Author: Joji Tokui, Faculty Fellow, RIETI

Even without quoting the Edo period senryu verse that humorously comments on the tendency for the well-educated grandchildren of once prosperous families to have to put up “House For Sale” signs in beautifully executed calligraphy (Karayo de uri-ya to kaku sandai-me), it should be clear that business succession over the long term is a difficult undertaking. In this senryu, “grandchildren (sandai-me)” refers to the idea that the company is built on the vitality and the hard work of the founders, is safeguarded by the children who grew up witnessing their struggles, but is in jeopardy once the torch passes to the third generation. However, this is not the only issue. If we calculate one generation as being 30 years or so, then the third generation marks 100 years, over which time the business environment is likely to have changed dramatically, and responding to these changes is also an important consideration.

Furthermore, in the Japan of today, the declining birthrate has led to the beginnings of a contraction in the labor force, and small and medium-sized enterprises (SMEs) in the regions are now confronted by an increasingly acute labor shortage as a result. The 2018 White Paper on Small and Medium Enterprises in Japan devotes one of its chapters to this issue. According to the Japan Finance Corporation’s “Quarterly Survey on SME Trends” to which the White Paper refers, the proportion of SMEs citing “labor shortages” as a management problem has been rising steadily over the past few years, to the point where it is close to the peak recorded during the late 1980s to early 1990s of ‘bubble economy’ years.

Read the entire article on the RIETI website

Image taken by Alan Cleaver and sourced from flickr.