Firms with price-to-book ratios of less than 1 account for 3 percent of all listed firms in the United States and 18 percent in Europe, but 43 percent in Japan, indicating a low assessment of their capacity to generate earnings. 4 My hope is that the rising sense of urgency among management or business owners will spur innovation among Japanese firms.
Furthermore, to bring about innovation, it is vital to shift business resources to higherproductivity businesses and sectors because there is an upper limit to such resources in Japan as a whole. Since startups have fewer constraints than large firms, they are particularly called on to take a leading role in the country in launching and scaling up new businesses that go beyond existing businesses.