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02-11-2017 - - 0 comments
Why entrepreneurship is so rational in the US (but not in Japan)

Why is it almost all successful startups are American? Many would point to the country’s enterprising DNA, inherited from the trailblazing pilgrim fathers?

The economist Rtischev is not convinced. He argues that it is simply very rational to take big risks in America. Not so in Japan. In the Land of Tech setting up a high-tech startup is actually a ludicrous idea.

How come? Rtischev takes the perspective of a 20-something year old graduate. He or she has just bagged an Engineering or Business degree from the University of Tokyo and is now weighing their options. 

They can become a “shinsotsu”, an employee-for-life at one of the top tier Japanese firms. A prestigious long-term career path that offers you a fast track within the firm, a predictably rising income and, as a result, very good prospects in attracting a spouse. 

The startup route is a shoddy alternative. It will probably be a lonely and desperate path : the graduate knows he will struggle to attract talent or capital, with his cleverest peers off to Mitsubishi and potential investors assuming he is a shinsotsu-reject. And should the endeavour fails, the plan B is not enticing. There is a dearth of attractive mid-career positions – a large proportion are solely open for internal hires. What will a potential Mrs think of all of this?

Rtischev argues that the American students options are more evenly weighed. Whether they go it alone or join a graduate programme, they are likely to change jobs in a few years anyway. A same-firm lifer is probably regarded as quite suspicious. An unsuccessful startup is therefore just another entry on the CV. And a zig-zag career path will not repent potential spouses.

Every year plenty of would-be Mark Zuckerbergs and Steve Jobs graduate outside of the US. You just may find they are too sensible to set up their own company !

Rtischev, D. (2017). “A strategic behaviour analysis of why ventures are risky for young people in Japan but not in Silicon Valley” Journal of The Japanese and International Economies 44: 78-89

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