Formation of Innovative SMEs and Their Local Conditions in Less Favored Areas : A Case Study of the Kamiina Area in Nagano Prefecture

In recent years the production systems of Japan’s manufacturing companies have gained knowledge- and technology-intensive features. This tendency has extended from metropolitan to rural areas. The purpose of this study is to elucidate the formation of innovative SMEs in rural areas from the viewpoint of interfirm networks. This study takes the innovative SMEs in the Kamiina area of Nagano Prefecture as examples of the transformation of small and medium-sized manufacturing firms in nonmetropolitan areas or rural areas with a concentration of industry. Innovative SMEs have formed and grown with the transformation of the production systems of Japan’s manufacturing industry. In the hope of breaking away from subcontracting work and expanding their business opportunities, innovative SMEs began to add new lines of work, such as experimental production or the development of original products and technologies. These changes occurred in the early 1990s in the Suwa area and in the 1980s and 1990s in the Kamiina area. Interfirm networks enabled them to create an innovative basis with highly skilled and original work and sophisticated knowledge. Production networks, which comprised the outside-order network and equipment purchase network, differ in each area and each function. Outside-order networks indicate strong mutual relations with the neighboring Suwa area. In particular, significant relations are indicated with the sampled mechanical systems companies in the Kamiina area. On the other hand, the main relations of the sampled electronics companies and press-plating companies in the Kamiina area were with regional and metropolitan areas. This is seen to be a similar tendency on a technical basis as well. In conclusion, innovative SMEs have grown and developed during the economic evolution of Japan. In this process, the production systems of Japan’s manufacturing industry have changed to knowledge- and technology-based ones. The author suggests that innovative SMEs are the forerunners of the Japanese SMEs in the non-metropolitan area under the globalized economy.