Chinese VS Japanese Attitudes Towards Entrepreneurship In The Internet Age

Why are Japanese young people less enthusiastic about starting their own businesses than Chinese young people?

(Chinese Version)

In the backdrop of rapid development of Chinese Internet+ industry, Chinese government is also pushing forward industrial upgrading, startups and innovation. Internet is no longer simply a tool but rather a new fashion in China. That’s why startups are established one after another in Chinese Internet industry. Statistics shows that while over 6,000 startups were established in Zhongguancun in 2013, more than 9,000 startups were launched in the first half of 2014. Tencent’s statistics also suggests that the number of entrepreneurs on Tencent’s open platform increased by 36 times in the past three years. So indeed, mass innovation is no longer a dream but rather comes into reality in today’s China.

However, things are completely different in Japan. I once overheard a story that three Japanese quitted their job in big-scale companies and instead made a living by planting and selling fresh vegetable to villagers. When a journalist asked them why didn’t they establish a startup in the Internet industry, they responded simply by saying that Internet industry contributed to 3% of Japan’s annual GDP, and was already fully-developed in Japan, so there wasn’t much room for them to explore and innovate.

Hays, a leading global expert in qualified, professional and skilled recruitment, once conducted a survey on young people in 13 different countries around the world and found out that while only 29% of Japanese youngsters were willing to be entrepreneurs, over 40% of Chinese young people were considering establishing their own startups later in their lives. Why are Japanese young people less enthusiastic about starting their own businesses?

Chinese society are more supportive of entrepreneurs than Japanese society

First of all, it has to do with the distinct culture and social environment of Japan. Entrepreneurship isn’t encouraged in Japan, and Japanese economy is largely controlled by various conglomerates. While local companies such as Toyota, Sony, Sharp, and Panasonic dominate the manufacturing industry, global Internet giants including Apple, Yahoo, Facebook, Google and Amazon, etc. control the Internet industry. No local Japanese Internet company can challenge these global Internet giants.

To upgrade Chinese economy and reduce unemployment rate, Chinese government, however, pushes forward to entrepreneurship a lot. To make it easier to start a business, Chinese government simplifies the application procedures so that Chinese entrepreneurs get to establish their own startups within two days. Earlier this year, the general office of the State Council issued some Opinions on Promoting Entrepreneurship and Innovation and promised to simplify procedures when registering in Trade and Industry Bureau, support a series of incubators, garages and café houses and “nurture” more startups. All these new policy changes show the willingness of Chinese government to promote entrepreneurship and Internet+.

Since 2007, venture capitals boomed along with the rise of GEM (Growth Enterprise Market). According to Zdatabase, 420 deals were made during Q1 2015 in China’s GEM. These deals covered over 20 industries, among which the Internet industry witnesses the largest number of deals (148). Startups from the Internet industry are becoming increasingly popular among investors and venture capitalists, so that they get to receive investment at a pretty early stage, which benefits lots of entrepreneurs and startups.

Japanese venture capitalists, however, are more conservative. They value reputation, brand and the experience of startups’ owners more, ideas, innovation and potential less. According to statistics from Japan Venture Enterprise Center and National Venture Capital Association of the US, the total investment volume in Japan, 2014 reached only 1.1 billion dollars, less than 3% of the total investment volume in the US. In other words, the total investment volume in the US, 2014 hit 50 billion dollars, 44 times more than that of Japan.

Noriyuki Takahashi, a researcher on entrepreneurship in Musashi University in Tokyo, pointed out that Japanese commonly saw entrepreneurs as greedy and aggressive, exact opposite of values upheld by Japanese traditional culture. He added that it was high time Japanese society eliminated their stereotype towards entrepreneurs, since only then could entrepreneurship and innovation thrive in Japan.

As a matter of fact, such mentality has something to do with the great recession during 1990 and 2000 in Japan. Japanese are so afraid to see unemployment rate soar again that they become more conservative and gradually develop lifetime employment system.

Chinese enterprise management system drives many young people to be their own bosses

Chinese enterprises value employees’ performance and ability, not their loyalty. For them, it is the responsibility of colleges and universities to educate their employees, not themselves. Japanese enterprises, however, attach great importance to loyalty, take on the responsibility to nurture their employees, enhance employees’ ability through their own special management mechanism and promote them step by step with the increase of their abilities and experiences. In this case, Japanese young people are comfortable with working for the same enterprise for a lifetime and are afraid to take much risk in starting their own businesses.

Japanese lifetime employment system was first come up with by Konosuke Matsushita, founder of Panasonic. Known as “the god of management”, he promised in 1982 to his employees that he would never fire any of his employee ahead of their retirement age, and his employees didn’t have to worry about unemployment. His management philosophy was later spread to other enterprises. Huge benefits are brought about by the lifetime employment system: Japanese enterprises get to keep a steady work force, improve productivity and efficiency and make best use of the labor resource. At the same time, however, this system rejects flexibility and innovation, so that many employees dare not quit their job and be their own bosses.

Moreover, under the lifetime employment system, Japanese enterprises promote employees based not on their performance but their work experience. Similar to Chinese SOEs, Japanese enterprises value experience and guanxi more, so that their employees work harmoniously together but lack the motivation to do things differently and innovate, which is crucial for entrepreneurs.

Chinese Internet companies, however, adopt American enterprise management system. Thus, they evaluate and promote employees based on their performance. If their performance always fall behind their colleagues, they might even face unemployment. In this case, Chinese employees can never feel safe and settled in big enterprises. As the social environment for entrepreneurship improves, many young people turn to the booming O2O and mobile Internet industry and start their own businesses, where they can be their own boss and make quick money.

The well-developed Japanese offline commerce precludes Internet and O2O industry

Let’s now compare the development of e-commerce and O2O in Japan and China. Although Unique and Amazon develop pretty well in Japan, I can still say for sure that Japan lag far behind China in e-commerce sector. How come? While China is lacking in enough offline shops and is in dire need of e-commerce to complement, Japanese can buy anything they want in time at offline shops and don’t need e-commerce that much.

For example, in take-out delivery industry, a typical O2O business, while the past two years witnessed the boom of take-out delivery industry in China, Japan has no such service providers except for KFC and McDonald.

Statistics suggests that there are more than 50,000 convenience stores, such as 7-11, Family Mart and Lawson, more than 20,000 drugstores, such as Matsumoto Kiyoshi, Sugi HD, etc. and hundred thousands of supermarkets, shopping malls and wending machines across Tokyo. Since Japanese can buy almost anything in offline shops around their work and living place, why should they bother to turn to the Internet for help?

To wrap up, a well-developed offline commerce industry makes it harder for O2O take-out delivery service providers to play a role in Japan.

Chinese entrepreneurs have more incentive than Japanese ones to start their own businesses

Another difference lies in the distinct cost of starting a business of one’s own. According to a survey, 90% of Japanese university graduates prefer to work in big-scale companies, which promises a steady and secure future. Those who change their jobs oftentimes are thought low of both by enterprises and by Japanese society. Moreover, in the face of parents’ expectations, and pressures to get married, care for the aged, buy houses, no Japanese dare to take risks and start their own businesses.

The benefit starting one’s own business can bring is not significant in Japan, either. Since equality is valued a lot in Japanese enterprises, the salary of CEOs is only several times higher than ordinary employees’. That is to say, Japanese employees are generally well-paid compared to Chinese employees, whose bosses might earn a lot more than themselves.

Now that China adopts American enterprise management system and evaluate employees based on their performance, it is only natural that Chinese CEOs get better-paid. This huge difference in salaries is the very incentive many Chinese employees start their own businesses, because they also want to get better-paid.

In other word, while Chinese entrepreneurs can make huge fortune if they succeed, Japanese entrepreneurs find it unrewarding to take risk starting their own business and earn as much as what they could have in big-scale companies. That’s why some insiders pointed out that many Chinese entrepreneurs wished to rise from rags, while Japanese young people are born with a silver spoon. Why should they bother to take risks and start their own businesses?

Japan has already lagged behind in global Internet age during the last two decades

Nobuo Lkeda, author of The Lost Two Decades, explained that the reason why Japanese economy was caught in economic stagnation was that Japan didn’t seize the opportunity during the third industrial revolution in 1980s. After the Second World War, Japanese united together and turned Japan into a manufacturing giant, who was excellent in making products of high quality.

In the Internet era, however, Japan repeated its past management model, which catered to the manufacturing age, but didn’t apply to the Internet age. While the Internet age promoted innovation, flexibility and openness, Japanese past management model valued accuracy, strictness and meticulousness. No wonder Japanese Internet industry lagged behind.

Although Japanese mobile Internet industry started pretty early (NTT DoCoMo, Japanese leading telecom provider even led the global mobile Internet for a while with its i-Mode), Apple and its iOS led today’s global trend of smart phones, while NTT DoCoMo has already paled into insignificance.

Besides that, when we look at the leading websites in Japan, we might find out that American websites, 7 among the top 10 companies are based in the US, including Yahoo, Google, Facebook, Amazon, MSN, Twitter, Microsoft, etc. Japanese people are always known for following the steps of the stronger, so they dare not to innovate now that there is no Japanese Internet giant for them to follow suit? As is put by a Japanese insider, “Since there is no single Japanese Internet company who can compete with Internet giants such as Facebook, Google and Twitter, Japanese young people don’t believe that they could make a difference.”

In China, however, many Internet giants started by copying American Internet giants but later outperformed them in the mobile Internet age. Baidu, Alibaba and Tencent defeated Google, ebay and MSN respectively in Chinese Internet market. In other sectors, no foreign Internet giant can play a role either. Statistics suggests that the top 4 websites in mainland China are all based in China, while the top 10 websites only include one foreign Internet giant, Google.

The success stories of Chinese Internet giants are only encouraging more Chinese entrepreneurs to enter this market and make a difference. Chinese Internet industry later witnessed the rise of Internet giants such as Weibo, WeChat and Xiaomi, etc. and popular O2O service providers in sectors including dyeing, house maintenance, message, driving, etc. This fad towards entrepreneurship and innovation can never happen in Japan.

However, it is not all gloom and doom in Japan. Japanese SNS provider GREE is at present the most popular one in Japan, and Mobagei is the largest mobile game provider in Japan. Still, it takes a long time to change Japanese people’s mindset towards entrepreneurship and failure. Only then will Japanese young entrepreneurs be dare to start their own businesses.

Well aware of the lack of innovation and entrepreneurship among Japanese young people, Japanese government is doing everything it can to help Japanese entrepreneurs, such as providing low-interest loans and being the consigner for loans. Japanese universities are also encouraging entrepreneurship in campuses. For example, Tokyo University sets up an incubator of innovation and help launch 25 startups in campuses. The well-known Waseda University also has similar policies to support college entrepreneurs.

To wrap up, Chinese young people are more active in starting their own businesses but lack patience to focus on their own projects and excel. Although Chinese young entrepreneurs can start their own businesses at pretty low cost, but few of them survive and even thrive later on. While Chinese entrepreneurs should keep their enthusiasm towards entrepreneurship and learn from Japanese people’s persistence and pursuit for perfection, become more rational and practical in managing their own businesses, Japanese young people should be encouraged to innovate and make something of their own.

 

[The article is published and edited with authorization from the author @Wang Xinxi, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.

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