The Evolution and Structure of Industrial Clusters in Japan

This paper focuses on two aspects of the evolution and structure of clusters in Japan, namely, what gives rise to clusters and what benefits are acquired by small firms from participating in clusters. The determinants of clustering are discussed by way of a review of the history of 14 industrial clusters which cover a wide range of industries and locations in Japan. It is noted that different factors dominate in different cases. Among the more important ones are the existence of leading large firms, the availability of a pooled labor market, and the presence of public research and testing facilities. The four most important benefits from clusters reported by small firms are : (i) specialization; (ii) ease of procurement; (iii) diffusion of technology, and (iv) public policy support. Access to skilled workers is not reported to be a significant benefit. This may be explained by the fact that the dominant source of skills acquisition among Japanese workers is on-the-job training and such skills may be too firm-specific to be useful to others, even within a geographically concentrated cluster.