Jun. 17--In the post-financial crisis world economic landscape, people are increasingly turning to emerging markets as the new engine of global growth. But are Japanese companies ready to compete in the changing environment?

Companies from industrialized nations will need to shift their research and development operations to those markets to better understand the different needs of local consumers, and Japanese firms appear to be lagging behind their leading competitors in that effort, experts from U.S. business schools said at a recent symposium in Tokyo.

Five scholars from American business schools took part in the May 29 symposium organized by the Keizai Koho Center under the theme, "Global economic crisis and challenges for Japanese corporations." Hideaki Miyajima, a professor at Waseda University's Graduate School of Commerce, served as moderator.

Growth forecasts for the coming decades clearly show that emerging markets, notably China and India, will be where the demand for new products and services is going to be, said Gautam Ahuja, a professor of business administration at University of Michigan Business School.

With their labor cost advantage, these countries have emerged as new hubs of global manufacturing and services. With the lower end of global manufacturing and services fast moving to the emerging markets, a typical answer from businesses in developed economies is that they will move up the food chain -- innovate and develop new technologies, he said.

"So if we accept this particular Darwinian logic of globalization, it would appear that there is a new division of labor. Japan, Europe and the United States serve as the innovative engine of the world economy while the emerging markets provide significantly cheaper, labor-based manufacturing and services," Ahuja said.

However, he noted, companies based in the emerging markets are "not going to respect" such a division of labor but are trying to take advantage of their proximity to consumers in those markets to "create innovations that are meaningful" to their customers.

To cope with the new landscape of global demand, companies from developed countries need to compete among themselves to develop higher-value technologies and products, and also ensure that technologies "lead to products and services that the buyers in emerging markets find valuable," Ahuja said. But added to this fairly difficult task is that companies from the emerging markets will be trying to innovate and develop technologies for new products and services, he added.

"The question is," he said, "how well prepared are Japanese firms for this particular battle."

Successful innovation, Ahuja pointed out, is not about creating new products, but creating new products and services that users demand and buy. And that comes not just from the creation of wonderful technology but from a match between user needs and technologies, he said.

To understand what consumers need and want, "the innovator has to put himself in the context of the buyer, and understand the buyer's life and the buyer's needs from the buyer's perspective. You have to step into the buyer's shoes to understand what their world is about and what needs need to be satisfied," he said.

And this implies that firms that intend to become successful innovators in a globalizing world need to globalize their innovation efforts, and spread out their R & D activities across different countries, rather than concentrating them on one or two countries, Ahuja told the audience.

U.S.