TECHNOLOGICAL LEADERSHIP AND
LATE DEVELOPMENT: EVIDENCE
FROM MEIJI JAPAN, 1868–19121
BY JOHN P. TANG

Meiji Japan, 1868–1912

Weak institutions and poor infrastructure

Industrialization that eventually occurred often attributed to the
Zaibatsu.

Japan was a late developer
BACKGROUND

Large family-owned conglomerates.

Large enough to adopt capital intensive technology

Family ownership so could be governed independent of investors
seeking short-term profit. Profits were retained within the firm and
so could be reinvested.

Being conglomerates meant that risks were spread and
investment could be financed internally.
ATTRIBUTES OF ZAIBATSU

Consider the role of the Zaibatsu in propelling the Japanese economy and
whether it has been overstated.

Whether they play a bigger role in innovative or non innovative sectors.
Questions whether they took a leadership role within the economy.

Correct methodological issues with previous studies in the area.
PURPOSE OF THE PAPER

Develops a dataset based on corporate genealogies which arguably
comprise the oldest source of firm information across industries for Japan.
Some extend back to the seventeenth century or earlier.

Uses ‘First appearance, first adoption assumption’ to see if the characteristics
of the pioneers were the same as those of the Zaibatsu.

Considers a wide range of sectors – more quantitative compared with
previous more anecdotal studies.

He includes failed establishments which is particularly important in sectors
with transferrable assets e.g. manufacturing.
BRIEF METHODOLOGICAL
DIFFERENCES

Diversification of each firm

Privately held vs. Publically traded

Omits other differences e.g., relationship with the government as
such factors are difficult to identify with all firms.

Hypothesis test used to check if any significant variables were
omitted. Passed at a 1% significant level.

Further excluded government firms because they were not
market driven.
MEASUREMENTS

1893 ‘Commercial Code’- defined corporate liabilities and
improved the protection of property rights.

Other institutional changes included: the adoption of the gold
standard (1897); renegotiations of foreign treaties and military
successes vs. China (1895) and Russia (1905)

Lower tariffs allowed for the transfer of technology which allowed
Japan to adopt established technologies from overseas.

The paper is largely silent on the impacts of the government and
trade.
OTHER FACTORS

Generally, diversification and private ownership seem to be
correlated to first entry.

a typical zaibatsu is 11.5 per cent more likely to lead entry into a
non-innovative sector compared to its independent rival.

however, for innovative sectors, it is 13.4 per cent less likely to be
a pioneer.
FINDINGS
• Initially the Zaibatsu were more likely to be the first entrants in all markets.
• However, their influence declined overtime.
• The graph suggests that this happened earlier than previous research
indicates.
• 1876, they were overtaken in innovative sectors
• 1905, they were overtaken in non-innovative sectors

Tang doesn’t differentiate between different industries and their relative
importance. It has been suggested that the Zaibatsu pioneered capital intensive
industries leading to mass production and paving the way for other industries.

Analysis is more general which limits the specific conclusions we can draw.

“This article also remains silent on two important influences: government and
trade.” e.g. the government sponsored model factories at the beginning of the
Meiji period to jump-start industrialization, provided subsidies and contracts in
emerging industries.

Rapid growth relied on technology imports and commodity exports further
suggesting the importance of trade. Perhaps he should consider the relative
importance of different firms and their activities.
CRITICISMS OF THE PAPER