Columbia International Affairs Online: Working Papers

CIAO DATE: 03/2009

Leading Without Followers: the Political Economy of Japan's ICT Sector

Kenji E. Kushida

December 2008

Berkeley Roundtable on the International Economy


Despite global leadership by Japanese firms in sectors such as automobiles, precision equipment, and various high tech components, Japanese firms in the ICT sector have followed a persistent pattern of leading without followers. While leading the domestic market to ever-high levels of sophistication, sometimes beyond that of most other advanced industrial countries, Japanese ICT companies have retreated dramatically from international markets. Moreover, in technology after technology, Japanese ICT firms invest heavily, undertake extensive R&D, and for network technologies, deploy infrastructure rapidly, only to find that global technological trajectories shift in a different direction. While globally successful Japanese industries were able to use their domestic market as a springboard into international markets, Japan‟s ICT sector became decoupled from global markets, trapping Japanese firms in the domestic market.

This chapter contends that this persistent pattern of Japanese ICT firms leading without followers was not simply the result of unfortunate technological choices, ill-informed corporate strategies, or insular government standard-setting processes. Rather, a set of distinctive characteristics of Japan‟s ICT markets, shaped by specific policies and political processes, combined to create dynamics of competition which led the sector to become decoupled from global markets. These dynamics of competition ultimately shaped the technological choices and business strategies pursued by Japanese ICT firms, trapping them in the domestic market. Although these distinctive characteristics have changed considerably since the late 1990s and early 2000s, many of the market dynamics persist, raising the real possibility that Japan will continue to be a leader without followers in landline and wireless Next Generation Networks.