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50

The Product Innovation Process with the Use ofMediators for Collaboration: The Case ofJapanese Traditional Local Industry
Yuichi Oshima*
System Design and Management Research Institute,
Graduate School of System Design and Management, Keio
University
Tetsuya Toma
Graduate School of System Design and Management, Keio University

ABSTRACT
Many Japanese traditional local industries with long history are declining due to factors
such as price competition with overseas products, the emergence of cheap substitutes, andchanges in consumer demand. In order to resolve this problem, many local associations in
the production areas have sought to develop new products. However, in many cases, thedevelopment of new products, so-called product innovation, is not progressing due topossessing a structure that depends on the ready-made in a culture of preserving tradition.
Therefore, unconventional incentives are required. As a new incentive, we consider
product innovation through collaboration with intellectual actors, since new productdevelopment requires novel knowledge and information from others, and focus on theeffectiveness of mediators in facilitating collaboration. In this paper, taking someproduction areas as examples, based on the hypothesis that product innovation in
production areas is realized by forming a network by utilizing mediators, the process andthe network of product innovation are visualized to identify mediators and elucidate its
types and roles. Additionally, the process of product innovation by utilizing mediators
according to the regional characteristics and the technological capabilities of the local
company is proposed.
Keywords: Traditional Local Industry; Product Innovation; Mediator; Collaboration.
Received 3 April 2022 | Revised 11 July 2022 | Accepted 4 August 2022.

1. INTRODUCTION
The recent declining birth rate and ageing of the population in Japan is having an impact
on economic and social development, requiring each region in Japan to take advantage
of local resources to proactively create a diverse community and revitalize the local
economy. In this context, local industries contribute to local employment and have aripple effect on industrial relations in primary to tertiary industries, thus playing a role
as a leader of the local economy.
A local industry is one in which a group of small- and medium-sized enterprises withlocal capital conduct production and sales activities by utilizing the management
resources (raw materials, technology, human resources, sales capabilities, etc.) of theregion (Small and Medium Enterprise Agency, 1981).

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From the Meiji period (1868-1912) until the period of rapid economic growth, local
industries have been expanding their production, especially exporting to overseas
countries, but since the 1990s they have shown a declining trend in production value
and other indicators. According to the Small and Medium Enterprise Agency (2006,2016), the number of employees decreased from a high of 1,057,482 in 1981 to 123,953
in 2015, and the production value decreased from a high of 16,432.7 billion yen in 1991
to 1,575.0 billion yen in 2015. Factors that have been pointed out as contributing to thisdecline include the slump in exports due to the appreciation of the yen during the Plaza
Accord in 1985, the long-term recession caused by the bursting of the bubble economy
in the 1990s, and later the increase in imports due to globalization and intensified
international competition in the 2000s, changes in consumer demand and shrinking
market size, and the emergence of cheaper alternatives.
Historically there are two types of local production areas: the traditional type, which
originated in the Edo period (1603-1868) or earlier, and the modern type, which wasformed after the Meiji period (1868-1912). The traditional type produces traditional
crafts and daily necessities using traditional raw materials and manufacturing methods,
while the modern type mass-produces daily necessities by transferring technology fromoverseas (Yamazaki, 1977). Examples of traditional products include lacquerware,
furniture, Japanese paper, ceramics, and cutlery, while examples of modern products
include towels, umbrellas, brushes, toys, sewing machines, and matches.
Traditional production areas have traditional technologies that have been cultivatedover the years, and if in response to the declining trend of local industries morecompanies use these traditional technologies to improve or develop products, so-called
product innovation, to produce high value-added non-daily goods, and to expand theirbusiness globally, then the entire production area will become more diverse and better
able to cope with the drastically changing environment and survive sustainably, thereby
contributing to the promotion of industry. Regarding the effects of innovation, Ismanu
and Kusmintarti (2019) shows that innovation can play a very important role in firmmanagement and improve firm performance, using the case of Batik handmade SMEs in
East Java region, Indonesia. In this study, product innovation is defined as a new or
improved product, based on the OECD (2018) definition, that is considerably different
from the previous product of the firm producing it and is made available to or used by
the firm concerned for potential users.
However, according to the Small and Medium Enterprise Agency (2016), 73.8% of
production areas reported no change in the percentage of companies developing new
fields and businesses in areas other than traditional products compared to five years
before, indicating that the development of new fields and businesses has not expanded
much. Therefore, it is necessary to consider how to improve the situation.
The original definition of innovation was a new combination of resources for thedevelopment of new products, introduction of new production methods, development of
new markets, acquisition of new sources of resources, and organizational reform
through creative activities (Schumpeter, 1926). However, in the 2000s, open innovation
theory (Chesbrough, 2003, 2006), which seeks to combine resources not only within acompany but also outside the company, gained scholarly attention. Small andmedium-sized enterprises (SMEs), which make up the majority of local industries, areforced to adopt a strategy of concentrating limited resources on their business due totheir small size. They tend to seek management resources that are in short supply suchas technology and know-how from external rather than internal sources, and are
therefore more likely to be familiar with open innovation.
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Even for companies in traditional production areas, product innovation can beachieved through collaboration with other actors such as other companies, universities,
and public research institutes. The definition of actors in this study is social units as
actors (Kanamitsu, 2003). However, traditional production areas tend to be in a state ofnegative lock-in because they have a culture of preserving traditions unique to the
production area and are dependent on existing products with a production structure ofmass production of homogeneous, low value-added daily necessities based on local raw
materials. Negative lock-in means that specialization in a particular industry becomes abarrier to change by promoting rigidity, homogenization of the way of looking at things,
and the inability to find solutions to problems because they are solved within the region,
leading to a failure to respond appropriately as a group to external changes (Grabher,1993). As a result, collaboration with other actors is difficult, and new and different
incentives are needed to realize product innovation. In this study, we consider the new
incentive to be the use of mediators for collaboration with other actors, and focus on thetype and role of the mediator in network formation. In this study, a mediator is defined
as an actor who connects two or more parties for the purpose of knowledge andinformation propagation based on the view that product innovation requires theacquisition of new knowledge and information.
Since there are multiple types and roles of mediators, it is expected that the mediator
to be utilized will differ depending on the situation of the company. In the case of a
traditional local industry, the company may be in a situation where the producing area
in which it is located is in a state of negative lock-in (hereinafter referred to as a

Company
Technology
High

Company
Technology
Low

Improved
Product
Production

Existing
Product Ⅰ
Production

Lock-in
Area

Innovative
Product
Production

Existing
Product Ⅱ
Production

Open
Area

Figure 1. Production Status According to Regional Characteristics and Company
Technological Capabilities“lock-in area”) or not (hereinafter referred to as an “open area”). In addition, there may
be a situation in which the company itself is not technologically advanced enough todevelop a new or improved product different from its existing products. It would be
helpful to examine the process of developing product production using the appropriate
mediators for such situations. As for the status of product production, we posit that the
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53company produces existing products Ⅰ when its technological capability is low in a
lock-in area, existing products Ⅱ when its technological capability is low in an openarea, innovative products when its technological capability is high in an open area, andimproved products when its technological capability is high in a lock-in area (Figure 1).
It is assumed that existing products Ⅱ is surrounded by more diverse existing products
than existing products Ⅰ.
A lock-in area is defined as a situation in which the ratio of specialization in a
specific industry (existing products) is high. Therefore, in a lock-in area, the value ofthe specialization coefficient for the value of shipments of existing products in theprefecture (or ordinance-designated city) where the company is located in the year inwhich the product was developed is high, and an open area is defined as a situation inwhich the value is low. The specialization coefficient looks at the relative
compositionalbias of an item by comparing its compositional ratio to the overallcompositional ratio, and when this coefficient exceeds 1 (nationwide = 1), the item isconsidered to be specialized. Specifically, the specialization coefficient LQij (Location
Quotient) of region i for industry j is defined by equation (1). M denotes the industrial
volume (either number of jobs, production value, etc.), and variables without subscripts
denote the respective total industrial volume of the nation.

(1)
Based on the hypothesis that product innovation in traditional local industries isrealized by the formation of networks through the use of mediators, this study aims tovisualize the networks in the process of product innovation through case studies anddata, identify mediators, elucidate and verify their types and roles, and makerecommendations for the realization of product innovation through the use of mediatorsthat match the characteristics of the region and the technological capabilities of thecompanies.
2. LITERATURE REVIEW
Traditional local industries, where small and medium-sized enterprises in the same
industry are concentrated in regional business clusters, can be regarded as industrial
clusters. Looking at the propagation of knowledge and information from the perspectiveof industrial clusters, Maskell and Malmberg (1999) argue that the more tacit a piece ofknowledge, the more face-to-face contact is required for knowledge exchange. Spatial
proximity between actors is important, as proximity lowers the cost of learning, and also
facilitates the transfer of tacit knowledge due to the cultivation of shared values andculture, or trust. On the other hand, Mizuno (2005, 2011) uses Nooteboom (1999)’s
concept of “cognitive distance” to argue that in regions where the same industries areconcentrated, cognitive proximity is extremely high due to the homogeneity of local
institutions and practices, and therefore, in order to obtain novel knowledge, it isnecessary to interact with cognitively distant counterparts, that is, counterparts locatedoutside the region. Note that Nooteboom et al. (2007) define “cognition” as a broad
mental activity that includes perception, value judgments, estimation, and emotions, and“cognitive distance” as the mental proximity of cognition. Regarding the mechanisms of
local knowledge circulation and knowledge inflow from outside the local area, Bathelt,
Malmberg and Maskell (2004) focused on the networks inside and outside the industrial
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54cluster. Storper and Venables (2004) suggest that knowledge creation in a local area ispromoted by buzz and pipelines (Owen-Smith and Powell, 2002, 2004), which refers tochannels of knowledge propagation from outside the local area.
For a study on the product innovation process, Purbasari, Muttaqin and Sari (2020)
analyzed the roles and interactions of the actors involved in the process using the A to F
theory by Trias de Bes and Kotler. The results revealed that each actor has diverse rolepositioning and dynamic interactions. However, this study does not focus on the
mediators that link the actors together.
From the perspective of mediators in networks, the research has been conducted
mainly in fields such as advanced industries. Sakata et al. (2006) refer to the mediator as
the “connector hub” in the networks of business-to-business transactions, joint researchamong companies, universities, and industrial support organizations, and commissioned
research in the medical industry in the Kinki region and the semiconductor industry inNorthern Kyushu, and state that core companies and universities in the industrial field
control the distribution of knowledge and information. Nakano (2007) also refers to themediator as “hubs” in the network of business-to-business transactions among
companies in Ota Ward, Tokyo, and states that some companies have relationships withmany actors and form the core of the network. In the network of joint research among
companies, universities, and public research institutes in the life science andnanotechnology fields of the “Consortium R & D Project for Regional Revitalization,”
which aims to conduct research and development of products and services that will leadto commercialization by utilizing the technological seeds and knowledge of universities
and other organizations, Yokura (2009) refers to the mediator as the “core” in the
network, noting that public research institutes play a central role in the intra-regional
circulation of knowledge and information, while universities and technical colleges playa central role in the intra-regional inflow of knowledge and information. Furthermore,Fuji (2013) refers to the mediator as “technology spillover hubs” in the network of joint
patent applications among companies in the paint industry, and states that Kansai Paint
Co., Ltd. and Nippon Paint Co., Ltd. play a central role in joint research among multiple
companies. Apart from these, Manabe (2017) mentions companies that support the
introduction of external technologies by general companies in open innovation, andrefers to mediators as “intermediary companies,” stating that intermediary companies
connect companies by matching knowledge and technologies. From the above, it can beseen that mediators have two roles: the hub, which acts as a mediator itself, and theintermediary role, which only connects multiple companies. While the studies discussed
above were limited to identifying the mediators in the target field and clarifying theirroles, the novelty of this study lies in the fact that it focuses on the use of mediators in
traditional-type local industries according to the situation of the company and the region.
3. RESEARCH METHOD
As a method of research, we will focus on companies that have succeeded in productinnovation in traditional-type production areas, analyzing the product innovation
process of companies that have collaborated with actors on their own and companies
that have participated in national cluster projects where a framework for collaboration
has been created.
As case studies of individual companies, we will focus on ceramics and cutlery,
which were the products of local industries that Japanese consumers purchased the mostin the past two to three years, exclusive of food products, according to a nationwide
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55

survey conducted by JTB Tourism Research & Consulting Co. (2018). Specifically, we
will focus on companies located in Seto City in Aichi Prefecture, which has the highest
value of manufactured goods shipments of the manufacture of ceramic, stone, and clay
products with four or more employees, and Seki City in Gifu Prefecture, which has thehighest value of manufactured goods shipments of the manufacture of edge tools,
artisans’ tools, and hand tools, excepting files, saws, and knives for kitchen use, withfour or more employees by the Census of Manufactures Report of 2019. As case studies
of national cluster projects, we will target ceramic related companies in Tajimi City,
Gifu Prefecture, and gold and silver thread-related companies in Kyoto City, anordinance-designated city, which have implemented projects aimed at promoting
traditional local industries.
In order to acquire data, we visit the target region and interview case companies,
universities, and other collaborating actors who have succeeded in product innovation
about the innovation process and other issues. Then, based on the results of theinterviews and the patent data of the case companies related to the results, we visualize
the network for knowledge acquisition in the process of product innovation, identify theexistence of mediators in the network, and discuss their roles. Note that data from
Oshima (2018) for the Seto and Seki case studies and Oshima and Toma (2017) for the
Kyoto case study are cited and modified.
The visualization of the network is organized based on the Onion Model, which isused in stakeholder analysis in systems engineering. For example, Alexander (2005)
considers the people involved in all processes of system planning, design, development,
and operation as stakeholders in system development, and develops them on the Onion
Model to analyze their relationships. The Onion Model is written in concentric circles,with the software/hardware product to be developed at the center. Moving outward fromthe center circle, the entire system to be built, other systems directly connected to it, andthings that affect it as the environment (social system) are represented.
Figure 2 shows the spatial location of actors who propagated knowledge andmediators, with the case company at the center and the actors that are spatially farther
away from the case company located outside. In addition to this, we added a newclockwise time element that visualizes the history of network change process. As for the
strata, since the case study area is located in a metropolitan area (Seto, Seki, and Tajimi
are located in the Chukyo area, and Kyoto is located in the Kansai area), it is divided
into three strata: the production area, metropolitan area, and outside the metropolitan
area. In addition, the time factor is assumed to be a yearly transition from left to right.
Based on the results of the interviews, the changes in the technological capabilities of
the case study companies from existing products to improved or innovative products arecaptured, and the specialization coefficients are calculated based on the industrial
statistics (Census of Manufactures) of the year in which the product innovation occurred
to understand the regional situation. Then we use Figure 1 to position the mediator
according to the technological capabilities of the company and the regional characteristics,

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Time

Year
X+2

Year
X+4

Year
X+3

Year
X+1

OutsideMetropolitan
area

Metropolitan
area

Year
X

56

Year
X+5
Year
X+6

Year
X+7

Production
area
Y1

Case study company

Figure 2. Onion Model with Additional Time Factor Clockwise to Express ProductInnovation Networkand show the development from existing products to improved or innovative products
when the companies utilize each mediator.
4. RESULTS AND DISCUSSION
4.1. The Case of Seto City
Seto City in Aichi Prefecture is a production center for ceramics. It is characterized byits long history and wide variety of products, as well as by the fact that it has one of thelargest production volumes and the largest number of establishments in Japan. The
history of Seto City began with the production of various containers such as Sue ware in
the 700s; over time the number of production items increased, and by the late 1930s, awide variety of ceramic products were being produced, including eating and drinking
utensils, toys and figurines, tiles, washbasins, toilet bowls, medical instruments,
insulators, switches, umbrella stands, vases, and ashtrays (Seto City History
Compilation Committee, 2007, 2010).
In Seto City, according to the Census of Manufactures Report of 2019, the value of
manufactured goods shipments of the manufacture of ceramic, stone and clay productswith four or more employees was 46,196,470,000 yen, while the number of
establishments was 156, the second largest in Japan.
As a case study, I would like to focus on Yamaju Ceramics Co., Ltd., a company thathas shifted from ceramics to manufacturing fine ceramics products. The company
currently manufactures a variety of oxide single crystals for the IT field, mainly formobile communications, and has a 30% share of the world market for the manufactureof single crystals used as substrate materials for surface acoustic wave (SAW) filters.
The company was founded in 1925 as a ceramic exporter in Seto City. In 1935, thecompany built a new factory in Owari-Asahi City and established an integrated systemof ceramic production, including raw materials, manufacturing, and painting processes,
in order to expand exports to Southeast Asia. In 1958, the company began to
manufacture semi-porcelain ceramic dinner sets (Western-style tableware) and shifted
its main focus to sales to the United States, Canada, and Australia. However, due to the
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57large number of employees in the factory, the president visited an advanced ceramics
factory of an American company (YC1) in 1968 in order to learn how to streamline andexpand the factory to increase production of ceramics. However, because of the poor
working environment despite the advanced factory, he had doubts about the future of
the factory and decided to stop the expansion of the ceramics factory in favor of
streamlining production and developing a new business in place of ceramics. The
following year, he proceeded with a complete rationalization of the ceramics production
line, which led to an increase in the profit margin, and he sought to develop new
businesses with the profits. An engineer who graduated from Waseda University (YC2)
joined the company in 1969. In 1970, he visited the research institute in Tokyo (YC3)
with a relative (M1)’s message to seek advice on new business. As a result, he foundout that there were three areas in which new business could be directed: aluminum
substrates for ICs, processed alumina products, and oxide single crystals. Of these,
aluminum substrates and processed alumina products had already been developed byother companies in the same industry, but oxide single crystals were still in the research
stage, so he decided to enter this field the following year. However, the ceramics
produced in the past were polycrystals with different crystal axes depending on where
they were cut, while the single crystals for which he decided to develop a new businesshave a constant crystal orientation no matter which part is taken out. After initiallyconducting research with Nagoya Institute of Technology (YC4), in 1972, under theguidance of Tohoku University (YC5), he proceeded with research on growing YAG(Yttrium Aluminum Garnet) single crystals for laser oscillation, but there was no
demand for them. In the meantime, he learned from a relative (M2) that an Americancompany (YC6) was conducting research on the use of single crystals as surface
acoustic wave filters for TV sets. In 1974, the single crystal laboratory was moved to
Seto City and started operation as the Seto Plant. He also invited two researchers who
had been studying crystals at Nagoya University (YC7) and the research institute in
Ibaraki (YC8), and received advice from a single crystal expert at the research institutein Tokyo (YC9) through a business partner (M3), leading to the mass production of
single crystals of lithium niobate in 1976. The above is summarized in Figure 3.
Figure 3 shows that the company's network extends both inside and outside themetropolitan (Chukyo) area. As the ceramic and fine ceramics industries areconcentrated in the Chukyo area, where there are universities (YC4, YC7) thatspecialize in this field of research, the company has formed a network with them tobenefit from this concentration. However, when there is a lack of technical knowledge
about a new business, development is carried out by connecting with research institutes(YC3, YC9) and companies (YC6) outside the sphere (far away) through a familiar
relative (M1, M2) and familiar business partner (M3) in order to obtain novel
knowledge. In 1976, when the developed product was completed, the specialization
coefficient of the production area (Aichi Prefecture) in terms of the value of
manufactured goods shipments of the manufacture of tableware pottery, an existingproduct, was 2.7.

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1972

1971

Time

58

1970

1973
OutsideMetropolitan
YC3 area

1969

1974
1975
YC8

Metropolitan
area

YC2

1968

YC6

YC5

YC4

YC1

YC7

YC9

1976

M3

Production
area
M1

Case study company

Company

M2

Research InstituteMediator

Mediated actor

Figure 3. Onion Model of the Network of Product Innovation (Seto)

4.2. The Case of Seki City
Seki City in Gifu Prefecture is a production center for cutlery. It is characterized by its
long history, high name recognition, and one of the largest production volumes andnumber of business establishments in Japan. In terms of history, sword smithing began
in the 1200s, and the production of swords was followed by a shift to knives, scissors,
knives, razors, and other daily-use cutlery. (Seki City Board of Education, 1999). Sekiknives have become world famous along with Solingen in Germany and Sheffield in
England for their sharpness, strong core, and resistance to spilling.
In Seki City, according to the Census of Manufactures Report of 2019, the value of
manufactured goods shipments of the manufacture of fabricated metal products withfour or more employees was 107,959,460,000 yen, and the number of establishments
was 166.
As a case study, we will focus on Miyakawa Industry Co., Ltd., which has shiftedfrom manufacturing knives to manufacturing drilling machinery and equipment. The
company currently produces the world’s first multi-axis attachment that can drill
multiple holes at once, and is known in the industry as the “multi-axis Miyakawa.” Thecompany holds patents in eight countries and has a large share of the market inSoutheast Asia, and is also expanding into India.
The company was founded in Seki City in 1935 as a sword processing wholesaler.
During the war, the company made military swords, but after the war, it started making
kitchen knives with bamboo handles. In the process of making kitchen knives, there is aprocess of drilling two holes by hand one at a time to fix the handle, but one day, apredecessor injured one of his arms and wondered if it was possible to drill two holes atthe same time. Thus, in 1953, the predecessor, who had an advanced perspective at thetime and was already aware of the situation overseas, planned and designed his own
machine using a German company’s (MK1) machine as a model, and collected parts
from nearby areas to develop a two-axis attachment for drilling machines. As a result,

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1956

Time

59

1957

1955

1958
OutsideMetropolitan
area

1954

MK4 Metropolitan

1953

area

MK1

MK3・M4

Production
area
MK2

Case study company

Company

Mediator

Mediated actor

Figure 4. Onion Model of the Network of Product Innovation (Seki)work efficiency was improved and production was accelerated. When he introduced theattachment to industry peers in the producing area (MK2), they asked him to sell it tothem, so he made arrangements with parts suppliers around the production area (MK3),
and in 1958 he started production and sales of multi-axis attachments for drillingmachines with adjustable shaft spacing. The above is summarized in the Figure 4.
Figure 4 shows that the company’s network is almost entirely within the metropolitan(Chukyo) area. In addition, the company developed attachments in theearly stage, and when the technology improved, it developed further attachments
through the intermediary of parts companies in Chukyo area. This is due to the fact that
Chukyo area has a large concentration of major machinery manufacturers such as
Toyota Motor Corporation and machinery parts companies. Parts companies are
exposed to competition for orders from major manufacturers and receive high-level
orders. In order to meet these orders, parts companies are required to improve theirtechnologies. By continuing to respond to these orders, the parts companies willaccumulate the advanced technologies of the major manufacturers. In the developmentof the company’s products, such parts companies (MK3, M4) act as mediators to spreadthe advanced technologies of the major manufacturing companies (MK4). In 1958,
when the developed product was completed, the specialization coefficient of the
production area (Gifu Prefecture) in terms of the value of manufactured goods
shipments of the manufacture of knives for kitchen use and hairdressing, an existingproduct, was 11.9.
4.3. The Case of Tajimi City
Tajimi City in Gifu Prefecture, together with the neighboring Toki City and Mizunami
City, is known as the western Tono area, and is a production center of ceramics. In the
900s, ash-glazed pottery was produced and spread throughout the country. Later,
unglazed pottery was also produced. In the 1500s, large kilns appeared and mass
production began, while tea ware such as Kiseto, Setoguro, Shino, and Oribe came to be
produced. Later, the production of sake bottles, earthenware teapots, porcelain, western

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60tableware, and tiles developed in each area, and mass production was developed bymodernizing firing kilns and introducing machinery equipment. According to the
Census of Manufactures Report of 2019, the value of manufactured goods shipments ofthe manufacture of ceramic, stone and clay products with four or more employees was
65,395,730,000 yen, while the number of establishments was 144, the third largest inJapan.
From 2005 to 2007, the western Tono area was selected for the national cluster
project, “City Area Program (General Type)” and Gifu Research and Development
Foundation served as the core organization for the development of next-generation
manufacturing technology for ceramics. The core research organizations were Nagoya
Institute of Technology and Gifu Prefectural Ceramics Research Institute, both locatedin Tajimi City. The number of participating institutions was 28 (industry), 1 (academia),
and 4 (government). One of the companies participating in the project was Yamase Co.,
Ltd., which was located in Tajimi City and manufactures raw materials for ceramic tiles
and tableware.
The company was founded in Kasahara Town (Tajimi City) in 1918, and wasengaged in the manufacture of raw materials for tableware, but in 1954 it also began to
manufacture raw materials for tiles. In 1995, when the chairman of the company wasserving as the chairman of the industrial promotion committee of the Kasahara Chamberof Commerce and Industry, a group of tile-related companies, he saw the decline of thetile industry up close and felt that it was necessary to pass on the original charm of tiles
to future generations. He then started an effort to collect old tiles with about 100
companies, and proposed the establishment of a tile museum, which he helped to open.
This led to the opening of the Mosaic Tile Museum in 2016, which is centered on a tile
collection and disseminates information and techniques about tiles that have beencultivated in this area, and the chairman became the director of the museum. The
company also has a laboratory where it continues to research raw material formulations
and utilize new materials. In 2001, the company filed a joint application with a company
in the western Tono area (Y1) for a method to manufacture porous materials, and in
2005, through the Gifu Research and Development Foundation (M5), the company
developed and patented a heat island mitigation building material based on thecompany’s raw material manufacturing technology, Nagoya Institute of Technology’s(Y2) porous ceramics technology, and Y1’s manufacturing technology through anational cluster project. This is a new building material tile made of porous ceramics,
which is light, soft, and has water retention properties due to the numerous small holes.
A single tile (30cm×30cm×2cm) can hold 1 liter of water, and in summer, when thewater evaporates, it has an average cooling effect of 5 degrees. The above issummarized in Figure 5.
Figure 5 shows that the company’s network is limited to the production area (Gifu
Prefecture). In addition, while the company was still manufacturing existing products, it
was able to link up with Y1 and Y2 through the cluster project mediated by M5, andsucceeded in improving the functionality of tiles, a product of the production area. In
addition to the relationship with Y1 as a business partner, Y1 is also involved in themosaic tile museum project, and the connection with Y1 can be seen through thecommunity-wide networking activities for the establishment of the mosaic tile museumby the Kasahara Chamber of Commerce and Industry (M6), an industry group. In 2005,
when the developed product was completed, the specialization coefficient of the

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Review of Integrative Business and Economics Research, Vol. 12, Issue 3

2004

Time

61

2005

2003
OutsideMetropolitan
area

2002

Metropolitan
area
2001
M5

Production
Y2
area

Y1

Y1

Y1

Case study company

Company

Research InstituteMediator

Mediated actor

Project Member

Figure 5. Onion Model of the Network of Product Innovation (Tajimi)
production area (Gifu Prefecture) in the value of manufactured goods shipments of the
manufacture of tile and mosaic except quarry tile, an existing product, was 33.0.
4.4. The Case of Kyoto City
Kyoto City has traditional industries that have been closely linked to daily life for a longtime, such as Nishijin textiles, Kyoto Yuzen dyeing and weaving, Kyoto Buddhist altars,
Kyoto fans, Kiyomizu-yaki pottery, and Kyoto dolls. According to a 2005 survey by the
Association for the Promotion of Traditional Craft Industries, the total number of
traditional craft items designated by the Ministry of Economy, Trade and Industry andthose not in Kyoto City was 72, ranking first in Japan, accounting for 5.6% of the total
number of 1,275 items nationwide. A wide variety of products exist. In addition to
traditional industries, Kyoto City also has a thriving manufacturing industry, which ischaracterized by nanotechnology-based precision instruments and machinery
manufacturing. According to Kyoto City (2004), at 2002, the specialization coefficientsfor the value of manufactured goods shipments of the manufacture with four or more
employees are, in descending order by 2-digit industrial classification, precision
instruments and machinery (7.1), textile mill products (except apparel and other finishedproducts made from fabrics and similar materials) (6.2), and beverage, tobacco, andfeed (4.2).
In Kyoto City, the “Kyoto Nanotech Cluster” project was adopted as a national
cluster project, “Knowledge Cluster Initiative,” from 2002 to 2007, and was
implemented based on six research and development themes with the Advanced
Software Technology and Mechatronics Research Institute of Kyoto (ASTEM) as thecore organization. The core research organization was Kyoto University, and the total
number of participating institutions was 200 (industry), 34 (academia), and 13(government) each year during the project period. One of the research and development
themes was to use nanotechnology to revitalize Kyoto’s manufacturing industry, which
has been nurtured in the field of traditional industries, and one of the companies
participating in the project was Oike & Co., Ltd..
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62

According to Kyoto Gold and Silver Thread Industry Cooperative Association (2009),
domestic gold and silver threads were probably used together with imported ones for
Nishijin brocade sashes and gold gauze in the late Muromachi period (1336-1573). The
first example of the name “gold thread shop” was said to be from the Edo period(1603-1868), and in the Meiji period (1868-1912), the new government allowed
liberalization of the business, which led to the emergence of the businesses that
continue today.
The company began manufacturing and selling gold and silver thread for Nishijin
textiles in Kyoto in 1876. The process involved manually attaching gold and silver foil
to washi paper and cutting it, but the company later developed a device for attaching foil
to washi paper. Then, in 1955, when the Kyoto City Craft Guidance Center opened thevacuum deposition method to the public, they tried to commercialize it and started
manufacturing gold and silver thread using the first vacuum deposition machine inJapan in 1956. Starting with the vacuum deposition machine, product innovation wasseen from attaching to Japanese paper to attaching to plastic film. Subsequently, throughthe development of metallic transfer foils and soft packaging (aluminum vapor
deposition) in the 1960s, and sputtering technology in the 1970s, the company began to
manufacture transparent conductive film for touch panels, optical film, materials forcircuit boards, functional transfer film, and vapor deposited film for molding (forautomobile parts), in addition to gold and silver thread. During the period of the Kyoto
Nanotech Cluster Project, based on the data of the joint patents of the company in thefield of developed products (International Patent Classification B32 (laminates) andH01 (conductive materials)), the company applied for patents on transfer materials witha company in Okayama (O1) and a company in Osaka (O2), and on gold and silver
threads with a research institute in Gunma (O3). In 2006, the company conducted joint
research with Kyoto University (O4) through ASTEM (M7) to establish a
low-resistance transparent ferromagnetic material and its production method. The idea isthat by using indium tin oxide doped with manganese as a starting material anddepositing a thin film on a substrate by the sputtering method, room temperature
ferromagnetism can be imparted without degrading conductivity or transparency. Afterthe cluster project, the company applied for a patent on the manufacturing method oflaminate with a company in Tokyo (O5), and a patent on transfer material with acompany in Okayama (O1) and a company in Osaka (O2) in 2008. Then, in anotherproject, the company became the principal investigator and ASTEM (M7) as theadministrator, together with Kyoto University (O4) and a company in Tokyo (O6),deposited a large area of zinc oxide on plastic film by sputtering method in 2009,
producing the world’s first touch panel using zinc oxide film. The company has
obtained a patent on its own. The above is summarized in Figure 6.
Figure 6 shows that the company’s network extends inside and outside themetropolitan (kansai) area. In addition, when the company possessed a relatively highlevel of technology, it developed a cluster project with O4 through the medium of M7.
After the cluster project, the company, which possesses high technology, took the
initiative in implementing other projects, and added O6, which has applied for a joint
patent with the National Institute of Advanced Industrial Science and Technology (O7)in the field of H01, to the network formed by the cluster project, so that the knowledge

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Review of Integrative Business and Economics Research, Vol. 12, Issue 3

2006

2005

Time

63

2004

2007
OutsideMetropolitan
area

O3

2003

O1
O1

2002

O5

2008

Metropolitan
area

O1
O7

O2
O1

O2

O2

Case study company

Production
area
M7

Company

O6・M8

O2

O4

M7

2009

O4

Research InstituteMediator

Mediated actor

Project Member

Figure 6. Onion Model of the Network of Product Innovation (Kyoto)of O7 and others is propagated to the company through O6. Furthermore, for O1 and O5,
there is a connection between this company and both companies belonging to theindustry group “Functional Film Research Association” (M9). This group wasestablished in 2000 with the aim of creating film products with new functions andvalues by combining the technologies of companies with unique technologies related toconverting. The activities include workshops to understand the technologies andstrategies of member companies and to create opportunities for joint development andnew product creation, as well as social gatherings held five or six times a year toprovide opportunities for personal interaction. In 2005, the company and O1 reported on
their membership, and connections have been strengthened through the group. These
factors have led to the successful development of the technology to rank first in theworld through the collaboration of project frames, intermediary companies, and industry
groups. In 2009, when the developed product was completed, the specialization
coefficient of Kyoto City in terms of the value of manufactured goods shipments of the
manufacture of twisting yarns (including gold and silver twisting yarn), an existingproduct, was 2.8.
4.5. DISCUSSION
From the case studies so far, there are four types of mediators that link companies
together in the background of network formation. Mediator A includes relatives andbusiness partners (M1, M2, M3) with high cognitive proximity, who only connect actors
upon request and do not appear as collaborators. Mediator B is a company that appears
as a collaborator and propagates the knowledge of the company or research institution(knowledge propagation company; M4, M8). Mediator C is a public institution (project
manager; M5, M7) that represents the project and manages the project to form a verticallink. Mediator D is an industry group (M6, M9) that does not appear in the project but
provides a place to promote connections (horizontal connections) among actors. In

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Review of Integrative Business and Economics Research, Vol. 12, Issue 3

Company
Technology
High（Expression）
B: Knowledge
Propagation
Company

Company
Technology
Low（Expression）
C: Project Manager（Under the surface）
D: Industry Group

Lock-in
Area

64（Expression）
B: Knowledge
Propagation
Company
C: Project Manager（Under the surface）
D: Industry Group（Under the surface）
A: Relatives・Suppliers

Open
Area

Figure 7. Mediator Model According to Regional Characteristics andTechnological Capabilities of the Company
addition, a strong network was formed by the addition of Mediator C, Mediator D, andMediator B. Based on the above, the following figure shows the types of mediators thatare suitable for realizing product innovation, depending on the characteristics of the area
and the technological capabilities of the company (Figure 7).
If the area is in a lock-in situation, as in Case Tajimi, and the company’s own
technological capabilities are low, the entire area should consider working together topromote product innovation, and use mediators such as a project manager (Mediator C)
to leverage the project and an industry group (Mediator D) to form underwater
connections. As shown in Case Seki, if the company’s own technological capabilities
are high, it has the ability to directly collaborate with other companies. Therefore, thecompany may collaborate with companies (partners) and also acquire the technologiesof the actors that exist in the background of the partner, viewing the partner as amediator (Mediator B). On the other hand, if, as in Case Seto, the area is in an open
situation, that is, other companies are expanding production in other industries throughproduct innovation, and the company’s own technological capabilities are low, it isdifficult to know where to start because there is a large difference between thecompany's own technology and that of other companies, making it difficult to connect
directly with other companies. Therefore, a method of consulting relatives or business
partners with high cognitive proximity (Mediator A) to introduce collaboration partners
is frequently adopted. On the other hand, if the company’s own technologicalcapabilities are high, as in Case Kyoto, along with the use of a knowledge transmission
company (Mediator B), a business manager (Mediator C) can be used to implement the
project and an industry group (Mediator D) can be used to form an extensive network inorder to achieve product innovation that can be used throughout the region up to theinternational market.

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Review of Integrative Business and Economics Research, Vol. 12, Issue 3

65World's First
Product Production
Company
Technology
High

Improved
Product
Production（Expression）
B: Knowledge
Propagation
Company（Expression）
C: Project Manager（Under the surface）
D: Industry Group

Company
Technology
Low

Existing
Product Ⅰ
Production

Lock-in
Area

Innovative
Product
Production（Expression）
B: Knowledge
Propagation
Company
C: Project Manager（Under the surface）
D: Industry Group（Under the surface）
A: Relatives・Suppliers
Existing
Product Ⅱ
Production

Open
Area
Transition due to successful use of
mediators
Transition due to some unsuccessful
use of mediators

Figure 8. Production Process Model Utilizing Mediators
The development from the existing product Ⅰ production to the innovative productproduction is shown in Figure 8, whereby the companies utilize each mediator
according to the characteristics of the area and the technological capabilities of thecompanies. In this Figure 8, the goal is to move from the situation of existing product Ⅰ
production in the lower left to innovative product production in the upper right. If the
project is implemented in the lower left situation and Mediator CD is used, the projectwill form a network in the area including the company, and if an innovative product iscreated, the position will shift to the upper right. If the company is unable to obtain its
own products and remains in the existing product production without improving its
technological capabilities, and other companies in the area obtain innovative products
through project and the area becomes open, the company will move to the right position.
The company then consults with Mediator A, who has cognitive proximity to close thetechnology gap with other companies in the area, and aims to transition to a higher
position on a one-to-one basis. On the other hand, if, as a result of implementing the
project in the lower-left situation, the company obtains an improved product outcomeon its own, but the entire area fails to produce an outcome, the company moves to theupper position. Then, with the technical skills acquired through the project, they will
work directly with the companies (partners) and aim for the right position by acquiringknowledge from the companies with high technology behind the partners (Mediator B).
The company will then be in the upper right position, where it has obtained an
innovative product for itself, occupying the position of Mediator B. In addition, it will
be possible to utilize Mediator BCD through further project and aim to develop theworld’s first product with a strong three-mediator system.
5. CONCLUSION

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66

This study showed that, with regard to the status of network formation for acquiringknowledge in product innovation in the traditional production area, small andmedium-sized companies in the cases collaborated with actors inside and outside theproduction area. For the companies, location in a metropolitan area with a highconcentration of peers and research institutions and participation in a cluster project thatencourages collaboration with actors presented an advantage in network formation.
To form networks of the companies, mediators are used. As the mediators, not only
universities, research institutes, and core companies that have been focused on in thepast, but also relatives, business partners, companies that manufacture parts, public
institutions, and industry groups that are cognitively close have become. Looking at therole they play, mediators are not only responsible for receiving requests and connecting
actors, but also for being partners and mediators, propagating the knowledge ofcompanies and research institutions through themselves, managing projects (verticalconnections), and providing a place to encourage connections between actors(horizontal connections).
Based on the fact that there are multiple types and roles of mediators, we thenpresented a model for realizing product innovation through the use of mediators
according to the characteristics of the area and the technological capabilities of thecompanies.
6. RECOMMENDATIONSIn order to realize product innovation in the future, small and medium-sized companies
in the traditional production area should be open-minded, find a mediator that suits thesituation of the area and the company, and actively utilize the mediators to collaborate.
This is also the case in the regional industrial policies of the national government andlocal governments, which are required to analyze the regional situation, discoverpossible mediating actors accordingly, and provide support for them.
ACKNOWLEDGEMENTS
The authors would like to thank Dr. Yasui, T. (Eikei University), Dr. Taniguchi, N.
(Keio University), Dr. Maeno, T. (Keio University), Prof. Kaneyasu, I. (Keio University)and Dr. Murase, H. (Nara Prefectural University) for useful comments, and Editage forEnglish language editing. This work is supported by Keio University Doctorate Student
Grant-in-Aid Program.
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