Learning and assimilation vs. M&A and innovation: Japan at the crossroads

Historically, Japan constructed its socio-cultural system so that it introduced, adopted, assimilated, and developed Western technology selectively without spoiling its own indigenous culture. And until recently, Japan learned and assimilated global best practices without being dependent on mergers and acquisitions (M&A). M&As in Japan were the lowest in the world until 2000, suggesting a low dependence on acquiring technology in this way. Recently, the number of M&As has increased dramatically among certain Japanese manufacturing firms. Prior to 2004, these firms were less profitable than their counterparts that did not depend on M&A. Today Japan's corporate technology and innovation strategy is at a crucial inflection point of maintaining the indigenous learning/assimilation function while also becoming more dependent on M&As. This paper explores the changing role of M&As in Japanese firms, and also considers the role of Web 2.0 and Enterprise 2.0 in the innovation process. Using an empirical analysis of the trajectories of Japan's leading electrical machinery firms, this paper explores the changing role of M&A in the context of business innovation in Japan, and the ongoing dialectic between indigenous strengths and global best practices.