Rising Sons

The success of American growth companies has inspired the first generation of japanese entrepeneurs in the past four decades.

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Twelve years ago, feeling like an itinerant peddler, Shigenobu Nagamori got off a plane in Minnesota, his luggage stuffed with electronically controlled motors. The slim 29-year-old engineer had come to the United States risking everything -- his career and the future of his fledgling Nippon Densan Corp. (Nidec) -- on the hunch that he could sell his newly designed product to St. Paul-based Minnesota Mining & Manufacturing Co. (3M).

Not that he had any choice. Although formerly a top electrical engineer at both Teac Corp., a tape-deck manufacturer, and Yamashina Seiki, a machine-tool maker, Nagamori had little hope of selling his small, high-technology motors to the great, diversified electronics giants of his native land. "There are ceilings all over Japan," he said, "and to break through them is almost impossible. In Japan everyone wanted to know the background of the company, its connections and affiliations -- even the age of its president. All these irrelevant things are more important in Japan than the product. But in America, land of entrepreneurs, I thought maybe if the product was right, they would buy it."

Nagamori's search for a market took him to Lee Pastor, engineering manager for 3M's Mincom Division. Unpacking his heavy bags, the young Japanese entrepreneur laid out samples of the small (three and a half inches in diameter) motors he had designed.

"Here comes Nagamori walking into the factory saying, 'Does anyone want my product?' " Pastor, now retired, remembers. "I never saw anyone so nervous, trying so hard to communicate. But when I asked for specifications, he told me them on the spot. I knew when I met Nagamori-san that I had met a creator of a company, a real inventor."

Although 3M's initial order was for only 1,000 motors, it was a beginning. Since their meeting, Nidec has grown into one of Japan's leading "venture businesses," as these new and growing companies are known in Japan. Building on its orders from 3M, which now buys the motors in batches of tens of thousands for its line of Wollensak 2770 high-speed cassette duplicators, the company currently sells to over 300 major corporations, ranging from domestic giant Hitachi Ltd. to such leading foreign companies as IBM, Digital Equipment, and Ing. C. Olivetti. Twelve years after his trip to St. Paul, Nagamori has built Nidec to sales of more than $36.3 million (8.5 billion Yen).

Nidec is one of a growing number of entrepreneurial companies which, inspired by the American model, are now challenging the entrenched power of Japan's corporate giants. But the prospects remain uncertain. Although eager to emulate the example of such American success stories as Apple Computer, Tandon, and Federal Express, these Japanese venture businesses face obstacles unimaginable in the American context. The hierarchical business and social culture of Japan has traditionally relegated small companies to the role of subcontractors for the nation's largest businesses. Start-up capital is severely limited. And support of the business giants remains the cornerstone of national economic policy.

As such entrepreneurs as Nagamori take on the corporate status quo, however, they are also perpetuating an enduring Japanese business tradition. From its inception, Japanese capitalism has been characterized by the continuing transformation of outsiders into insiders, of businesses that began by fighting the established power structure and ended up as its pillars.

Japan's oldest and most established financial empires, like Mitsui & Co., the $70-billion international corporation, were the progeny of 17th-century samurai who chose to lower their class status in order to enter the business world. Other established giants, such as Mitsubishi Corp., founded by the Iwasaki family, started out as modest peasant shopkeepers. By the 20th century, however, those shopkeepers had become the great Japanese zaibatsu, or "money cliques," whose interlocking financial and industrial empires enjoyed a predominance perhaps even greater than that of turn-of-the-century cartels and trusts.

With the defeat of Japan in World War II, however, the zaibatsu were broken up; many of their leaders were jailed or proscribed from business by the "creative destruction" imposed by American occupation authorities. "The new freedom kindled many fires," wrote British historian G. C. Allen, opening up a new realm of possibilities for entrepreneurs and middle-level managers who had traditionally lived under the shadows of the zaibatsu. Many of the new businesses were spun out of the old conglomerations, including Toshiba Corp., which broke out of the Mitsui orbit, and Hitachi, a former satellite of the Nissan empire, both of which would grow into world-straddling electronics giants. At the same time, new empires were being carved out by formerly obscure businessmen. Akio Morita and Masaru Ibuka were creating Sony Corp. Konosuke Matsushita was building the Matsushita empire. And Soichiro Honda, a one-time Toyota Motor Corp. subcontracter, was creating his own automobile giant.

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