in the Japanese software industry results from strong user preference for customized software over packaged products. Large users develop highly customized software systems that reflect their unique organizational structures and operating advantages. Software is viewed as an input into the production process, rather than an output to be independently marketted. As such, the structure of the software reflects the administrative heritage of major industrial users as much as developments in computer technology. The tendency to emphasize customization favors intra-industry software advances over interindustry expansion. Moreover, high demand for customization combines with large variation in operating systems to fractionalize the industry and frustrate government support policies. Even though the Ministry of International Trade and Industry followed the same industry support model that proved so successful in manufacturing, an independent world class software industry has not developed. The preference for customization has also allowed foreign software producers to successfully pursue a hub and spoke strategy. Foreign producers have been able to expand their user base, thereby lowering unit cost and putting local software developers at a further disadvantage. The research suggests that this situation will continue.

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Academic Units
Center on Japanese Economy and Business
Publisher
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Series
Center on Japanese Economy and Business Working Papers, 94
Published Here
February 8, 2011
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