The Changing Japanese Multinational: Application, Adaptation and Learning in Car Manufacturing and Financial Services

ABSTRACT The combination of increasingly international operations, the continuing domestic recession, and the gradual opening of the Japanese economy to foreign investment might be expected to change many features of Japanese multinational companies. In particular, the level and mode of central control of overseas units, especially their reliance on expatriate managers, could change as firms become more willing to use foreign subsidiaries as sources of innovation and learning rather than as delivery pipelines for domestically designed and developed products. These changes are more likely in sectors dominated by non‐Japanese firms, such as international financial services. Interviews with managers of 14 Japanese manufacturing and financial service firms in the UK and Japan confirmed substantial differences in their internationalization patterns in the 1990s, both between and within sectors. Car manufacturers in particular invested major resources in transferring significant features of their domestic operations to UK units, usually with expatriate managers, and one was investing in developing an international cadre of managers. In the case of banks and other financial service companies, the continuing banking crisis in Japan and limited profitability of their European operations, had stimulated a variety of responses. While some had simply withdrawn from serving non‐Japanese clients, or withdrawn altogether from Europe, others were trying to develop new skills and approaches to compete effectively with established Anglo‐Saxon firms at the same time as refocusing on Japanese customers to improve profitability. However, the sharply contrasting labour market practices in London and Japan made it difficult for many banks to develop firm specific skills that would enable them to become competitive in markets currently dominated by western banks. This raises general questions about how multinational companies coordinate skills and careers across differently organized skill formation and control systems.