Determinants of innovative activity in Japanese technology-based start-up firms

Very few, if any, empirical studies have been conducted on innovation in technology-based start-up firms in Japan, mainly because there has been little up-to-date data on such firms, and because small firms in Japan have been viewed as being of minor economic importance. The purpose of this article is to fill this gap in the literature by examining the determinants of innovation, measured by patent applications and new products, in Japanese technology-based start-up firms, using original firm-level data. We examine these determinants from the viewpoint of both firm-level and managerial-level characteristics. Our findings indicate that technological capability, the availability of internal funds, venture capital funding, and university industry linkages are important firm-level determinants of innovation. We find also that a CEO's educational background and capacity for networking with researchers are important managerial characteristics. The article includes an overview of the general business context for start-up firms in Japan and it concludes with some considerations for future policy based on our findings.