Escaping the Japanese Pyramid: The Association of Small and Medium Sized Enterprise Entrepreneurs (SME Doyukai), 1947-1999

In Japanese society the pinnacle of economic and political powerresides in Tokyo conglomerates and elite ministries: the Ministryof International Trade and Industry (MITI) and the Ministryof Finance. Until now, the story of this power arrangement hasbeen told from the perspective of national bureaucrats and bigbusiness executives. The image projected to the outside worldhas been of cooperative, trust-based relational contractingwith big business at the top "taking care" of its suppliersand subsidiaries below. The story from the bottom, however,is one of technology expropriation (of patentable technology)and monopsony squeeze (unilateral cost-down demands, for example).Firms unwilling to toe the line have been wholly excluded fromaccess to the benefits reserved for those at the top of thepyramid, where one finds lucrative main bank financing, governmentsupport, and copious technological information. This article offers a historical narrative of the politicalstruggle by independent-minded entrepreneurs in postwar Japan.Central to the struggle has been the challenge of building broad-basedcoalitions to avoid becoming embedded in these hierarchies whileat the same time trying to obtain alternative sources of financeand technological know-how. The most successful example of suchefforts is the Association of Small and Medium Size EnterpriseEntrepreneurs (SME Doyukai). The SME Doyukai has somehow managedto remain completely independent from the state, while mostother small business associations have not. This independencehas not been free, and the association has gone through a numberof institutional dilemmas as a result. We analyze these dilemmasover time and offer comparative lessons.