Silicon Valley Bridges to Japan

A New Convergence

Japan and the San Francisco Bay Area find themselves in strategic alignment as digitalization drives the Industry 4.0 revolution. Bay Area technology companies are expanding their footprint in the Japanese market, and Japan’s largest industrial firms are engaging both Japanese and Silicon Valley startups.

Japan has struggled to adapt to the digital era. In its traditional business culture, reputation is critical and dependent on meeting high quality and customer service standards. Improvement is continuous and typically pursued cautiously through consensus—a process that has in the past delivered competitive advantage but is challenging today as large firms compete in fast-moving global markets.

While Japan has been quick to embrace and adapt foreign technology and business innovation, foreign influence in its economy—through trade, direct investment and M&A, foreign managerial input, or immigrant labor—has historically been limited. Gradually, however, a quiet change is taking place across Japan’s industrial base and business culture, driven by the economic necessity of digitalization. And the pace of change is accelerating. Japan is loosening up: large keiretsu and Silicon Valley startups are partnering on cutting edge technology, and corporate venture capital is fueling growth in the Bay Area and within an emerging homegrown startup community back home. Startups and founders in both places are more disciplined and business-focused as financing models mature and the pool of talent broadens.

Companies and regions are finding the best of both worlds—through innovation and scale—as disparate cultures rub off on one another.

This analysis builds on discussions at a February 20, 2020 conference at Stanford University, “Japan and the Bay Area: Developing Entrepreneurial Business Partnerships in the New Japan,” organized by the Bay Area Council Economic Institute and Stanford’s US-Asia Technology Management Center.