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Big business in Japan has transferred its production bases to overseas countries including China one after the other from nineteen-nineties. Besides, the aging society has been coming, and young people dislike participating in dirty, dangerous, and hard work. The subcontractor has not been able to accomplish all requests from the prime contractor, and also created new business. Due to these above conditions, the small and medium business blessed with Japanese contract system was forced to reduce the production scope or shut down. During the disappeared ten years, the statistic data such as a decline in start-up and a rise in unemployment has proved that industrial agglomeration has encountered the long-term economic depression. On the other hand, in these being exhausted agglomerations, a lot of business attempted to change their management model by developing their unique production skill or creating a new business chance in order to survive there. Besides, the Japanese government also promoted a series of policies in order to improve the environment of management around the agglomeration and make the best use of the advantages of agglomeration. Being based on the above motives, the thesis’s purpose is to research the condition and changes of the industrial agglomeration in the past decade from Marshall and SEKI Mitsuhiro’s theory; and further, this thesis intends to analyze the management environment of the small and medium business, and how did the business make use of the division relation in agglomeration by changing business model. Besides the first chapter is the preface and the fifth one is the conclusion, this thesis is divided into three parts as following: the second chapter is to introduce the various viewpoints of scholars about agglomeration’s functions; the third chapter is to discuss the changes on transaction and management of the business in agglomeration from nineteen eighty-five to two thousand; and the fourth chapter is to analyze the relation between business innovation and external economy for Nagaoka area in Japan.
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