Trends and sources of the development of the start-up of new ventures in regional development

Osada, N. & Watanabe, C. (2003). Trends and sources of the development of the start-up of new ventures in regional development. Development Engineering 99-116.

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Abstract

The virtuous cycle between technology and economic development can be attributed to innovation supported by vigorous R&D investment. The Japanese management system has encompassed the system of "Invisible investment" which controls younger workers' wages keeping lower than the level of the marginal productivity and appropriates this difference toward an investment in the future, and this investment has played not a few role to stimulate the uncertainty investment including R&D investment. While Japan's "Invisible investment" system has similarity with the Stock Option System as both depends on the employee's own contribution, it is unique sophistication system as manager of the firm has a sole authority to decide the objective investment. However, under a new paradigm in the 1990s, corresponding to the bursting bubble economy along with low or negative economic growth and an aging trends, the firm lost the incentive to R&D investment brought by the foregoing system. A recent trend in decreasing R&D investment is considered due to these foregoing mentioned. Based on the calculations of "Invisible investment" and the position of R&D investment in the cost of capital in Japan's manufacturing industry, this paper attempts to demonstrate this hypothetical view focusing on the comparison between the performance of Japanese economy before 1990s and after 1990s. Intensive analysis demonstrated that the system of "Invisible investment" has stimulated the growth of the firm through the following mechanism: "Wage restraint of young age --> retained profit increase --> investment increase --> Growth of the firm --> Comparatively high wages at middle and advanced age." However, as recent paradigm change including low or negative economic growth and an aging trends emerges, it is clear that the firm lost the incentive to the R&D expenditure brought by the foregoing system, and it becomes important to construct a system which enable to shift from an increase in investment to an increase in system efficiency in the future.

Item Type:	Article
Research Programs:	General Research (GEN)
Bibliographic Reference:	Development Engineering; 9:99-116 [2003]
Depositing User:	IIASA Import
Date Deposited:	15 Jan 2016 02:15
Last Modified:	27 Aug 2021 17:37
URI:	https://pure.iiasa.ac.at/6844

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