Patient capital, corporate governance and investment in digital innovation: what can Japan learn from South Korea’s experience?

This article investigates why the patient capital provision in Japan has been insufficient since the late 1990s, taking Japan’s struggle with digitalisation as an example and highlighting ‘varieties of patient capital’, the finance-digital nexus, and lessons from South Korea. It conceptualises developmentalist and market-based patient capital to fill a literature gap regarding their divergent social purposes and characteristics. Despite mounting pressure to converge with Anglo-American ‘financial-digital capitalism’, Japan has resisted the convergence. The deterioration of developmentalist patient capital and bureaucratic capacity to coordinate Japanese stakeholder capitalism has made this adaptation more difficult. Stronger government initiatives, market-based patient capital and shareholder-based corporate governance are required to promote Japan’s investment in digital innovation. However, these have adverse effects, creating labour precarity and social tensions and eroding the traditional core strengths of Japanese companies (e.g. organisational solidarity and accumulated analogue technology). Therefore, I argue that Japan should learn from South Korea’s experience, hybridise shareholder- and creditor-based corporate governance and combine developmentalist and market-based patient capital to re-coordinate stakeholder capitalism while balancing market efficiency and socio-political stability. The concept of varieties of patient capital can be applied across East Asia and beyond as many state financial institutions have recently been established and expanded.