Japan's software industry: a failure of institutions?

This article argues that the key cause of the current weakness of Japan's software industry is the institutional arrangements of Japan's system of catch-up capitalism. These include industrial policy; the keiretsu industrial groups; a centralized, bank-centered financial system; lack of enforcement of the antimonopoly law; a weak intellectual property regime; and education and employment systems that emphasize conformity, loyalty, and stability. Key to success in other industries, these arrangements are found to be the source of its weakness in software. The case thus exposes some of the costs and limitations of the catch-up system. (C) 2000 Elsevier Science B.V. All rights reserved.