JAPAN MNE Insights
Volume 8, Issue 2
February 2023
CONTENTS

1. Special Essay:
Shige Makino

Japan Academy of Multinational Enterprises

http://www.mne-jp.org

Special Essay:“Global Rise in NonDemocratization andJapan’s International
Business”

Global Rise in Non-Democratization andJapan’s International Business2. Special Essay:

Shige Makino, Ph.D.

Chitose Furukawa

Professor of Management,
Graduate School of Economics,
Kyoto University, Japanmakino@econ.kyoto-u.ac.jp“The Challenges inInternationalization ofJapanese SMEs in the
Food Manufacturing
Industry”

Recently, I was shocked to learn that
democracy was not working well. Last year,
Sweden’s V-Dem Institute published its Democracy
Report 2022. According to the report, democracy inthe world is declining considerably. First, the level of
democracy enjoyed by average global citizens in
2021 fell to the level recorded in 1989. This decline isparticularly pronounced in the Asia-Pacific region,
Eastern Europe, and Central Asia. With a total of 42
countries, the number of democracies peaked in 2012,
but by 2021, this number dropped to 34. Currently,
only 13% of the world’s population lives indemocracies. The number of dictatorships is on therise, increasing from 25 to 30 between 2020 and
2021, and covering 2.8 billion people. More states
have become dictatorships in the past 50 years than in
any other period.
Japan, following the lead of the U.S. afterWorld War II, has developed through both thepolitical system of “democracy” and the economic
system of “capitalism.” Many people in Japan firmly
believe that these twin mechanisms of politics andeconomics are the basis for ensuring freedom andequality through the rule of law and bringing about
economic growth. However, the data presented aboveshow that non-democratic countries are growing in
number and that former democracies are shifting fromdemocratization toward non-democratization. Why isdemocracy not spreading around the world? Why domany countries choose the path of obedience toauthoritarian leaders over the rule of law? Has
democracy ever functioned as a mechanism to bringhappiness to our societies?
With these questions in mind, I examined past
research on how democracy has affected the world welive in. To my surprise, I found that past studies havenot proven, either conceptually or empirically, that
democracy has a positive impact on society1. First, I

1 I have not done a thorough literature reviews here and may have overlooked important arguments and evidence to discuss.

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Vol.8 Issue 2
examined the relationship between democracy andeconomic growth. A series of past studies haveconcluded that it has not yet been possible to identify
a systematic positive effect of democracy on
economic growth. In theory, democracy may
promote, hinder, or have no effect on economic
growth, but research does not provide firm support
for either viewpoint (Sirowy & Inkeles, 1990).
Nonetheless, it has been widely confirmed that
democracy has an “indirect effect–” either positive or“

better able to improve the welfare of the poor thannon-democracies. This is because democracies are
believed to be more effective than non-democracies
in generating public benefits and redistributing
income (see Ross, 2006, for a review). However,detailed analysis reveals that democracy has little
positive or even negative effect on health and welfare.
For example, Ross (2006) found that democracy had
no effect on infant and child mortality rates. Narita

Why is democracy not spreading around theworld? Why do many countries choose thepath of obedience to authoritarian leaders
over the rule of law? Has democracy everfunctioned as a mechanism to bringhappiness to our societies?”

negative, on economic growth. For example,
Helliwell (1994) showed that democracy has apositive indirect effect on economic growth througheducation and investment. Similarly, Doucouliagos
and Ulubaşoğlu (2008) show that democracy has apositive indirect effect through a high level of humancapital, low inflation, low political instability, andhigh economic freedom. Tavares and Wacziarg(2001), by contrast, found that democracy hinders
economic growth by reducing the rate of physicalcapital accumulation and showed a negative indirect
effect of democracy. Moreover, studies have shownthat the net effect of democracy on economic growth
after controlling for indirect effects is likely to be
negative. Barro (1996) showed that the overall effectof democracy on economic growth is weakly negative
when known indirect effects are removed. Morerecently, Narita and Sudo (2021) showed throughcareful causality analysis that democracy was a major
cause of the GDP loss in 2020.
Next, I examined the relationship between
democracy and health and welfare—the foundationsof social life. It is often assumed that democracies are

and Sudo (2021) found that a stronger
democracy led to higher COVID-19 mortality
rates. They explained that this was because
democracies were unable to implement
containment policies as extensively as nondemocracies in the early stages of thepandemic.

Another question that arises is—what
is the relationship between democracy andtechnological development? In a democratic
world, individuals are allowed to constantly develop
and maintain diverse and free contact with others withdifferent values and interests. Thus, innovations that
result from connecting diverse knowledge are more
likely to be realized in democracies. However, few
empirical studies have examined whether democracy
can be a direct driving force behind innovation.
Among these, Gao et al.’s (2017) study concludes that
democracy has no direct positive effect on innovation,
as measured by patent counts, patent citations, andpatent originality.
We cannot conclude from the short review
above that democracy has a clear positive impact onan economy, society, or innovation.
Hereafter, I will examine the data withreference to these findings to see how
democratization has contributed to global economic
growth and social development in the recent years.
Democratization is measured using the liberal
democracy index score from the Democracy Report
2022 (V-Dem Institute, 2022, (https://www.vdem.net/data/)). Economic growth is measured by the2Vol.8 Issue 2
annual GDP growth. Social development is measured
using the COVID-19 morbidity and mortality rates, theProgram for International Student Assessment (PISA)
achievement test results, and the number of Olympic
medals won. Note that the analysis conducted in thisessay does not represent a strictly causal relationship.
This essay only presents stylized correlations obtained
from cross-sectional statistical analysis.

JAPAN MNE Insights
Figure 1-1 Democracy and Economic Growth

Economic Growth
Figure 1-1 shows a scatterplot of averageannual GDP growth from 2010 to 2020, and the degreeof democratization in 2022. GDP growth rates were
derived from The World Bank’s World Development
Indicators(https://databank.worldbank.org/source/worlddevelopment-indicators). The figure shows thatcountries and regions with higher levels of nondemocratization have had higher economic growth
rates over the past decade. The three factors that
support economic growth are labor input, capital
accumulation, and technological progress. I used theConference Board data (https://www.conferenceboard.org/us/) to examine the relationship between the
average shares of labor input, capital accumulation,and technological progress in GDP, and the level of
democratization over the period 2012-2021. Figure 1-2
shows the scatterplot of the relationship between labor
input and democratization. It can be seen that thedegree of democratization is negatively related tohours worked per worker and positively related to
productivity (output per hour worked). Figure 1-3
shows that the degree of democratization is positively
related to ICT-related capital stock and negatively
related to non-ICT capital stock. In other words, nondemocratizing countries have grown their economies
mainly in traditional non-ICT industries that are labor
intensive. No clear pattern was found in therelationship between technological progress, measured
by the average annual growth rate of Total Factor
Productivity (TFP), and democratization.

Figure 1-2 (a) Democracy and Average Hours Worked

Figure 1-2 (b) Democracy and Labor Productivity(output per hour worked)

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Vol.8 Issue 2
Figure 1-3 (a) Democracy and Capital Growth in ICT

its zero-COVID policy in January this year. Therefore,
using the most recent data may yield different results.

Figure 2-1 Democracy and COVID-19 Confirmed
Cases

Figure 1-3 (b) Democracy and Capital Growth in nonICT

Figure 2-2 Democracy and COVID-19 Death Toll

COVID-19
The COVID-19 pandemic has had a significant
impact on the global economy and people’s social lives.
Figures 2-1 and 2-2 show the relationship between thepercentage of people affected by the virus per
population, their mortality rates, and democratizationlevels at the end of October 2022. Data were obtained
from The Johns Hopkins Coronavirus Resource Center(https://coronavirus.jhu.edu/region). The figures showthat countries with higher levels of non-democratization
have lower rates of COVID-19 morbidity and mortality.
This result is consistent with the analysis of Narita andSudo (2021), using the same data. It should be noted,
however, that the data used here do not reflect the
spread of infection since China effectively eliminatedEducation
Let us now examine the impact of democracy
on educational outcomes. Educational outcomes were
measured using two indicators: the number of Olympic
medals and average score in the PISA achievement
test. The data on the former were obtained from theInternational
Olympic
Committee(IOC)(https://olympics.com/en/olympic-games/olympicresults) and those on the latter, from OECD’s PISA
database (https://www.oecd.org/pisa/data/). Figure 3-1
shows the relationship between the number of Olympic
medals won and level of democratization. Figure 3-24Vol.8 Issue 2shows the relationship between PISA scores inreading, mathematics, and science in 2018 and thelevel of democratization. A common feature of both
relationships is the polarization of the results incountries with high and low levels of democratization.
In terms of medal counts, the Olympics seem to havebecome a site of proxy war between democratic andnon-democratic camps, as symbolized by the medal
war between the United States and the Soviet Union in
the past and the United States and China in the recent
years. The polarization of math and science scores
between democracies and non-democracies seems toforeshadow a fierce competition in science andtechnology between the two camps in the future.2

JAPAN MNE Insights
Figure 3-2 (b) Democracy and PISA Score in
Mathematics

Figure 3-2 (c) Democracy and PISA Score in Science
Figure 3-1 Democracy and Olympic Medals Won

Figure 3-2 (a) Democracy and PISA Score in Reading

Implications for the International Business ofJapanese Firms
The above stylized data analysis indicates that
democracies do not clearly outperform nondemocracies in economic growth or social
development. With the rise of non-democracies, theglobal economy seems to become fragmented as
democracies and non-democracies fight for supremacy.
How have the Japanese firms responded to thesedevelopments? Figure 4 shows the time series of theaverage democratization scores of the host countries
for Japanese firms’ direct investments. The hostcountries were identified using Toyo Keizai’s Kaigai
Shinshutsu Kigyo Soran (Overseas Japanese

2 This polarization may reflect the educational effects of freedom and control that underlie democracy and non-democracy, but it may simply indicate
the influence of other national factors (such as country size). Further research is needed to elucidate the mechanisms linking democracy andeducation.

5Vol.8 Issue 2
Companies
Data)(https://biz.toyokeizai.net/en/data/service/). The figure
shows that the average level of democratization inthese countries has declined over the years. Whileprevious studies have shown that the relationshipbetween host country democratization and FDI inflows
can be positive or negative (Jensen, 2003; Li &Resnick, 2003), thi analysis clearly shows thatJapanese firms are increasingly dependent on nondemocratic countries for their international business.

Figure 4 Changes in the Level of Democratization in
Host Countries of Japanese FDI

How should Japanese firms, who have believedthat maintaining and developing democracy is in anation’s interest, interpret this fact and face it? Here, I
point out three strategic directions for the future
development of Japanese firms’ international
businesses:
1. Pursue “Ally advantage.”This strategy involves uniting with democratic
allies to compete monolithically against nondemocratic firms and thereby expand business
opportunities. Although it is difficult for firms tocounter the policies of non-democratic countries on
their own, they can become a major countervailingforce if they work with their democratic allies. For
example, as seen in the recent passage of the Creating
Helpful Incentives to Produce Semiconductors

JAPAN MNE Insights(CHIPS) and Science Act, the U.S. under the current
administration is working to prevent the outflow ofadvanced semiconductor technology to China.
Japanese firms can enhance their bargaining powers
and expand business opportunities by partnering withfirms in allied countries to compete with their rivals in
non-allied countries.

2. Turn "Non-ally disadvantage" into advantage.
This strategy seizes business opportunities in
non-democratic countries ahead of other democratic
countries’ firms. Many of Japan’s non-allied countries
are non-democracies and many of these are emerging
economies. These countries have large markets and ahigh growth potential, although there are concerns
regarding intellectual property protection andexpropriation risks. By effectively liaising with local
governments and building relationships with firms inthese countries ahead of firms in other democratic
countries who are hesitant to do business in nondemocratic countries, Japanese firms can gain
legitimacy among local stakeholders and grab business
opportunities as first-movers.

3. Make competitive advantage independent ofpolitics.
This strategy reduces dependence on a specificcountry or political system by developing unique
technologies and services that the world demands. For
example, in environment related fields, such as
decarbonization, Japan’s technologies and experiencein environmental load reduction and the carbon cycle
can make an important contribution. In addition,
Japan’s high-quality services are now highly valued in
the ever-expanding global consumer market. Superior
technologies, products, and services are widely
accepted in society regardless of the political system.
Firms accepted by society are less likely to be
influenced by politics.
These three directions present trade-offs. The
direction chosen by Japanese companies depends on a6

Vol.8 Issue 2
variety of factors, including the type of business,
technological capabilities, and brand recognition, butwhat is certain is that the influence of national politics
has come to cast an ever-larger shadow on Japan’sinternational business. This trend is expected tocontinue and Japanese firms may eventually have to
make difficult choices.
Democracy is not a single political system andhas many variations (Zakaria, 1997). There is no
guarantee that democratically elected governments will
always implement the most efficient policies (Cheung,
1998; Fung & Wright, 2001; Huntington, 1991). In any
case, democracy is said to be a difficult political system
to sustain. This is because democracy can only berooted in a stable society. In unstable societies,
authoritarian systems tend to emerge because
authoritarian leaders gain power and support bypresenting their vision to a populace whose future is
uncertain. With the rise of non-democratic states, theglobal economy may become even more fragmented in
the future. Japanese firms must squarely face thecontradiction between the adherence to democracy as apolitical ideology, rise of non-democratic nations andincreasing dependence on non-democratic nations. As
the world undergoes systemic transformation, it will beinteresting to see the direction that Japanese firms takein their global business activities.

References
Barro, R. J. (1996). Democracy and growth. Journal of
Economic Growth, 1(1), 1-27.
Cheung, S. N. S. (1998). The curse of democracy as an
instrument of reform in collapsed communist
economies. Contemporary Economic Policy, 16(2),247-249.
Doucouliagos, H., Ulubaşoğlu, M. A. (2008).
Democracy and economic growth: A
meta‐analysis. American Journal of Political
Science, 52(1), 61-83.

JAPAN MNE Insights
governance. Politics & Society, 29(1), 5-41.
Gao, Y., Zang, L., Roth, A., & Wang, P. (2017). Does
democracy cause innovation? An empirical testof the popper hypothesis. Research Policy,
46(7), 1272-1283.
Helliwell, J. F. (1994). Empirical linkages between
democracy and economic growth. British
Journal of Political Science, 24(2), 225-248.
Huntington, S. P. (1991). The Third Wave:
Democratization in the Late Twentieth Century,
Norman and London: University of Oklahoma
Press.
Jensen, N. M. (2003). Democratic governance andmultinational corporations: Political regimes andinflows of foreign direct investment.
International Organization, 57(3), 587-616.
Li, Q., Resnick, A. (2003). Reversal of fortunes:
Democratic institutions and foreign direct
investment inflows to developing countries.
International Organization, 57(1), 175-211.
Narita, Y., Sudo, A. (2021). Curse of democracy:
Evidence from 2020. Cowles Foundation
Discussion Papers, No.2281R.
Ross, M. (2006). Is democracy good for the poor?
American Journal of Political Science, 50(4),860-874.
Sirowy, L., Inkeles, A. (1990). The effects ofdemocracy on economic growth and inequality:
A review. Studies in Comparative International
Development, 25, 126-157.
Tavares, J., Wacziarg, R. (2001). How democracy
affects growth. European Economic Review,
45(8), 1341-1378.
Zakaria, F. (1997). The rise of illiberal democracy.
Foreign Affairs, 76(6), 22-43.

Fung, A., Wright, E. O. (2001). Deepening democracy:
Innovations in empowered participatory

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Special Essay:
The Challenges in Internationalization of JapaneseSMEs in the Food Manufacturing Industry
Chitose Furukawa, Ph.D.

Associate Professor,
Faculty of Business Administration, Aichi University, Japanfchitose@vega.aichi-u.ac.jp

Promoting Japanese Food Products
Japanese food has become popular worldwide.
More people have become health conscious around theworld, and regard Japanese food as healthy andnutritious. Additionally, Japanese food restaurant
chains, for example, Sushiro and Marugame Seimen,
are expanding their business overseas. Consequently,
the export figures of processed Japanese food products
have been increasing in the past decade.
Given the rising export figures, the Japanese
central and local governments have stimulated foodexport and promoted several activities, includinginternational advertisement and participating ininternational food trade shows for Japanese foodcompanies, especially small and medium-sizedenterprises (SMEs). The Japanese government has
currently conducted programs that facilitate exporting
Japanese food products and give support and subsidize
SMEs in the food manufacturing industry.
For example, the Ministry of Economy, Trade,and Industry (METI) provides SMEs with support fordeveloping regional brands by introducing external
advisors who have enough experience and knowledgeof the overseas business. The Ministry of Agriculture,
Forestry, and Fisheries (MAFF) subsidizes SMEs todevelop new products using Japanese domestic
agricultural, forestry, and fishery products, and design
those product packages for the international market.

Furthermore, the Japan External Trade Organization(JETRO) supports SMEs in exporting their products
by providing seminars on international tradeadministration and exhibiting their products atoverseas trade shows.
Even though the Japanese central and local
governments actively provide these export
promotion programs, there are problems withaccelerating the internationalization of the Japanesefood manufacturing industry. Most companies
engaged in the industry are SMEs, and they are
unlikely to possess enough resources to promoteand sell their products to international markets.
SMEs need to gain experience in export processes
and negotiations to expand their business overseas.
Therefore, the Japanese government policy is
expected to address this challenge. Regarding this,the following questions need to be examined: how
do SMEs use the Japanese government export
promotion program? How does the program
stimulate the export of Japanese food products?
Lastly, what other factors will facilitate theprocesses of SMEs’ internationalization besides
support from the government.
In the following section, I begin by taking acase study of a Japanese Sake brewery, an SME, in
the Tokai area which I had collaborated with. This
experience is related to how SMEs use and apply

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Vol.8 Issue 2
for the export promotion program provided by aregional government. Secondly, I illustrate myexperience of accompanying the CEO of the Japanese
Sake brewery to the Hong Kong Trade Development
Council (HKTDC) Food Expo, one of the famous

In the second year of collaboration, the CEO
decided to promote his products in Asia. Since thebrewery is a family run business and needed moreresources to expand its business overseas, the CEOapplied for subsidies from a regional governmental

international food trade shows in
Asia. Based on the observation of
SMEs’ behavior at the HKTDCThe Japanese central and local governments actively
Food Expo, I explore the interprovide various export promotion programs.
relationships between SMEs, their
Still, there are problems with accelerating theregional government, bank, and theinternationalization of the Japanese foodinteractions among SMEs from the
manufacturing industry, as most SMEs need moresame region. This will describe how
resources to promote and sell their products togovernmental support stimulatesinternational markets.”
SMEs’ internationalization and what
other factors can influence theinternationalization processes. Following this, I
institution to exhibit his products at the HKTDC Foodsummarize the challenges Japanese SMEs face when
Expo, held for five days in August every year.
entering international markets. Finally, I explain the
Subsequently, the CEO asked the seminar group to
future perspectives for the internationalization ofdesign a label for the Sake bottles for the Hong KongJapanese SMEs in the food manufacturing industry.
market, help him to exhibit his products at the HKTDC
Food Expo, and research local supermarkets and
The Motivation and Experience of Collaboration
buyers in Hong Kong.
with a Japanese SME
For four years, my undergraduate seminar
The Activities of Exhibiting at the HKTDC Foodgroup had collaborated with a Japanese Sake
Expobrewery in the Tokai area. At first, one of theDuring the HKTDC Food Expo, the Japanese
undergraduate students had connected me to theSake brewery exhibited at a joint booth with other
CEO of the Japanese Sake brewery who was eager
Japanese SMEs from the same region. Throughout theto collaborate with a seminar group at Aichi
HKTDC Food Expo, the regional support bodies (i.e.,
University. The CEO wanted to get some ideas fromregional government and regional bank) provided theundergraduate students about ways to promote
financial support, including the translators’ fees. In
Japanese Sake in domestic or/and international
addition, they introduced the CEO to networks andmarkets.
connections in Hong Kong, such as staff of the JETROIn the beginning, we tried to promote
Hong Kong branch and local business coordinators,
Japanese Sake for the younger Japanese generation
who have expertise in the Hong Kong market for a
by designing a label for Sake bottles and providing
long time.
cocktail recipes that use Japanese Sake. However,Along with support from regional support
the survey conducted by the seminar group revealed
bodies, Japanese SMEs in the same booth helped eachthat the younger Japanese generation preferred theother and shared information about international
taste of other alcohols over Japanese Sake. Hence,
markets, including the Hong Kong market, to deal with
the CEO decided to export Sake to international
foreign buyers. There were more than ten SMEs in themarkets.
same booth, and each had different background and“9Vol.8 Issue 2JAPAN MNE Insights

population, their best strategy to survive is to expand
their business overseas.
However, SMEs face some barriers tointernationalization known as “the liability ofsmallness” (e.g., Child et al., 2022). The liability ofsmallness means that SMEs have restricted resources
and capabilities, such as detailed foreign market
information, finances, and managerial resources since
the company size is small (e.g., Child et al., 2022;
Guercini & Milansei, 2016).
There are various types of
information that SMEs need to obtain forinternationalization: 1) a detailed targeted
To what extent can governmental support
market,2)
theinternationalization
stimulate SMEs’ internationalization, andprocesses, and 3) network building.
other factors influence theJapanese SMEs in the foodinternationalization processes of Japanesemanufacturing industry started searching
SMEs?”
for information using the closed network
linkage to overcome the lack of detailed
foreign market information. They used theirSome SMEs had been exhibiting at theconnections from existing social ties and networks to
HKTDC Food Expo for several years since they
enter a new market (e.g., Agndal et al., 2008;
wanted to communicate with local buyers and findCoviello & Munro, 1997; Ellis, 2000; Ellis &new distributors in Hong Kong. Furthermore, they
Pecotich, 2001; Evers & Knight, 2008; Harris &acquired market knowledge and learned about foreign
Wheeler, 2005; Loane & Bell, 2006). At the firstbuyers' behaviors as the years passed. I discovered
stage of internationalization, SMEs intended tothat those SMEs have kept good relationships withcollect information and opportunities about detailed
customers in Hong Kong and continuously obtained
foreign markets from regional networks. For example,
more beneficial information from their regional
the information on how and where to exhibit insupport bodies. Along with their regional support
international trade shows was sometimes collectedbodies, the SMEs had accumulated common
from neighboring companies or official organizations
knowledge of international markets by sharing thein the same region.
same experience and building interpersonal trust
At the next stage of internationalization, somethrough several years.
SMEs exhibited at the HKDTC Food Expo to collectprimary data and information about the target markets
The Struggles and Challenges of Japanese SMEs
todecide whether they should export products to
As mentioned above, the SMEs collected
Asia. A trade show is generally regarded as a placeinternational market information and built-up
that provides opportunities to access foreign markets
networks through foreign activities, including theand acquire knowledge of customer needs fromHKTDC Food Expo. From my experience, however, I
different geographical areas, which helps therealized each Japanese SME in the foodcompanies that have little international business
manufacturing industry had faced similar struggles
knowledge and experience (e.g., Bathelt et al., 2014).
and challenges. Since the Japanese domestic market is
By exhibiting at a trade show, SMEs wereshrinking due to a declining birthrate and aging

experience in international markets.
As typical exchange activities among theseSMEs, they visited local supermarkets in Hong Kongand had dinner with the regional support bodies. And
if one of the SMEs detected a suspicious buyer who
might not be trusted, the SME visited the buyer’s
office with the staff of their regional support bodies. I
realized that SMEs built interpersonal relationships
with their regional support bodies and other SMEs
through interactions at the HKTDC Food Expo.

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Vol.8 Issue 2able to gain relevant knowledge from multiple
associations and diverse international businesses(Bathelt et al., 2014; Measson & Campbell-hunt,2015). I observed that the regional support bodies,mainly regional public organizations, introduced
advisors and local coordinators to SMEs using their
networks in a targeted foreign market. Also, some
SMEs from the same region shared information about
networks, including overseas distribution networks andexporters in Japan, during the HKTDC Food Expo
(Furukawa, 2018).
Regarding financial restrictions, SMEs received
subsidies to exhibit at a joint booth at the Food Expofrom their regional support organization in their
institutional network (Oparaocha, 2015). In my study, I
found, such subsidies brought down the cost of thestandard fees to almost half. In addition, to reduce theshipping fees of their products, SMEs from the same
region used the same container organized by one of theSMEs.
The other financial challenge for SMEs washiring translators in Hong Kong. Since support region
bodies also provided translators for the joint booth,SMEs did not need to hire translators by themselves.
This enabled them to promote and sell products at the
HKTDC Food Expo, even though SMEs’ sales andmarketing staff did not speak the local language.
Given the limited managerial resources, some
SMEs from the same region helped each other to deal
with foreign buyers if others had faced a staff shortage.
In addition, SMEs shared their experience of the Food
Expo and foreign trade as they spent a lot of time
together. This shows that SMEs from the same region
might create strong ties and such social network
relationships connect to the concept of social capital(Brass, 2012). These relationships also lead to building
group social capital (Oh et al.,2006) and community
social capital (Kwon et al., 2013) to protect against theliability of smallness by using networks, inter-firm
relationships, and informal connections (Paul et al.,2017). After the HKTDC Food Expo, some SMEs kept
their connections with the regional support bodies toexpand the business, even though other connections

JAPAN MNE Insights
among SMEs may have become weak.
Future Perspectives
Through my experience accompanying SMEs
for the HKTDC Food Expo for three years, it was
clear that Japanese SMEs in the food manufacturingindustry tried to expand business overseas using theirregional networks. Although SMEs seemed toovercome some barriers to exhibiting at international
trade shows, such as the HKTDC Food Expo, several
challenges still need to be addressed for large scaleinternationalization. These challenges are related totheir resources, time constraints, and networks.
Firstly, SMEs, despite successfully promoting
their products at an international trade show, might not
be able to accept large orders from foreign buyers anddistributors due to their limited production capabilities.
One SME explained that buyers and distributors from
Mainland China requested large amounts of productsthat Japanese domestic buyers and distributors havenever ordered.
In addition to this, they face language
challenges due to their lack of foreign language skills
and face financial limitations in hiring translators.
Therefore, they must use free AI translators tocommunicate with local buyers and distributors. For
example, they use the WeChat application, which has atranslation function. Such problems restrict ex-post
dealing with foreign buyers and interfere withexpanding the international business networks.
In the movement of the world food market,
some regions that produce local specialty foods try tobuild a regional brand. For example, French wines and
Italian hams are distinguished and promoted byregional brands. Such regional brands also contributeto adding value to the food products. However, theJapanese food manufacturing industry is behind withmaking such movement towards creating regional
brands.
This may be because Japanese SMEs have time
constraints that do not allow them to establish theirregional brand. Some SMEs at the HKTDC Food Expo

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Vol.8 Issue 2recognized the importance of building their regional
brand for internationalization and the necessity tocollaborate with other SMEs. Establishing a regional
brand takes time and requires keeping relationships
among SMEs in the region. That creates the nextchallenge in terms of maintaining networks.
There are several challenges in maintaining anddeveloping regional networks to create a group social
capital (Oh et al.,2006) and community social capital(Kwon et al., 2013) to overcome the liability ofsmallness. As mentioned before institutional networksof regional support bodies and the relationships they
make during trade shows with SMEs from the same
region are beneficial at the early stage ofinternationalization (Oparaocha, 2015). However, it ishard for those SMEs to maintain and develop networks
after the trade show even in the same region because
they have different levels of awareness about
internationalization.
We already acknowledge that Japanese SMEs
search for ties and opportunities in their region to
overcome
theirlimitedcapabilitiesforinternationalization due to the liability of smallness. In
the next step of Japanese SMEs’ internationalization, it
would be ideal to figure out how to facilitate theinteraction among Japanese SMEs by sharing theexperience and knowledge of international markets andhow to make them more interdependent in expanding
their business overseas with developing social andbusiness networks. I believe it would be possible toencourage Japanese SMEs to build group social capital(Oh et al.,2006) and community social capital (Kwonet al., 2013) among the SMEs from the same region by
sharingawarenessoftheimportanceofinternationalization and trying to establish theirregional brand. Building a group and community social
capital would also contribute to accelerating Japanese
SMEs’ internationalization in several regions andfacilitate the internationalization of the entire Japanesefood manufacturing industry.

JAPAN MNE Insights
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Vol.8 Issue 2

Japan Academy of Multinational Enterprises
2021-2023 Executive Board
President:International Relations:Tetsuya Usui (Gakushuin University)

Chie Iguchi (Keio University)
Hiroshi Hoshino (Kyushu University)
Naoki Yasuda (Rikkyo University)
Xiaohong Qin (Kyushu Sangyo University)*

Vice President:

Yoshinori Yasuda (Soka University)
Masayuki Furusawa (Kindai University)

General Affairs:

Masahiro Ida (Hannan University)
Hiroshi Hoshino (Kyushu University)

General Planning:

Yasuro Uchida (University of Hyogo)
Hajime Baba (Kansai University)
Tamiko Kasahara (University of Shizuoka)
Nisato Suzuki (Meiji University)
Tatsuo Mori (Hirosaki University)*

Publications Commitee:

Hajime Baba (Kansai University)
Takeshi Fujisawa (Kwansei Gakuin University)
Naoki Yasuda (Rikkyo University)
Sadanori Arimura (Yamaguchi University)*
Hiroyasu Furukawa (Meiji University)*

Best Book and Paper Award Commitee:

Naotoshi Umeno (Osaka University of Commerce)
Susumu Harada (Meiji University)
Shohei Tabata (Kobe International University)
Shingo Nishii (University of Hyogo)*
Hirofumi Tatsumoto (University of Tsukuba)*

Public Relations:

Masashi Arai (Asia University)
Tamiko Kasahara (University of Shizuoka)
Yukiko Shinomiya (Kindai University)
Hiroyuki Yamabe (Nara Prefectural University)
Takao Yamamoto (Kanagawa University)*

Program Commitee:
Tomokazu Seki (Rikkyo University)
Takeshi Fujisawa (Kwansei Gakuin University)
Takahide Yamaguchi (University of Hyogo)
Motoyuki Kanetsuna (Nanzan University)*
Yoshikazu Sakamoto (Nihon University)*
Masato Yamauchi (Senshu University)*

Eastern Chapter:
Susumu Harada (Meiji University)
Kohei Mishima (Keio University)
Chitose Furukawa (Aichi University)*
Tatsuya Karasawa (Kanto Gakuin University) *Mitsuru Nakagawa (Nihon University)*

Western Chapter:

Yukiko Shinomiya (Kindai University)
Naotoshi Umeno (Osaka University of Commerce)
Sungwoo Byun (Kindai University)*
Taehyun Lee (Hannan University)*
Yoshihiro Matsukawa (Hiroshima University of Economics)*

Executive Secretariat and Directors:

Head Office: Takuya Fukazawa (Tokyo Fuji University)
Eastern Chapter: Nisato Suzuki (Meiji University)
Western Chapter: Hiroyuki Yamabe (Nara Prefectural University)

Auditor:Kazumi Tada (Hosei University)
Risa Jitosho (Ryukoku University)

Note: Those with * are coordinators of the role.

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JAPAN MNE Insights

Vol.8 Issue 2

Japan MNE Insights will be published twice a year on the AMNE official website (www.mne-jp.org).
Please feel free to contact with the editorial team if you have any question or request.

Japan MNE Insights Editorial Team
Editor-in-Chief
Tamiko Kasahara (University of Shizuoka)
EditorMasashi Arai (Asia University)
Yukiko Shinomiya (Kindai University)
Hiroyuki Yamabe (Nara Prefectural University)
Takao Yamamoto (Kanagawa University)
Japan MNE Insights Editorial Team is currently located at
Office of Dr. Tamiko Kasahara,
University of Shizuoka, School of Management and Information
52-1 Yada, Suruga-ku, Shizuoka, 422-8526, Japan
TEL/FAX:+81-54-264-5435 (direct)
Contact e-mail address: kasahara@u-shizuoka-ken.ac.jp
Copyright @ Japan Academy of Multinational Enterprises (Japan)

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