VENTURE MANAGEMENT IN JAPANESE COMPANIES

This study, based on a survey of reports on the subject published in Japan since 1980 and an in-depth analysis of 20 companies, aims to understand the reasons why Japanese firms have adopted Western-style venture management techniques and the organizational patterns they have created to implement them. Although they started relatively recently, large Japanese firms have adopted venture management methods in about the same proportion as their American counterparts. The main reasons for this lie in the need to diversify out of mature industries, to foster innovation, to speed up new product development and to create an organizational vehicle permitting creative younger employees to develop their ideas. The traditional characteristics of Japanese firms have not been found suited to the latter two reasons. The general pattern of organizing new venture activities was found to represent five different models, ranging from company-wide task forces to the creation of a separate New Venture Company. These models constitute a decreasing order of integration of venture teams with other divisions and staff departments of the parent company. The degree of integration of venture teams with the parent was found to be only partially related to the extent of diversification involved. While task forces and New Venture Companies-the two extreme categories-represented increasing diversification, the intermediate organizational forms were less uniformly related. In separating the diversification variable into its technology and market components, however, a somewhat better explanatory link could be established. Companies in which new ventures drew upon the core technology tended to integrate their ventures with the parent more than others. The other reasons for the weak link between diversification and integration was surmised to be the general trend toward encouraging entrepreneurship and speeding up the innovation process. This was reflected in the authors' interviews with companies and some overt behavior, particularly the propensity to spin off new venture early and often. The use of venture management methods in Japan, with its emphasis on youth and independence, constitutes a partial renunciation of certain managerial policies and cultural traits that formed the strength of Japanese companies in the past. While certain aspects of traditional Japanese management-such as small-group accountability, shared division of labor, and self-organizing teams-favor the implantation of venture management methods in Japan, others having to do with the seniority system and egalitarianism do not. So far, at least, Japanese managers have coped reasonably well with the organization frictions that one might have expected to arise, partly because of the active interest and involvement of senior management. The latter not only helped define the strategic context (the domain of search) but had venture teams report to them directly or indirectly in most cases. © 1990.