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US-JAPAN- INDIA ALLIANCE: BUSINESS DEVELOPMENT OPPORTUNITIES IN THE ‘NEW ASIAN ERA’.

Overview

Leader Gautam Ray, Professor, Kyoto University
Researcher Prof. Kiyoshi Kobayashi, Prof. Michael Santoro, Rutgers Business School, USA, and Raymond Dezzani, University of Idaho, USA
Term April 2011 - March 2012
Research Outline

 Social, cultural and political resources are known to impact the growth of human and economic development opportunities in countries and regions which in turn impact development of business opportunities not only within such countries but across the globe. Examples of such resources include social capital of trust, human and knowledge networks, rule of law, equal opportunities for the access to the common pool of knowledge resources through education, democratic institutions such as independent Judiciary, free press and platforms for collective action including civil societies fighting for human rights, protection of environmental and natural resources, and improved governance.

 The United States of America have developed throughout the last century its rich social and political resources such as democratic values of individual freedom, diverse and multicultural society attained through its immigration policy and the policy of promoting upward social mobility through merit based reward system uniformly applicable to all people irrespective of their nationalities and social or economic status. Its universities and research institutions have attracted human capital resources from all over the world and integrated them into its vibrant capitalist economy. These human and social resources have fuelled innovation and creativity that have been augmenting the productivity of its knowledge economy in an unprecedented scale.

 Japan, on the other hand, showed how rapid economic growth can come along with a phenomenal rise of its middle class and eradication of poverty as it created a highly productive industrial economy and obliterated its hierarchical social structure. Japanese manufacturing enterprises trusted its working class population’s ability to sustain the growth engine and shared with them the fruits of growth through a wage structure and performance bonus system that made Japan one of the most equitable societies in the world. Social capital of trust, loyalty and team-work helped the growth Japanese enterprises.

 Despite their social and economic infrastructural resources, business development opportunities in both these two developed economies have been steadily shrinking in recent years. While Japan has been facing economic stagnation since the bust of its bubble economy in the early 1990s, US economy’s growth bubble artificially propped up by the supply of excess credit seems to have busted irretrievably since the onset of the financial crisis in 2008. India with its large domestic market and huge growth potential can provide the requisite synergy and complementarities that can unleash a new momentum in the growth of business opportunities of US and Japanese enterprises.

 India’s democratic institutions- free press, independent judiciary, election commission, and vibrant civil society- have enabled growth of its domestic market fuelled by the steady growth of its educated middle and lower middle class population. With its vast human capital resources, low median age of 25 years, very low dependency ratio of 7.5%, Indian market presents a golden opportunity of strategic business development opportunities for capital and technology rich economies such as Japan and United States . India has also been facing the problem of an unprecedented surge in the supply of educated workforce in coming years.

 This research shall seek to explore how the three large democracies can use their respective social, cultural, political and economic resources to form productive business alliances that can create win-win-win outcomes for all. It shall aim to identify the legitimate foundations of such business alliances and explore how to develop sustainable business ventures that address the needs of their vulnerable populations.

Report

Leader Gautam Ray, Professor, Kyoto University
Researcher Prof. Kiyoshi Kobayashi, Prof. Michael Santoro, Rutgers Business School, USA, and Raymond Dezzani, University of Idaho, USA
Term April 2011 - March 2012
Achievements Outline

 The workshop on US-India-Japan Business Alliance(USINJA) was held on the 8th March,2012 in Embassy Row Hotel, Washington DC as part of the USJI’s centenary celebration of plantation of Cherry Blossom in Washington DC during the USJI week, March 5-9, 2012. The workshop’s objective was to provide a platform for academic scholars from different disciplines to exchange their preliminary thoughts and ideas on business alliances across these three largest democracies. At the end of the workshop a panel discussion was held on the “ Developmental role of Business Alliances in Democratic Countries”. Prof. Gautam Ray moderated the proceedings of the workshop and panel discussion.

 The workshop started with the inaugural address of Prof.Junichi Mori. He introduced the role of USJI to the participants of the workshop and thanked scholars from USA and Japan for participating in this workshop and the research work. Prof. Mori underlined the important role of India in the changing economic and geopolitical landscapes in the aftermath of the financial crisis in the developed economies and the rise of China as a leading global power. In his key note address, Prof. Kiyoshi Kobayashi spoke on the interdependence of the probability of a meeting (collaboration) on other meetings (collaborations) with the same or different parties over time and space in the emerging knowledge world society in the 21st Century. Mutual collaborations across multiple parties enabled by technological innovations in the emerging knowledge world society can therefore be an instrument for internalizing the positive external effects of separate two-party collaborations and augmenting human well being.

 Prof. Gautam Ray said that USINJA is conceived as a transnational alliance at different levels. They include alliances of governments, industry leaders, public policy makers, academic scholars and civil societies. Firm level transnational alliances are not easily formed because neither the principal nor the agents of transnational firms have adequate knowledge about the critical role of host countries’ social, political and cultural resources in optimizing business value creation over the medium and longer run period. Without such knowledge, firms at individuals cannot form alliances with host state and communities and develop ‘legitimacy capital, which is critical for sustaining business value creation for all stakeholders both effectively and efficiently. He posited that legitimacy capital is developed by transnational firms by discharging their obligations and responsibilities towards all resource providers including host state and society/community and managing effectively the legitimate needs and aspirations of all stakeholders.
Prof. Ray said that his USINJA vision entails collaborative research for building a pool of knowledge of the prevailing social, political, economic and cultural dynamics in these three countries. This knowledge will help transnational businesses to understand better the diverse local ecosystem, forge alliances with host state and community, develop legitimacy capital and create higher value for all stakeholders.

 In his special address, Dr. Arvind Virmani said that strategic business alliances such as USINJA could possibly reduce the knowledge deficit about India’s ecosystem. India’s demographic advantage and its vast pool of educated workforce have created enormous opportunities for USINJA to develop business opportunities in many sectors such as R&D, energy, and medical care. He said that aged Japanese people can escape harsh winter months in Japan, receive good quality medical care in nursing homes in India, travel across India and enjoy warm Indian hospitalities.

 The post-lunch session opened with the presentation of Prof. T.K. Das of City University of New York on managing multipartner business alliances. Prof. Das emphasized that firm level multipartner alliances are more difficult to manage than two partner alliances because multipartner alliances call for higher levels of trust and reciprocities that come from social exchanges with highly uncertain outcomes. Yet, there are many examples of successful multi-partner business alliances particularly in mega construction projects where resources of only two partners are often inadequate to manage the inherent risks in such projects. In the context of USINJA, it is possible to envisage business alliances where Japan provides technology and R&D, USA provides marketing network and resources while India provides the manufacturing base. One possible area where such an alliance can be developed is the generic drug sector in the pharmaceutical industry.

 Prof. Michael Santoro spoke how, through what he called ‘Apple Connection’, Steve Jobs brought about an alliance of Silicon valley’s creative resources with Zen Capitalism and Karma capitalism derived respectively from Buddhist and Hindu doctrines in order to create symbiotic relations between Apple products and customers all over the world. He quoted Steve Jobs from the recently published biography to say that the product development foresight that Steve jobs displayed came from the intuitive knowledge endowment that he acquired after witnessing how ordinary Indians make use of their intuition during his spiritual quest to India early in his life. Prof. Santoro cited the research of Prof. Mohanbir S.Sawhney of Kellog Business School which showed how such a symbiotic relationship between customers and businesses can come from the precepts of Bhagavad Gita, the sacred text of the Hindus. He also gave examples of creative masterpieces of Picasso and Van Gogh which heavily drew upon, if not copied, the traditional African masks and the floating landscape painting of Hiroshige, Ukiyo-e artist. Creative business development opportunities can therefore come from social, cultural and economic resource exchanges among USA, India and Japan.

 Prof. Raymond Dezzani talked about economic interconnectivity in a world systems framework and presented some empirical results of convergence of semi periphery countries such as India. He argued that capital accumulation of core countries such as USA and Japan can occur through investments in infrastructure in semi-periphery countries which increase the returns of other investments made by core countries. Prof. Naoki Wakabayashi talked about developing industry-academia R&D alliances and possibility of their internationalization in Japanese Bio region. He said at present there are some alliances between USA and Japan but very little with India in biotech industries. He said that there were possibilities of developing international collaboration with India and USA particularly in generic drug sector.

 Opening the third session of the workshop, Prof. T.R. Lakshmanan spoke on the potentials of greater Indo-Japanese business collaborations in sectors such as IT where there exist knowledge complementarities between Japanese expertise in hardware development and Indian expertise of software development. Similarly there is a huge potential for Indo-Japanese collaboration in other knowledge intensive industries such as pharmaceuticals & biotechnologies, machineries and medical equipments. Japanese collaboration in India’s infrastructure development is gaining momentum through Delhi Mumbai industrial Corridor project(DMIC), but there are greater scopes of collaboration as India faces a huge urbanization challenge in the next two decades. He said that governing such a massive urbanization will be a major challenge for local and city governments in India.

 Prof. William P. Anderson essentially spoke of the experiences of US-Canada business alliances in commodity trading and argued that USINJA can learn some lessons from those experiences. In particular, he talked about how US emphasis on security issues is dampening the trade relations between the two countries. He also talked about the need of a more broad based engagements rather than confining trade or investments to select industrial sectors as happened in the case of US Canada business alliances as they focused on auto industries and oil and gas. USINJA also need to address the issue of exchange rate fluctuations which adversely affected the outcome of US-Canada business alliances.

 Prof. Lata Chatterjee emphasized the need of high technology, low cost and high efficiency business solutions to address the developmental needs of the vulnerable populations in the BOP markets in these countries. She argued that Japanese SMEs could play useful role using their high tech and high efficient business resources to address the needs of about 4 billion BOP population across the world, a large segment of which live in India. Both India and Japan could learn from American experience of developing social entrepreneurship and companies investing on their corporate social responsibilities . Ms.Akiko Shigemoto explained how Japanese financial and technological support in Delhi metro project had resulted in the development of a safety standard in India’s transportation system that did not exist earlier.

 The final session was a panel discussion on the “Developmental Role of Business Alliances in Democratic Countries”. The discussion followed on the leads given in his keynote speech by Mr. Nobumitsu Hayashi, Executive Director for Japan in the World Bank. Mr. Hayashi wanted academic scholars working in this project to address the practical issues faced by businesses and suggest solutions: for example, how Sony can penetrate into the huge market in India and compete effectively with companies such as Samsung without compromising its high brand value as translated in high quality, high end Sony products? Prof. Michael Santoro said that there could be two business solutions: one was a pure marketing solution while the other is the ‘flexible brand protection’ strategy that allows Sony to reduce the price of its products for consumers in less developed economies such as India. Prof. Lakshmananan focused on an innovation based solution for poorer consumers the benefits of which can eventually span across countries and income class as happened in the development of portable ECG machine in India which have now been adapted for American consumers. Prof. Kobayashi said that the solution might well lie in the notion of ‘legitimacy capital’ enunciated in Prof. Gautam Ray’s paper. Taking on this cue, Prof. Ray added that it would be perfectly legitimate for Sony to charge high price for a new product that came out of a rigorous and expensive R&D process. However, after one or two year of production its price can be suitable reduced to increase the product’s market size by making it affordable to a large cross section of income constrained consumers. He argued that this could help Sony to develop legitimacy capital through higher value creation for its stakeholders, which would happen if income constrained consumer, whose marginal utility of consumption of the product is higher than the richer population because of their higher level of aspiration for using Sony prod, could begin to use Sony products. Prof. Das emphasized the need for taking a relook at the popular notion of brand value. He thought that Sony’s brand value could also increase through the vehicle of appropriate product development strategy that increases Sony product’s affordability and usability among the large number of income constrained consumers. Prof. Lata Chatterjee elaborated Prof. Lakshmanan’s innovation based solution approach and mentioned that Sony needs to revisit its product development strategy keeping in mind the prevailing ecosystem in developing economies such as India which has poor infrastructure on the one hand and increased competition on the other.

 The second issue of the panel discussion was what transnational business alliances such as USINJA could do to address the needs of vulnerable populations- such as the aged and disillusioned youth in Japan, the poor and other marginal sections of populations in both India and USA. Taking cue from Prof. Lakshmanan’s point that this problem can only have longer term solution which includes reforming education system, Prof. Ray wondered whether India’s highly affordable and effective English medium school education system can service (through video conference or other web based distant education tools) the needs of a section of Japanese youth or even American kids coming from poorer backgrounds. Prof.Chatterjeee mentioned the example of Khan Academy of a Bangladeshi national in Maryland who developed a web based educational program in mathematics initially for his nephew in New Jersey who had been failing in the subject in American schools. Now this educational program has gone global, she said. The workshop ended with a clearer understanding of the tasks ahead in the USJI sponsored research that begins from April, 2012.

Activity Contents

1.Presentation of papers by ten academic scholars from various fields including strategic business management, international project management, business ethics and corporate social responsibility, economics, political science, geography and development from interdisciplinary perspectives.
2.Panel discussion on “ Developmental Role of Business Alliances in Democratic countries”
3.Special Address by Dr. Arvind Virmani, Executive Director (India), IMF and Keynote Address by Mr. Nobumitsu Hayashi, Executive Director (Japan), World Bank.

Relative URL(s)

http://www.us-jpri.org/en/week/mar2012#event6

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