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Understanding an Emergent Diversity of Corporate Governance and Organizational Architecture: An Essentiality-Based Analysis

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  • Masahiko Aoki

    ()
    (Economics Department, Stanford University)

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    Abstract

    This article proposes a simple framework for understanding 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 evidence 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.

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    File URL: http://www-siepr.stanford.edu/repec/sip/07-019.pdf
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    Bibliographic Info

    Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 07-019.

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    Date of creation: Oct 2007
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    Handle: RePEc:sip:dpaper:07-019

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    Related research

    Keywords: Corporate governance; essentiality; human assets; institutional change; organizational architecture; path dependence;

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    1. John Parkinson, 2003. "Models of the Company and the Employment Relationship," British Journal of Industrial Relations, London School of Economics, vol. 41(3), pages 481-509, 09.
    2. Andrei Shleifer & Robert W. Vishny, 1995. "A Survey of Corporate Governance," Harvard Institute of Economic Research Working Papers 1741, Harvard - Institute of Economic Research.
    3. Steven N. Kaplan & Per Strömberg, 2000. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," CRSP working papers 513, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    4. Franks, Julian & Mayer, Colin, 2001. "Ownership and Control of German Corporations," Review of Financial Studies, Society for Financial Studies, vol. 14(4), pages 943-77.
    5. Trevor Buck & Azura Shahrim, 2005. "The translation of corporate governance changes across national cultures: the case of Germany," Journal of International Business Studies, Palgrave Macmillan, vol. 36(1), pages 42-61, January.
    6. Mari Sako & Gregory Jackson, 2006. "Strategy meets institutions: The transformation of management-labor relations at Deutsche Telekom and NTT," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 59(3), pages 347-366, April.
    7. Mari Sako, 2005. "Does Embeddedness Imply Limits to Within-Country Diversity?," British Journal of Industrial Relations, London School of Economics, vol. 43(4), pages 585-592, December.
    8. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
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