5. New Roles for Japanese Companies at the Knowledge-Based Economy

Information technology (IT) lies at the heart of today’s techno-economic paradigm. In the latter half of the twentieth century, Japanese companies succeeded in achieving high international competitiveness in the home appliance and industrial electronics markets by making technological progress in various hardware, including microfabrication technologies. However, as symbolized by the emergence of the term “knowledge-based economy,” the relative importance of software, rather than hardware, in IT began to increase during the transition from the twentieth to 21st century. Successful adaptation to this change in techno-economic paradigm is essential to maintaining international competitiveness. However, Japanese companies did not succeed in shifting their R&D focus to software. This failure to adapt in a timely manner is considered one of the important reasons for Japanese companies’ prolonged stagnation. This paper draws on patent and magazine article data to verify that the core of techno-economic paradigm is changing from hardware to software and that Japanese companies failed to adequately adapt to this change.