Management Practices, Relational Contracts, and the Decline of General Motors
General Motors was once regarded as the best-managed and most successful firm in the world. However, between 1980 and 2009, GM's US market share fell from 46 to 20 percent, and in 2009 the firm went bankrupt. We argue that the conventional explanation for this decline?namely high legacy labor and healthcare costs?is seriously incomplete, and that GM's share collapsed for many of the same reasons that many highly successful American firms of the 1960s were forced from the market, including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did. We focus particularly on the problems GM encountered in developing the relational contracts essential to modern design and manufacturing, and we discuss a number of possible causes for these difficulties. We suggest that GM's experience may have important implications for our understanding of the role of management in the modern, knowledge-based firm and for the potential revival of manufacturing in the United States.
Volume (Year): 28 (2014)
Issue (Month): 1 (Winter)
|Contact details of provider:|| Web page: https://www.aeaweb.org/jep/|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marvin B. Lieberman & Shigeru Asaba, 1997. "Inventory Reduction and Productivity Growth: A Comparison of Japanese and US Automotive Sectors," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(2), pages 73-85.
- Susan Helper, 2011. "Challenge and opportunity in the U.S. auto industry: the key role of suppliers," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2011(2), pages 51-68.
- Sylvain Chassang, 2010. "Building Routines: Learning, Cooperation, and the Dynamics of Incomplete Relational Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 448-65, March.
- Akerlof, George A, 1984. "Gift Exchange and Efficiency-Wage Theory: Four Views," American Economic Review, American Economic Association, vol. 74(2), pages 79-83, May.
- Marina Halac, 2012. "Relational Contracts and the Value of Relationships," American Economic Review, American Economic Association, vol. 102(2), pages 750-79, April.
- Simon Board, 2011. "Relational Contracts and the Value of Loyalty," American Economic Review, American Economic Association, vol. 101(7), pages 3349-67, December.
- Helper, Susan & Levine, David I, 1992. "Long-Term Supplier Relations and Product-Market Structure," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(3), pages 561-81, October.
- Jin Li & Niko Matouschek, 2013. "Managing Conflicts in Relational Contracts," American Economic Review, American Economic Association, vol. 103(6), pages 2328-51, October.
When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:28:y:2014:i:1:p:49-72. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.