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Japanese Management Japanese Management The Search for a New Balance between Continuity and Change Edited by René Haak and Markus Pudelko Japanese Management This page intentionally left blank Japanese Management The Search for a New Balance between Continuity and Change Edited by René Haak and Markus Pudelko Selection and editorial matter © René Haak and Markus Pudelko 2005 Foreword © Irmela Hijiya-Kirschnereit 2005 Individual chapters © contributors 2005 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2005 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN-13: 978–1–4039–4194–7 ISBN-10: 1–4039–4194–7 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Japanese management : the search for a new balance between continuity and change / edited by René Haak and Markus Pudelko. p. cm. Includes bibliographical references and index. ISBN 1–4039–4194–7 1. Industrial management—Japan. 2. Personnel management—Japan. 3. Organizational learning—Japan. 4. Organizational change—Japan. I. Haak, René. II. Pudelko, Markus, 1967– HD70.J3J3942 2005 658′.00952—dc22 2005042906 10987654321 14 13 12 11 10 09 08 07 06 05 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne We dedicate this book to one of our authors, Father Robert J. Ballon, Professor Emeritus of Sophia University, who passed away on 14 December 2004. We remain deeply indebted to Father Ballon for the generous way he freely shared his advice in the preparation of this book. His wise counsel, wit and the warmth of his personality will be sadly missed by the editors and the wider community of scholars in Japanese business studies. René Haak and Markus Pudelko This page intentionally left blank Contents List of Figures and Tables ix List of Abbreviations and Acronyms x Notes on the Contributors xii Foreword by Irmela Hijiya-Kirschnereit xiii Part I Introduction 1 The Current State of the Japanese Economy and Challenges for Japanese Management: An Overview 3 Markus Pudelko and René Haak Part II Contributions 2 Continuity through Change in Japanese Management: Institutional and Strategic Influences 21 David Methé 3 Organizational Survival 55 Robert J. Ballon 4 The Long Road to Globalization: In Search of a New Balance between Continuity and Change in Japanese MNCs 78 Schon L. Beechler 5 Innovation for Whom? 97 Ronald Dore 6 Organizational Learning Mechanisms for Corporate Revitalization 116 Yoshiya Teramoto and Caroline Benton 7 Corporate Governance and Law Reform in Japan: From the Lost Decade to the End of History? 133 Luke Nottage and Leon Wolff 8 A Perfect Financial Storm 167 James C. Abegglen 9 Japanese Human Resource Management: From Being a Miracle to Needing One? 184 Markus Pudelko vii viii Contents 10 Japanese Production Management: Organizational Learning at the Confluence of Knowledge Transfer, Technology Development and Work Organization 213 René Haak Part III Conclusion 11 Continuity versus Change: The Key Dilemma for Japanese Management 241 Markus Pudelko Index 253 List of Figures and Tables Figures 3.1 Japanese stakeholder network 69 6.1 Organizational learning 127 7.1 Concentric circles of stakeholder influence 155 11.1 Causes, effects and possible outcomes of change and continuity in the Japanese management model 246 Tables 3.1 Gross domestic product in major countries, 2000 56 3.2 Employment in the public sector 58 3.3 Trade associations by type and industry 58 3.4 Number of firms and workers in non-primary industries, 2001 60 3.5 Estimated number of Japanese rivals in selected industries, 1987 and 1997 60 3.6 Number of subsidiaries and affiliates, selected major companies, 1955–95 61 3.7 Financing structure by number of employees, 2000 64 3.8 Type of main bank for SMEs by number of employees, 2001 64 3.9 Number of companies by capitalization, 1990 and 2000 65 3.10 Trends in the number of patent applications in manufacturing, 1996–2000 67 3.11 Sources of funding when starting a small or medium-sized business, December 2001 68 5.1 Characteristics of Japanese and Anglo-Saxon firms 101 6.1 Effects of traditional institutions on organizational learning 122 7.1 Japanese corporate governance models after the 2002 reform 140 ix List of Abbreviations and Acronyms CNC Computer Numerical Control CPA Certified Public Accountants ESOP Employee Share Ownership Program EU European Union FANUC Fujitsu Automatic Numerical Control FDI Foreign Direct Investment FILP Fiscal and Loan Program FRI Fujitsu Research Institute FY Fiscal Year GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GNP Gross National Product HR Human Resource HRM Human Resource Management HQ Headquarters IMVP International Motor Vehicle Program IT Information Technology JETRO Japan External Trade Organization JMNC Japanese Multinational Corporation JPY Japanese Yen JUSE Japanese Union Scientists and Engineers LDP Liberal Democratic Party (Japan) M&A Mergers and Acquisitions METI Ministry of Economy, Trade and Industry (Japan) MIC Mobile Internet Centre MIT Massachusetts Institute of Technology MITI Ministry of International Trade and Industry (Japan) MNC Multinational Corporation MNE Multinational Enterprise MOF Ministry of Finance (Japan) NC Numerical Control NGO Non-Governmental Organization NIE Newly Industrializing Economy NRI Nomura Research Institute OECD Organisation for Economic Cooperation and Development OEM Original Equipment Manufacturer PDAC Plan Do Check Act POS Point of Sales x List of Abbreviations and Acronyms xi PPP Purchasing Power Parity R&D Research and Development ROE Return on Equity SME Small and Medium-sized Enterprises TPS Toyota Production System TQC Total Quality Control TQM Total Quality Management TRIM Trade-Related Investment Measures TRIPS Trade-Related Aspects of Intellectual Property Rights TSE Tokyo Stock Exchange UNCTAD United Nations Conference on Trade and Development UK United Kingdom UN United Nations US United States USA United States of America USD US Dollar WTO World Trade Organization Notes on the Contributors James C. Abegglen is Chairman of the Asia Advisory Service K. K., Tokyo, Japan. Robert J. Ballon was Professor Emeritus at the Faculty of Comparative Culture, Sophia University, Tokyo, Japan. Schon L. Beechler is an Associate Professor at the Graduate School of Business, Columbia University, New York, United States. Caroline Benton is Professor, MBA Programme, validated by the University of Wales, UK. Ronald Dore is Associate of the Centre for Economic Performance at the London School of Economics, London, United Kingdom. René Haak is Head of the Business and Economics Section and Deputy Director of the German Institute for Japanese Studies, Tokyo, Japan. David Methé is Professor at the Institute of Business and Accounting, Kwansei Gakuin University, Japan. Luke Nottage is Senior Lecturer in Law at the University of Sydney, Australia, and Codirector of the Australian Network for Japanese Law. Markus Pudelko is Lecturer at the University of Edinburgh Management School, Edinburgh, United Kingdom. Yoshiya Teramoto is Professor at the Graduate School of Asia Pacific Studies, Waseda University, Tokyo, Japan. Leon Wolff is Senior Lecturer in Law at the University of New South Wales, Sydney, Australia, and Codirector of the Australian Network for Japanese Law. xii Foreword Japanese management has been a subject of great interest to Western scholars and managers since the 1970s. Ten years ago, Western industry was at pains to master Japanese management concepts, hoping to share in the elements of success promised by the Japanese way of doing business. Topics such as Japanese human resource management, lean production and total quality management often formed part of training programmes for European and American managers. With the weakness of the Japanese economy in recent years, this has changed drastically. Now it increasingly seems that the Japanese management model is outdated. Numerous factors have contributed to this recent development: production has been moved to cheaper neighbouring countries; there have been crises in banking; companies have collapsed; unemployment has risen; domestic consumption has stagnated; socio-demographic problems have emerged and the state is massively in debt. Japanese management needs to change in order to respond
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