Large Japanese Corporations, Alternative Systems of Capitalism

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Large Japanese Corporations, Alternative Systems
of Capitalism

• Ingmar Björkman
• Swedish School of Economics
• Helsinki, Finland
• INSEAD Euro-Asia Centre
• Fontainebleau, France
• 14.9.2004

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The Large Japanese Corporation

• 1. The ability to grow very large, and remain
  stable, while integrating complex and technically
  sophisticated operations. Dense networks of
  stable trading relationships.
• 2. The capability for advanced R D and highly
  competitive product development. Capable of high
  levels of production efficiency based on detailed
  incremental improvements.
• 3. The capability for world-wide marketing and
  the creation of international brands. Rich in
  market information.
• 4. Long-term financial strategies based on
  moderate, stable yields and not on short- term
  results, helped by extensive ownership by related
  companies with similar agendas. Also commonly
  tied long-term to banks.

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The Large Japanese Corporation

• 5. Historically responsive to subtle government
  guidance by the Ministry of International Trade
  and Industry and the Ministry of Finance,
  although this influence is slowly decreasing.
• 6. Extremely competitive with a strong concern
  for market share.
• 7. A view of the firm as essentially existing for
  its employees (including managers) and not
  primarily for shareholders.
• 8. A paternalistic and humanistic culture with
  moral commitment to core employees, extensive
  welfare and fringe benefits. Unions identified
  with company. Length of service important
  promotion criterion.

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The Large Japanese Corporation

• 9. A consultative managerial style with extensive
  internal communication. Little manager/ worker
  class distinction.
• 10.Larger company gt better reward system and
  higher societal status.
• But attacks against the Japanese business system
  lately, partly

Foreign ownership
Poor firm performance
Shareholder value key Lay-offs Merit-based
promotions
Break-up of cross-holdings
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Capitalist Corporations
Western Individualist
Western Communitarian
Japanese
Korean
Chinese Family
Adapted from Gordon Redding
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Alternative Systems of Capitalism

• Implications

• Different strategic perspectives -
• time horizons
• yield expectations
• risk attitude
• criteria for alliance
• behavioral priorities
• loyalties to firm
• capacities to co-ordinate complexity
• capacities to operate abroad
• traditions of control/discipline/reward
• degrees of freedom to decide
• political agendas

Ultimately different reasons for existence!