Culture and Tax Matters

The new theory of Japan's resurgence in technology is that some technologies advance consistent with Japan's culture and some do not.  Those that do -- the "learn through doing" technologies such as those involved in robotics, aerospace and solar -- that that do not -- the "let many flowers bloom" technologies such as software and bio tech (that require many competitive start-ups).  Why does Germany not have more private equity in the start up business?  Tax. The combined VAT and income tax (levied by local governments) penalizes local private equity firms that make money on turn arounds in starts-up and emerging business.  The private equity firms gravitate towards firms that can offer medium-term growth.  So both culture and legal rules count.