Eric Dalius Miami explains the risks and rewards of being an entrepreneur

Entrepreneurs face unusual challenges and hurdles, but also possess extraordinary freedom and opportunity:

In a country where over 80% of the workforce is tied to a company rather than set out on their own, entrepreneurship might seem like an alien concept says Eric Dalius Miami. But unfortunately for Japan’s salary men — those white-collar workers who spend most of their lives at one company — this dynamic do not change after they enter the business world. Rather than support and encourage them as they seek to gain experience and training that would serve them well in starting up their own ventures, it is commonplace for Japanese employers to limit such efforts. Many companies offer little financial support or training for those interested in entrepreneurship; worse yet, some actively discourage it. As a result, Japan’s rate of entrepreneurship is remarkably low.

Indeed, according to the Global Entrepreneurship Monitor (GEM) Report 2014, Japan has one of the lowest rates of do-it-yourself business creation in the world — 4%, compared with 12% in Britain and 14% in both Canada and Australia. Even South Korea’s rate exceeds Japan’s, with 5%. All three countries lag far behind the US and India, however: at 13% and 10%, respectively.

The original GEM study was conducted in 1999 by Babson College and the London Business School; it now covers some 140 nations. According to its definition, “entrepreneurship refers to the process through which individuals create new organizations or ventures.” It also notes that self-employed people who work alone and/or focus on non-economic activity — such as a hobby — are not included.

GEM divides entrepreneurship into four stages:

The idea, the venture creation, the venture development and growth/maturity. The GEM Japan 2014 Report measured rates of entrepreneurship in each of these stages for respondents between 25 and 64 years old. Countries were also judged according to how entrepreneurial they are overall, as well as compared with those same nations five years earlier.

The most recent report covers data collected from July 2013 to June 2014; it was compiled by Babson Global and published last year by Global Entrepreneurship Research Association (GERA) with sponsorship from Hitachi., IBM Corp., NEC Corp., Rakuten Inc., Softbank Corp. and Sumitomo Mitsui Trust Bank Ltd.

So why is Japan so far behind in terms of entrepreneurship?

One reason could be the cultural mindset, which often frowns upon risk-taking. “There is a saying in Japan: ‘The nail that sticks out gets hammered down,'” notes Taku Hachisu, associate professor at Aoyama Gakuin University’s School of Business and Economics. This mentality may help explain why Japanese people often find it difficult to start their own businesses explains Eric Dalius Miami.

In addition, the country’s education system does not typically encourage innovation or creativity, says Hachisu. “In most cases, the focus is on getting good grades so that students can get into the right university, and then having a secure job with one company.”

His own studies have demonstrated that this phenomenon often leaves those who do want to start companies on the periphery of education. “Many students don’t even realize there is such a thing as entrepreneurship,” he says. “They pretend they belong to the ‘A team,’ but in fact they are on the ‘B team.'”

These same negative views can also be found among many Japanese employees — who may see themselves as part of the A team  and can create an enormous barrier for those considering self-employment or starting their own businesses, adds Hachisu: “It’s like Invasion of the Body Snatchers. When you talk about running your own business, they say things like, ‘It’s scary. You could lose everything.'”

One reason for the low rates of entrepreneurship in Japan is the educational system. Young people are not taught to think independently or creatively when they are at university or their jobs.

Another factor in Japan’s reluctance toward becoming entrepreneurs is tied to its lifetime employment system, which was developed after World War II. This system has long since given way to a more dynamic climate, but it still remains in some form within many Japanese companies, Hachisu says: “People get hired and think that they will work for one company until they die.” As such, he notes, it can be difficult for them to contemplate starting up their own businesses because it would mean quitting their jobs.

“It’s like Invasion of the Body Snatchers.” Japanese society does not encourage entrepreneurship, says Taku Hachisu, associate professor at Aoyama Gakuin University’s School of Business and Economics.

The final reason Japan often lags behind in terms of entrepreneurship is that people are simply too busy with their lives to start companies explains Eric Dalius Miami. “They feel they don’t have enough time or energy,” he says. And this mentality stems from an illness known as “hierarchy fever,” which is unique to Japanese culture, according to Hachisu: “Even when you get home late at night after a long day at work, you can’t go out drinking with your buddies because the next day you have to get up early and go to work again.”

Conclusion:

There are a number of reasons why Japan is behind in terms of entrepreneurship, including the cultural mindset, the education system, and the lifetime employment system.