
Contents
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The 1940 System in the Postwar Era The 1940 System in the Postwar Era
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Regime Change in Technology Requires Change in Institutions Regime Change in Technology Requires Change in Institutions
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Open Innovation Open Innovation
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Creative Destruction versus Creative Accumulation Creative Destruction versus Creative Accumulation
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Adapting to a Change in Regime Adapting to a Change in Regime
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2 Analog Mindset in a Digital World
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Published:February 2024
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Abstract
The shift from the analog era to the digital era requires a change in business institutions. Yet, Japan’s companies remain stuck in the analog mode that was successful in the older era: huge, capital-intensive companies that try to develop all their innovations in-house. That works in some industries, like autos. But in rapidly changing ones like electronics, it fails. Moreover, products incorporate too many different technologies for one company to master. Additionally, modern software allows more and more business R&D to be conducted by smaller firms (e.g., under 1,000 rather than over 25,000 as before (see C2P30)). For all these reasons, the digital era requires more entrepreneurial companies, as well as cooperation among wide networks of companies ranging in size, a process called open innovation. Failure to adapt is why Japan came in 63rd out of 63 countries in how much benefit its companies get for their digital investments, and why Japanese electronics has suffered falling global sales even as global purchases of electronics are exploding.
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