40 TECH MONITOR  Jan-Feb 2006 Special Feature : Value Addition or Creation through Innovation Green / Black Green / Black Innovation to cope with globalization A case study of a Japanese SME M. H. Bala Subrahmanya Globalization affects SMEs irrespective of location or industry. Technological inno- vation is a strategic weapon to counter competition in the globally competitive eco- nomic environment. This article presents the case of how a Japanese SME adopted technological innovation successfully to climb up the value chain and stave off the threat of competition from its rapidly industrializing neighbours. Introduction mall and medium enterprises (SMEs) occupy a place of stra- tegic significance in almost every economy due to their consider- able contributions in terms of employ- ment, manufacturing value addition and exports, apart from innovation. Their contribution to value creation through technological innovations is well recorded in developed coun- tries. 1,2,3 Among industrialized coun- tries, Japanese manufacturing occu- pies a unique place due to its exten- sive sub-contracting practices and its contribution to industrial efficiency and competitiveness. 4 However since the 1990s, Japa- nese SMEs, like SMEs anywhere, are steadily and increasingly exposed to globalization and international compe- tition. One consequence has been the availability of cheaper light consumer Dr. M. H. Bala Subrahmanya Japan Foundation Visiting Research Fellow National Graduate Institute for Policy Studies (GRIPS) 7-22-1, Roppongi, Minato-ku Tokyo 106-8677, Japan E-mail: mh_bala@grips.ac.jp products and economical intermediate goods for large Japanese firms from South East Asian countries and Chi- na. As a result, among others, the num- ber of SME establishments and their employment in Japan has been on a decline since 1990. 5 Technological innovation is an important source of acquiring and strengthening competitiveness for a firm. Among firms of different sizes, SMEs are best suited to carry out tech- nological innovations due to their ad- vantages of flexibility, concentration and internal communication. 6 Some of these SMEs achieve technological upgradation through innovations, and climb up the value chain for the pro- duction of high-value items, to survive and grow in the competitive environ- ment. This is particularly possible if the entrepreneur concerned is in constant touch with his market and customers. S Special Feature : Value Addition or Creation through Innovation