This paper explores Japan's pre-war industrialization from the viewpoint of
small- scale businesses.
A typical case can be seen in the development of rural weaving industry before the World WarT.
There functioned the production form besides factory such as putting-out system based on the peasant's
sideline work. After the World WarT, however, putting-out system in the weaving industry rapidly gave
way to factory system that equipped the power looms. Contrastively, the industrial development in large
cities, especially in Tokyo during the Inter-war period, entailed the increase of newly formed petty and
small workshops. There functioned the production system based on the complex transaction of
merchants, factories, small workshops and domestic works. Toy manufacturing, which developed as
an export industry in the Inter-war Tokyo, was one of the typical industries based on that production
As the urban area lacked the peasants and the intimate communities, urban small businesses stood
on the different foundations. The skill was trained in the quasi-apprentice system where juvenile workers
experienced a sort of on the job training. Based on this skill formation, not a few employees set up their
own businesses and competed even with the wholesalers. Their activities were supported by the positive
externality of the cluster. The formal and informal institutions played significant roles to prevent the
transactions from disorder.
The role of production organizer that combined the function of the merchant was also important.
The combination of the merchant and the household economy, together with the social and institutional
basis, promoted an industrialization based on the small businesses.