Study on Global Niche-top Enterprises as Representatives of Excellent Small and Medium Manufacturing Companies in Japan

Author Name HOSOYA Yuji  (Consulting Fellow, RIETI)
Creation Date/NO. March 2013 13-J-007
Research Project Research on the Interactions Between the Business Strategies of Excellent Small and Medium Enterprises (SMEs) and their External Environment
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One of the characteristics of Japan's manufacturing industry is being able to find throughout the country excellent small and medium size enterprises (SMEs) which are not dependent on a few specific customers and have highly competitive products as shown in the strong market shares domestically as well as internationally. Such SMEs are called niche-top type enterprises, and those with more than one niche-top product as well as shares in the world market are called global niche-top enterprises (GNTEs). The Ministry of Economy, Trade and Industry (METI) has provided various supports for niche-top type enterprises to become globally competitive GNTEs since the end of the 1990s. For the purpose of inducing more productive and efficient results from such policies, it is necessary to research the niche-top type enterprises and analyze the differences between GNTEs and other niche-top type enterprises from the theoretical view of strategic management.

In 2011, METI conducted an interview survey of 31 typical GNTEs. It was found that these companies share commonalities in the new product development process such as making users show up for consultations on problems which they cannot solve, exerting effort to formulate solutions with the aid of suppliers and universities with which GNTEs have a consistent relationship, and succeeding in finding solutions which turn into new niche-top products. Typical GNTEs share a number of other attributes as evident in their products penetrating smoothly into foreign markets due to the high non-price competitiveness, demonstrating smart overseas operations in an unhurried step-by-step manner, and often confronting threats of cheap knockoff products yet able to manage to secure their markets through their high-quality products and various intellectual property protection methods such as patent and trade secrets.

For the purpose of bearing out these findings statistically, RIETI presented a questionnaire survey in 2012. Questionnaires were sent to 2,000 niche-top type enterprises and 1,000 randomly selected manufacturing SMEs. The collection rate was 33.2% for the former and 17.8% for the latter. This paper analyzes the survey using various multivariable analysis techniques. We find that GNTEs share many characteristics from the interview survey in 2011, and also demonstrate high performance in many figures compared to other niche-top type enterprises. Based on wide-ranging comparisons between successful GNTEs and other niche-top type enterprises, we discuss the policy implications on how the latter can turn into the former.