Japan's high-technology miracle in the industrial society up until the end of the 1980s prompts the postulate that co-evolutionary dynamism between innovation and institutional systems is decisive for an innovation-driven economy and also that Japan indigenously incorporates an explicit function in such dynamism. However, Japan's contrasting economic stagnation in an information society resulting from a "lost decade" in the 1990s prompts another postulate that such stagnation can be attributed to a system conflict between a new paradigm in an information society and traditional business model moulded by organizational inertia and also that an innovation-driven economy may stagnate if institutional systems cannot adapt to innovations. These postulates provide a reasonable explanation for the noteworthy surge in Japan's new innovation in recent years in its high-technology firms. This reactivation can be attributed to the co-evolution between indigenous strength developed in an industrial society and the effects of cumulative learning from competitors in an information society, with co-evolution facilitating the emergence of hybrid management of technology by fusing "east" (indigenous strength) and "west" (learning from and corresponding to a digital economy). This paper attempts to demonstrate the foregoing hypothetical views and extract lessons from Japan's success and failure over the last three decades by means of an empirical analysis focusing on the self-propagating dynamism typically observed in a mobile phone-driven innovation and also the co-evolutionary domestication initiated by Canon.
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Japan's high-technology miracle in the industrial society up until the end of the 1980s prompts the postulate that co-evolutionary dynamism between innovation and institutional systems is decisive for an innovation driven economy. While not a few studies analyzed the structure and the inducing role of institutions (e.g., North, 1990, 1994, Nelson and Sampat, 2001), they remained no direct link with the foregoing co-evolutional dynamism. Watanabe et al. postulated that institutional systems are similar to soil in that they cultivate emerging innovation realized by means of a three-dimensional system consisting of (i) a national strategy and socio-economic system, (ii) an entrepreneurial organization and culture, and (iii) historical perspectives (Watanabe and Zhao, 2006) as illustrated in Figure 1.
While this concept provides clear insight on the Japan's explicit function in accomplishing its sophisticated co-evolutionary dynamism in an industrial society, Japan's long-lasting economic stagnation in an information society that emerged in the beginning of the 1990s resulting from a "lost decade" in the 1990s provides another postulate that an innovation driven economy may stagnate if institutional systems cannot adapt to innovations, and Japan's economy in the 1990s is one example.
The foregoing observations prompt the following hypothetical view that Japan indigenously incorporates an explicit function which induces co-evolutionary dynamism enabling it to achieve conspicuous performance in a virtuous cycle between innovation and rapid economic growth in the 1960s followed by technology substitution for energy in the 1970s leading to the world's highest energy efficiency improvement and broad advances in manufacturing technology level in the 1980s (Watanabe, 1999).
Although Japan's dynamism shifted to the opposite in the 1990s resulting from a lost decade due to a systems conflict between indigenous institutional systems and a new paradigm in an information society, a swell of reactivation emerged in the early 2000s (Watanabe et al., 2006) which prompts also the following hypothetical view that this can largely be attributed to hybrid management fusing the "East" (indigenous strength) and the "West" (lessons from corresponding to a digital economy). …