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Theories of corporate governance, as formulated by US researchers, typically rely on mechanisms of control such as monitoring by an independent board of directors and incentive alignment contracts to protect shareholder interests (e.g. Fama and Jensen, 1983a), dismissal of poorly performing CEOs (e.g. Fama, 1980) and discipline from financial markets including the threat of takeovers for underperforming firms (e.g. Jensen and Ruback, 1983). Firms are responsive to market forces and achieve efficiency through the mechanisms of corporate governance (e.g. Williamson, 1988). But how generally able is this theory in explaining the functioning of markets in nonUS settings such as Japan? This paper examines the applicability of current theories of corporate governance to Japan and highlights a number of important differences which may undermine the usefulness of US theories. Based on field research in Japan, this paper suggests that existing theory needs to be expanded to include uniquely Japanese mechanisms of informal networks of former government officials ('old boys') and the use of administrative guidance (gyōsei-shidō) as important control mechanisms that are ignored by US theories. [ABSTRACT FROM AUTHOR]

This paper investigates, by using a highly abstract evolutionary game model, the mechanism of evolution of different organizational conventions, as well as roles of free trade, integration, experiments, emulation and entrepreneurial foresight for exploring gains from organizational diversity. It focuses on an aspect of organization as a voluntary association of economic agents trying to overcome the bounds of their rationality, scope of action and competence, rather than as an 'instrument' for entrepreneurial maximizing behavior, and identifies two generic forms of organization as an information system. The paper concludes by discussing the relevance of the evolutionary game model for understanding actual organizational evolutionary processes in North America and Japan. [ABSTRACT FROM AUTHOR]

This paper explores Chinese efforts to join the ranks of the East Asian developing economies of South Korea, Taiwan, Hong Kong and Singapore. It describes Chinese efforts to emulate the Japanese model of industrial management rather than American management schemes, and it notes the compatibilities between certain legacies of Maoist socialism in China's state enterprises and the Japanese model. In particular, the paper traces the development of the Chinese employment system in the state sector. Compatibilities include indications that the Chinese workers could become company men, that they prefer paternalistic managers, that their work responds to appreciation, and that they do not regard management and worker interests as necessarily conflictual. Granted the evolution of greater autonomy for Chinese state enterprises, the paper concludes that an organization-oriented system can develop within Chinese state enterprises and that a shift to a market economy need not be accompanied by a marketoriented employment system. [ABSTRACT FROM AUTHOR]

According to agency theory, debt is a useful governance mechanism for curbing the tendency of managers to over-invest in firm growth. First, we extend this view by using the theory of rules versus discretion to explain why the ability of debt to constrain excessive growth is contingent upon lenders relinquishing discretion and committing to rigid rules. Next, we draw on the financial intermediation literature to distinguish between two types of debt. We explain that transactional debt (i.e. public securities such as bonds and commercial paper) conforms to a rules regime, and thus can serve as effective governance mechanisms for limiting the agency costs of over-investment in growth. In contrast, relational debt (i.e. private loans from financial intermediaries) is best characterized as a discretionary regime, and therefore is less effective in curtailing these agency costs. Paradoxically, it is the very intention of lenders to act optimally in the future that may result in this governance breakdown. Our empirical analysis of a large sample of Japanese firms confirms that the type of debt influences both firm growth and the performance consequences of that growth. [ABSTRACT FROM PUBLISHER]

Investment in production assets is a strategic decision that results from organizational search and risk taking. The behavioral theory of the firm predicts that performance below the aspiration level and slack resources initiate organizational search. Risk theory predicts that performance below the aspiration level increases risk tolerance. This paper integrates these theories to form a theory of problem- and slack-driven strategic change and applies it to the growth of production assets. The predictions are tested by analyzing the growth of production assets in the Japanese shipbuilding industry, yielding clear evidence that high performance causes low asset growth, but no effect of slack. [ABSTRACT FROM AUTHOR]

A major concern in the current public discussion is rapidly accelerating automation and in particular the use of robots. Many experts and researchers see it as a driver of employment losses hitting in particular so called routine jobs. The present study challenges this perspective. It examines two central questions: First, what approaches to automation and digitalization have been pursued in the automotive industry in Germany, Japan, and the United States? Second, how have employment and its occupational composition in the automotive industry developed in the three countries? The first part of the study focuses on the evolution of automation and digitalization approaches in the automotive industry from the early 1990s until today. It combines a qualitative analysis of press articles and a quantitative evaluation of the development of the stock of industrial robots from 1993 to 2018 based on the statistics of the International Federation of Robotics. The second part of the study focuses on the change in employment structures using occupational statistics from the Bureau of Labor Statistics (US), the Federal Employment Agency (Germany), and the Statistics Bureau of Japan. The results of the study question the perception of an automation-related threat to employment and especially to production employment. At the same time, they highlight differences between automation and digitalization approaches in Germany, Japan, and the United States as well as different paths of change in employment structures. [ABSTRACT FROM AUTHOR]

Develops a framework that distinguishes five types of organization for the vertical division of labor between manufacturing firms. Distinction between recurrent transactions, interdependent transactions and vertical quasi integration; Explanatory power of the framework as demonstrated on the case of the vertical division of labor in the Japanese manufacturing industries.

The article examines János Kornai's influential argument that "soft budget constraints" impede innovation, and finds that under certain conditions, they may promote it instead. Kornai's concept is derived from his analysis of socialism. In capitalism, soft budget constraints can promote innovation if competition is enforced and finance is well regulated. This argument is developed using the same Schumpeterian foundation as Kornai, illustrated empirically with the case of innovation in post-war Japan. Implications are relevant for innovation and industrial policy in general. [ABSTRACT FROM AUTHOR]

Improving an interface to increase control over interactions between existing product modules can create new product features which alter the basis of competition in mature (sub)markets. We empirically examine the impact of interface innovation by new market entrants from Japan in the high-end, professional camera submarket between 1955 and 1974. Prior to 1960, the industry architecture of the professional camera submarket was modular, dominated by German specialist body and specialist lens manufacturers. This market structure changed due to the success of integrated Japanese startups who, from 1961, offered novel automated exposure features, facilitated by improving the existing interface between the camera body and lens, and by making this interface a proprietary standard. Their success broke the mirror between the industry architecture, which became vertically integrated, while the product architecture remained modular. [ABSTRACT FROM AUTHOR]

The diffusion of technological knowledge is key to industry growth. But not all knowledge is created equal. I use a nanoeconomic approach to examine knowledge diffusion-based growth in the Meiji-era Japanese cotton spinning industry, which enjoyed remarkable success after a decade of initial failure. By tracing sources of technological knowledge to individual engineers, I find that successful technology diffusion required the right kind of human capital embodying and transmitting knowledge, and a competitive environment that rewarded talent while weeding out incompetence. [ABSTRACT FROM AUTHOR]

Many products are manufactured in networks of firms linked by transactions, but comparatively little is known about how or why such transaction networks differ. This article investigates the transaction networks of two large sectors in Japan at a single point in time. In characterizing these networks, our primary measure is “hierarchy,” defined as the degree to which transactions flow in one direction, from “upstream” to “downstream.” Our empirical results show that the electronics sector exhibits a much lower degree of hierarchy than the automotive sector because of the presence of numerous inter-firm transaction cycles. These cycles, in turn, reveal that a significant group of firms have two-way “vertically permeable boundaries”: (i) they participate in multiple stages of an industry’s value chain, hence are vertically integrated, but also (ii) they allow both downstream units to purchase intermediate inputs from and upstream units to sell intermediate goods to other sector firms. We demonstrate that the 10 largest electronics firms had two-way vertically permeable boundaries while almost no firms in the automotive sector had adopted that practice. [ABSTRACT FROM PUBLISHER]

While previous research on vicarious learning assumes that managers pay adequate attention to any event in an environment, boundedly rational managers can only pay selective attention to salient events. This study proposes the hypothesis that managers pay disproportionately less attention to and learn less from an external event if it has attributes almost identical to those that they have encountered in the past in either a direct or an indirect manner. An analysis of errors by Japanese firms operating nuclear power plants supports this theory and presents an explanation about why an organization repeats an error that others have made in the past. [ABSTRACT FROM PUBLISHER]

Although heterogeneity in the performance of firms is a well-established stylized fact, we still lack full understanding of its origins and the reasons why it persists. Instead of assuming that performance differences are exogenous, this article focuses on two endogenous strategies—innovation and global engagement—and interprets them as two ways to accumulate knowledge and improve firms’ capabilities. We are particularly interested in analyzing interactions between these strategies and their effect on firms’ performance. By using a firm-level panel dataset drawn from a Japanese large-scale administrative survey for the years 1994–2003, we first find that innovation and exporting strategies are characterized by complementarities, which define coherent productive models or patterns of learning. Second, we show that these different strategies lead to various performances in terms of productivity and survival. Third, by using a propensity score-matching approach, we show that these differences in performance are lasting. Overall, our article shows that the interaction of innovation and export investments is a source of permanent differences in performance among firms. [ABSTRACT FROM PUBLISHER]

This article attempts to identify the determinants of total factor productivity (TFP) catch-up by Korean firms compared with that of Japanese firms. The degree of catch-up is measured in terms of the TFP gap between each Korean firm and the industry average of the Japanese firms in each sector. Regressions are then employed to establish the determinants of the TFP gap or catch-up. These determinants are classified into two groups: sectoral- and firm-level variables. Sectoral-level variables, drawn from the sectoral innovation system literature, test the hypothesis that catch-up is more likely to occur in certain sectors than in others. It is found that TFP catch-up by Korean firms is more likely to occur in sectors where technologies are more explicit and easily embodied in imported equipment. This discovery helps explain why the TFP of Korean firms is now close to, or even higher than those of Japanese firms in the electronics sector, and why TFP gaps still remain after some catch-up in the automobile sectors associated with more tacit knowledge regimes. Second, the degree of the sectors’ top firm dominance is positively related to the TFP catch-up, implying that catch-up is more likely to occur in sectors with more monopolistic market structures. It is also shown that firms in a monopolistic market structure should be subjected to the world market discipline to attain better performance in the productivity catch-up. Third, sector-level variables only affect international TFP catch-up, whereas firm-level variables determine intranational catch-up. Important results remain consistent in some robustness tests using different proxies for sectoral variables and catch-up as measured in labor productivity, as well as in the results obtained from using period average variables rather than yearly variables. [ABSTRACT FROM PUBLISHER]

This article proposes a simple framework for understanding an emergent diversity of linkages between corporate governance (CG) and organizational architecture (OA). It distinguishes discreet modes of their linkage by different combinatorial patterns between three basic assets: managers' human assets (MHA), workers' human assets (WHA), and non-human assets (NHA). Using the concept of essentiality of human assets proposed by Hart (1995) and distinguished from that of complementarities, we first propose a new characterization of four known modes of CG-OA linkage: three traditional (Anglo-American, German, and Japanese) and one relatively new (Silicon Valley) models. Then we present empirical evidences of emergent diversity of CG-OA linkages in Japan, which is somewhat at odds with the old Japanese model. We interpret its emergent dominant mode as the path-dependent evolution of a new pattern of essentiality between human assets, made viable by lessening of institutional-complementarity-constraints, which surrounded the traditional Japanese model. We argue that this new mode interpreted in terms of essentiality may have broader applicability beyond Japanese context. [ABSTRACT FROM AUTHOR]

Japan's largest textile firms have adopted the strategy of diversification into new product markets, since they started facing industry maturity and macroeconomic turbulences. We find that the nature and magnitude of capabilities had decisive impacts on the direction of diversification. Our panel data analyses show that different diversification paths actually yielded contrasting performances. The outcomes also suggest that the effectiveness of specific diversification schemes was contingent on macroeconomic environments. Ultimately, however, only the commitment to technology, not marketing or finance, ensured long-term profitability. [ABSTRACT FROM AUTHOR]

What factors facilitate and constrain the sustained development and replication of organizational capabilities of suppliers? This question is addressed in a comparison of historical case studies of Toyota, Nissan and Honda in Japan. First, as expected, replication difficulty is overcome by enabling companies to share the practice, rather than the representation, of tacit knowledge. Second, interdependence in the hierarchy of routines that constitute organizational capabilities has led companies to broaden the scope of supplier development over time. Third, this broadening challenges suppliers to accept customer companies' intervention in internal investment decisions, requiring a certain mode of corporate governance. It is argued that the boundary of a capability-based firm may go beyond legally distinct units of financial control when firms are subjected to a cumulative process of capability enhancement. [ABSTRACT FROM AUTHOR]

Focuses on Japan's economy and corporate reform. Economic problems of Japan; Origins of country's economic problems; Corporate responses to adverse conditions created by the collapse of Japan's bubble economy in 1990 and the persistence of recessionary conditions in the 1990s.

The author summarizes the various developments of business strategy, business finance and labor management in Great Britain, U.S. and Japan, and explains from a long-term business history perspective the meaning of the business system in Japan after World War II as compared to those in Great Britain and the U.S. The international differences in basic business strategies which developed at the early stages of the countries' industrialization resulted in the emergence of industrial and business organizations unique to the respective nations which in turn gave rise to the different modes of business performance among the industrial nations.

This article discusses the relationship between the evolution of corporate structure and the structure of the financial systems within the U.S., British, German, French and Japanese economies during the first half of the twentieth century. The financial system of each of these economies exerted an important influence on the development of corporate structure, but did so largely through facilitating, rather then determining, organizational innovation. The financial system of each of these economies influenced the selection environment within which firms developed, but this environment reflected the operation of other factors as well. The relationship between the evolution of corporate and financial structure is an interactive one that exhibits considerable path-dependence; the array of economic and technological opportunities available to one firm or to one economy contrasts with that faced by another firm or economy at a different historical moment.