Comment on "A Porterian Perspective on Japan's Global Competitiveness Ranking"

Takahiro Miyao (Professor, GLOCOM)

Regarding my criticism against the IMD competitive ranking, Dr. Daniel Dolan has pointed out in his comment, "A Porterian Perspective on Japan's Global Competitiveness Ranking," that in terms of the usual definition of productivity a la Michael Porter, Japan is actually ranked higher than such Asian countries as Malaysia and Thailand, but at the same time, according to Porter, Japan's competitiveness ranking could be lower than the usual productivity ranking, because "[competitiveness] depends on mutually supportive interactions between companies and the quality of the larger national business environment," where the latter includes such factors as research institutes, skilled workers, infrastructure and competitive pressure.

I do not think that Japan's extremely low ranking by the IMD could be justified even if we take all these factors into consideration. For example, the fact that Japan's top patent-producing organization has been the Agency of Industrial Science and Technology does not necessarily represent a negative environment for business, as suggested by Porter. On the contrary, it is a reflection of the strength of Japanese business in this area relative to its American counterpart, because the primary purpose of that agency is to coordinate joint research activities among private companies, where first-rate researchers tend to stay with private companies rather than universities. That is why Japan is quite strong in producing patents for commercial applications for mass consumer markets in contrast to U.S. researchers who tend to pursue originality and differentiation in their research activities. Which is a better environment for business is clearly a matter of debate, and no clear-cut answer may be obtained – let alone numerical ranking against Japan!

How about other factors such as laws relating to IT, judicial independence, favoritism in decision of government officials, effectiveness of anti-trust policy, quality of public schools, quality of math and science education, and university/industry research collaboration? Some of them, such as judicial and administrative problems, might contribute to Japan's low ranking, but even that could not explain the lower overall ranking of Japan than Malaysia or Thailand. Furthermore, in terms of anti-trust policy, quality of public schools, quality of math and science education, and university/industry research collaboration, many observers have pointed out the superiority of the Japanese system over the American system from the viewpoint of business.

Finally, it is true, as suggested by Porter-Takeuchi-Sakakibara in their book "Can Japan Compete?", Japan suffers from protecting weak domestically-oriented industries." However, it should also be pointed out, Japan has made progress in market opening, deregulation, and reform in many of those industries for the last couple decades, and those changes should be duly appreciated in international comparisons of competitiveness and productivity.

In this regard, I would like to make a couple of points by quoting from my article, "Comment on Economic Performance Ranking." (http://www.glocom.org/debates/20020502_miyao_com/)
"Then why such a low ranking for Japan? I think there may be at least two factors, that is, change and expectations. First, Japan's economy has not been growing as fast as it should in terms of GDP, and in fact it has been shrinking slightly in recent years. Since its change is virtually zero or even negative, that may have affected Japan's ranking (in other words, there may be some confusion in ranking regarding the level and change). Second, foreign observers as well as many of the Japanese themselves are disappointed and frustrated when their expectations for "reform" are not fulfilled as originally anticipated or promised. Such disappointment or frustration may have lowered Japan's ranking too much. Furthermore, those rankings only see individual "trees" (micro factors) selectively, but not the "forest" (macro pictures) as a whole."