The purpose of this article is to theorize the concept of “re-founding” of small business implemented by its successor. Since the decline in performance of Japanese firms for the last several decades seems to correspond to the decline of each industry. In other words, it is not enough to simply win the competition within the industry through product or process innovations for long-term survival of family-owned small business. But also this business should transit from the original one to the new type. This is themost significant entrepreneurial activity in family business and it is called re-founding in this article. In order to develop this concept theoretically we also investigate how the successor of family-owned small business carries out re-founding, focusing on pinpoint business definition which is determined by the combination of “what is the main product that a company sells” and “who is its key customer.” The findings from the exploratory case study show that business structures will be overhauled in the process of re-founding and those changes are organized into four aspects: (1) restructuring of operations in the operational dimension which will provoke conflicts with employees; (2) (re-)organizing of the management layer in the administrative dimension according to organizational growth life cycle; (3) reconstruction of business categories in strategic dimension, including disposition of unprofitable or old businesses; (4) generational change of employees , derived from the nature of invisible assets. We address a new perspective based on paying attention to fundamental factor of strategic management explicitly to reconsider the extant literature about small- and medium-sized enterprises and family business.

According to spreading of the word “open innovation,” large enterprises in Japan have come to seen as active to collaborate with other organizations for the purpose of developing new technologies and new products. This may give a good opportunity for us to make use of many SMEs with excellent technologies in Japan, and thereby to increase innovation capacity of Japan as a whole. However, because the large enterprises do not usually disclose their needs information when they search outsidetechnologies and knowledge, effective matching between the large enterprises and the SMEs that have appropriate technologies for them are hindered. Although this issue does not appear to be a core discussion point in the existing open innovation literature in English, it is actually a big problem for the people engaged in promotion of SMEs and regional industry. The TAMA Association established as an industrial cluster promoting organization have been achieving its performance in the matching activities between large enterprises and SMEs in both forms of non-disclosing and disclosing the needs information of the large enterprises, and its experience give us implications to make a solution for this issue of the negative attitude of the large enterprises to disclose their needs information.