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Impacts of the Information-technology Revolution on Japanese Manufacturer-supplier Relationships

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Author Info

  • Hodaka Morita

    (University of New South Wales and Cornell University)

  • Hirohiko Nakahara

    (Ministry of Economy, Trade and Industry)

Abstract

'Vertical keiretsu', characterized by suppliers' willingness to make customized investments and their long-term relationships with manufacturers, had been recognized as an important source of strength in Japanese industries. Our model predicts that, in contrast to the recent popular argument, the information-technology revolution can strengthen 'vertical keiretsu'. This is because the efficiency of designing customized parts is significantly enhanced if suppliers undertake a substantial level of IT investments such as the introduction of 3D CAD systems, and the customized nature of such investments could reduce the number of potential suppliers. Our interviews with Japanese manufacturers provide a support to this prediction.

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File URL: http://128.118.178.162/eps/io/papers/0207/0207009.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0207009.

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Length: 28 pages
Date of creation: 10 Aug 2002
Date of revision:
Handle: RePEc:wpa:wuwpio:0207009

Note: Type of Document - pdf; pages: 28; figures: included
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Web page: http://128.118.178.162

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Keywords: Customized investment; Information technology; Japanese firm; Vertical Keiretsu; Subcontracting;

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References

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  1. Ulrich, Karl, 1995. "The role of product architecture in the manufacturing firm," Research Policy, Elsevier, vol. 24(3), pages 419-440, May.
  2. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
  3. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-86, July.
  4. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. David Lucking-Reiley & Daniel F. Spulber, 2001. "Business-to-Business Electronic Commerce," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 55-68, Winter.
  6. Kim B. Clark, 1989. "Project Scope and Project Performance: The Effect of Parts Strategy and Supplier Involvement on Product Development," Management Science, INFORMS, vol. 35(10), pages 1247-1263, October.
  7. Baba, Yasunori & Nobeoka, Kentaro, 1998. "Towards knowledge-based product development: the 3-D CAD model of knowledge creation," Research Policy, Elsevier, vol. 26(6), pages 643-659, February.
  8. Asanuma, Banri, 1989. "Manufacturer-supplier relationships in Japan and the concept of relation-specific skill," Journal of the Japanese and International Economies, Elsevier, vol. 3(1), pages 1-30, March.
  9. Morita, Hodaka, 2001. "Partial Ownership Induces Customised Investments under Repeated Interaction: An Explanation of Japanese Manufacturer-Suppliers Relationships," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(3), pages 345-59, August.
  10. Banri Asanuma, 1985. "The Organization of Parts Purchases in the Japanese Automotive Industry," Japanese Economy, M.E. Sharpe, Inc., vol. 13(4), pages 32-53, July.
  11. Flath, David, 1996. "The Keiretsu Puzzle," Journal of the Japanese and International Economies, Elsevier, vol. 10(2), pages 101-121, June.
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Cited by:
  1. Shuhei Nishitateno, 2012. "Global Production Sharing in the Japanese Automobile Industry: A Comparative Analysis," Departmental Working Papers 2012-02, The Australian National University, Arndt-Corden Department of Economics.

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