Entry Barriers of Small and Medium-sized Software Firms in the Japanese Market

Abstract

The Japanese software market size was 131,773 million U.S. dollars in 2004. Due to limited domestic software production, Japan is highly dependent on imported software products. Despite the market potential for foreign software firms in Japan, almost no research exists on what kind of challenges foreign software firms encounter when they are entering the market. To fill this gap, this paper investigates the entry barriers of small and medium-sized software firms in the Japanese market by using a multi case-study. The findings suggest that most of the barriers are firm-specific and mainly related to firms’ resources and capabilities to operate in the market. The entry barriers encountered also seem to differ somewhat from those of earlier investigations, which have mainly targeted large-sized manufacturing firms. The new observations relate to the common barriers created by the intensive information flow due to customization and localization needs and market requirements for software products.