The Japanese Enterprise System This Page Intentionally Left Blank the Japanese Enterprise System
Total Page:16
File Type:pdf, Size:1020Kb
The Japanese Enterprise System This page intentionally left blank The Japanese Enterprise System Competitive Strategies and Cooperative Structures W. Mark Fruin CLARENDON PRESS · OXFORD Great Clarendon Street, Oxford OX26DP Oxford University Press is a department of the University of Oxford It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Bangkok Buenos Aires Cape Town Chennai Dar es Salaam Delhi Hong Kong Istanbul Karachi Kolkata Kuala Lumpur Madrid Melbourne Mexico City Mumbai Nairobi São Paulo Shanghai Taipei Tokyo Toronto Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York © W. Mark Fruin 1992 The moral rights of the authors have been asserted Database right Oxford University Press (maker) Hardback edition first published 1992 First published in paperback 1994 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose this same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloging in Publication Data Fruin, W. Mark, 1943– The Japanese enterprise system: competitive strategies and cooperative structures/W. Mark Fruin. p. cm. Includes bibliographical references and index. 1. Corporations—Japan—History. 2. Industrial organization— Japan—History. 3. Entrepreneurship—Japan—History. I. Title. HD2907.F78 1991 338. 7'4'0952—dc20 91—33285 ISBN 0-19-828318-0 ISBN 0-19-828898-0 (Pbk) To my parents and for my sons This page intentionally left blank Acknowledgements This book was a long time coming, nearly ten years. During so many years of research, writing, and reflection, institutional and personal debts have piled up, unanswered for the most part. The following inventory captures only the most obvious and important of these which, in fact, must be judged closer to assets than arrears. Institutional support came first from the Harvard Graduate School of Business Administration; and subsequently from California State University, Hayward; Osaka University; and INSEAD (the European Institute of Business Administration). The Harvard Business School, therefore, was first to see the value of this line of research and support it. My gratitude for that foresight. Foundation support came from the Social Science Research Council, the Toyota Foundation, and the National Endowment for the Humanities. Professor Alfred D. Chandler, Jr. of the Harvard Business School was the figure who inspired this work. I was fortunate enough to spend nearly two years at Harvard working with Chandler, writing Kikkoman: Company, Clan, and Community (Harvard University Press, 1983) and sketching out the early ideas for this book. From the beginning of this project to its completion, Chandler advised, queried, and counseled me. Without his scholarship, wisdom, friendship, and encouragement The Japanese Enterprise System could not have been written. In addition, Gary Allinson, Masahiko Aoki, Banri Asanuma, Bala Chakravarthy, William Cummings, Yves Doz, Richard L. Fruin, Jr., Michael Gerlach, Margaret B. W. Graham, Martin Kilduff, Bruce Kogut, Mitchell Koza, Toshihiro Nishiguchi, Robert Ozaki, Hugh Patrick, Thomas Roehl, Jerry Ross, Richard Scott, Masahiro Shimotani, Thomas C. Smith, Michael Smitka, Koji Taira, Christena Turner, Eleanor Westney, and Oliver E. Williamson gave generously of their time and knowledge, immeasurably improving the book's content and argument. Collegial interactions at INSEAD were most important, underscoring the importance of environment for both the quality of life and work. Mrs. Helen Varin of the Euro-Asia Centre, INSEAD, contributed valuable technical and secretarial help. Professor Tsunehiko Yui of Meiji University was pivotal to the successful completion of the research on several occasions. I have relied heavily on his erudition for my discussions of various aspects of the Japanese enterprise system. Together, we developed lists of the largest 200 industrial firms in Japan for 1918, 1930, 1954, and 1973. The pre-war lists were immeasurably more difficult to assemble than the post-war lists. Together, we evolved a typology of enterprise features for pre-World War Two Japan. Without him, the book would have less detail, depth, and insight. As always, however, any errors of interpretation or fact are my own. And I viii suspect that there are many. This is a very ambitious work in scale and scope, and I still have a lot to learn about the modern corporation and enterprise system in Japan. But writing projects have to end sometime and somewhere, and this is the time and place. Finally, I owe much to my parents, Richard Lawrence Fruin and Gertrude Winter Fruin, and to my sons, Noah Glenn and Nathan Mark. Any voluntary, ten-year project is a labor of love. That love, mine and theirs, sustained this endeavor. Endeavor led to knowledge and knowledge to understanding. I want to end by suggesting that families, like all institutions, have a capacity for organizational learning. My sense of history probably comes from my father, a physician but a gifted amateur historian of the American Civil War and the Austrian school of economics. My mother is the family historian, unerringly able to trace the Irish and German sides of the family. Noah, my older son, already knows more European history (and much more about computers) than I do, and Nathan, younger by five years, can recite American aviation history chapter and verse. I hope this work continues and enriches the family tradition. W.M.F. Palo Alto, California and Fontainebleau, France Spring1991 Contents List of Figures x List of Tables xi Abbreviations xii Introduction 1 1. History and the Logic of Interdependence 16 2. The Institutional Environment 57 3. Inventing the Enterprise System 89 4. Defining the Enterprise System 126 5. Advancing the Enterprise System 163 6. Focal Factories 210 7. Interfirm Networks 256 8. Dynamic and Structured Interdependence 301 Appendix The 200 Largest Industrial Firms in Japan: 1918, 1930, 1954, 1973, and 1987 329 Bibliography 366 Index 387 List of Figures I.1 Dynamics of the Japanese Enterprise System 11 1.1 The Industrial Institutions of Modern Japan: A Two-Dimensional View 17 1.2Number of Product Lines by Level of Measurement: 200Largest Industrial Firms in Japan, 1918 –1987 23 1.3 Diversification Strategies in Japan 24 1.4 Stages of Functional Integration in the Japanese Enterprise System Value Chain 32 1.5 Varieties of Organizational Learning 43 3.1 Evolution of the Structure of the Mitsubishi Zaibatsu 100 3.2Minimum Ef ficient Scale, Unit Cost, and International Competition 123 4.1 Nissan Industries in the 1930s: Evolving Product-Centered Group 152 5.1 SIC Graphical Distribution of the Largest 200 Japanese Industrial Firms (ranked by assets) 165 5.2Trends in Intragroup Relations: Stockholding and Bank Borrowing 191 6.1 Major Mergers and Devolutions: The Toshiba Corporation 221 6.2Technical Support and Organizational Structure: The Yanagicho Works in 1945, 1955, and 1971 230 6.3 Product Lineage at the Yanagicho Works: Labor-Saving Products 243 6.4 The Toshiba Corporation and the Yanagicho Works: Functional Interdependence 250 7.1 Toyota Motor Supplier Network: Inter-Level Decentralization of Transactions 271 7.2Toyota Motor Supplier Network: Cross-Level Functional Groups 286 8.1 Organizational and Functional Interdependencies in the Japanese Enterprise System: Two Three-Dimensional Views 316 List of Tables 1.1 Number of Product Lines: 200 Largest Industrial Firms in Japan, 1918–1987 21 1.2Turnover among 200Largest Industrial Firms in Japan, 1918 –1987 29 1.3 Why Micro-Organizational Alternatives in Japanese Industrial History 48 1.4 Largest Five Firms in Selected Industries Comparison: America and Japan, 1987 51 1.5 Sensitivity Test for SIC Distribution, 200 Largest Japanese Industrial Firms, 1987 53 2.1 A Chronology of Evolving Hierarchy: Factory, Firm, and Interfirm Network 63 2.2 Per Capita Income at the Start of Modern Economic Development (1965 dollars) 65 3.1 Shibaura Engineering's Product Line, 1900 95 3.2Structure and Strategy of Zaibatsu Enterprises before World War One 102 3.3 Structure and Strategy of Independent, Urban Enterprises before World War One 106 3.4 Structure and Strategy of Independent, Rural Enterprises before World War One 110 4.1 Matsushita Electric Industrial Sales by Product Line, 1935 150 4.2Three Types of Modern Industrial Enterprise, 1918 to 1954 157 5.1 SIC Numerical Distribution of the Largest 200 Japanese Industrial Firms (ranked by assets) 164 5.2Washing Machines, Televisions, and Refrigerators in the Total Production of Electrical Goods (in %) 180 5.3 A Comparison of Managerial Hierarchies in 1984 186 5.4 Kigyo Shudan Intergroup Shareholding, 1961–1977 (percentages, odd years only) 190 6.1 Basic Technologies Incorporated in Labor-Saving Equipment 244 7.1 Time Periods Used in Delivery Schedules for Parts and Components Supplied to Toyota Motor, 1979 and 1982(in