Use of Plant-Level Micro-Data for the Evaluation of SME Innovation Policy in Japan

Japan’s SME policies have reached a turning point. The traditional policy of “lifting up SMEs” has been changed into a more pro-competitive policy to foster entrepreneurship and innovation in SMEs. This paper evaluates this policy and the new innovation promotion schemes initiated by METI through an examination of plant-level micro data. Longitudinal micro-data from the Census of Manufacturing are linked to the list of firms participating in SME innovation policy schemes under the Law on Creative Activities in SMEs and the Law on Supporting Business Innovation in SMEs. The plant-level pattern of industrial dynamics suggests that both policies for new business start-ups and for innovation creation in existing firms are important. In addition, positive effects on sales growth are observed for firms that participate in the programme on Creative Activity Laws ...