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Keiretsu, Governance, and Learning: Case Studies in Change from the Japanese Automotive Industry

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  • Christina L. Ahmadjian

    () (Graduate School of Business, Columbia University, New York, New York 10027)

  • James R. Lincoln

    () (Walter A. Haas School of Business, University of California, Berkeley, Berkeley, California 94720)

Abstract

The keiretsu structuring of assembler-supplier relations historically enabled Japanese auto assemblers to remain lean and flexible while enjoying a level of control over supply akin to that of vertical integration. Yet currently there is much talk of breakdowns in keiretsu networks. This paper examines some recent developments in Japanese parts-supply keiretsu .We argue that keiretsu relationships are drifting from “hybrid” or “network” (i.e., keiretsu ) governance modes toward the extremes of arms-length contracting and top-down administration. These changes are best understood through a combination of transaction cost and learning perspectives on alliance. Consistent with transaction-cost economics, the shift in purchase-supply relationships can be traced to changes in the nature of parts transactions and keiretsu -governance structures. A learning perspective on alliance complements and extends transaction-cost theory, providing additional explanation of the sources of change and the specific governance choices being made.Our first two cases document a drift in Toyota's keiretsu supply network toward a hierarchical form in the management of parts-supply transactions. Toyota has effectively internalized its transactions with Daihatsu by taking a controlling interest. Toyota's strategy toward long-term partner Denso, on the other hand, was very different. Toyota built, from the ground up, an in-house capability in electronic components, thus scaling down its dependence on Denso. A third case considers a general trend in the Japanese auto industry toward greater standardization of parts. With the routinization of quality, reliability, and speed in supply management, the need for keiretsu -style governance has declined. The withering of keiretsu obligations is also traceable to globalization and the continuing weakness of the Japanese economy, which have prompted Japanese firms to question received business practice.

Suggested Citation

  • Christina L. Ahmadjian & James R. Lincoln, 2001. "Keiretsu, Governance, and Learning: Case Studies in Change from the Japanese Automotive Industry," Organization Science, INFORMS, vol. 12(6), pages 683-701, December.
  • Handle: RePEc:inm:ororsc:v:12:y:2001:i:6:p:683-701
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    File URL: http://dx.doi.org/10.1287/orsc.12.6.683.10086
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    Cited by:

    1. Chen, Yi-Su & Su, Hung-Chung & Ro, Young K., 2017. "The co-evolution of supplier relationship quality and product quality in the U.S. auto industry: A cultural perspective," International Journal of Production Economics, Elsevier, vol. 184(C), pages 245-255.
    2. Fujita, Mai, 2013. "Exploring the sources of China's challenge to Japan : models of industrial organisation in the motorcycle industry," IDE Discussion Papers 419, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. Lincoln, James R. & Guillot, Didier, 2011. "Business Groups, Networks, And Embeddedness: Innovation And Implementation Alliances In Japanese Electronics, 1985-1998," Institute for Research on Labor and Employment, Working Paper Series qt35g695gn, Institute of Industrial Relations, UC Berkeley.
    4. Matsushima Noriaki & Mizuno Tomomichi, 2012. "Equilibrium Vertical Integration with Complementary Input Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-32, June.
    5. Yann Duval & Chorthip Utoktham, 2011. "Trade Facilitation in Asia and the Pacific: Which Policies and Measures affect Trade Costs the Most?," Working Papers 9411, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    6. Garry D. Bruton & Chung-Ming Lau, 2008. "Asian Management Research: Status Today and Future Outlook," Journal of Management Studies, Wiley Blackwell, vol. 45(3), pages 636-659, May.
    7. repec:eee:worbus:v:53:y:2018:i:2:p:134-150 is not listed on IDEAS
    8. Fan, Huan & Li, Gang & Sun, Hongyi & Cheng, T.C.E., 2017. "An information processing perspective on supply chain risk management: Antecedents, mechanism, and consequences," International Journal of Production Economics, Elsevier, vol. 185(C), pages 63-75.
    9. repec:eee:jomega:v:77:y:2018:i:c:p:127-142 is not listed on IDEAS
    10. Wang, Yue & Tanaka, Akira, 2011. "From hierarchy to hybrid: The evolving nature of inter-firm governance in China's automobile groups," Journal of Business Research, Elsevier, vol. 64(1), pages 74-80, January.
    11. Becker, Markus C., 2004. "Towards an integrated theory of economic governance: Conclusions from the governance of ethics," KIeM Working Paper Series 09/2004, HTWG Konstanz, University of Applied Sciences, KIeM Institute for Intercultural Management, Values and Communication.
    12. Noriaki Matsushima & Cong Pan, 2016. "Strategic Perils of Outsourcing: Sourcing Strategy and Product Positioning," ISER Discussion Paper 0983, Institute of Social and Economic Research, Osaka University.
    13. Lincoln, James R. & Shimotani, Masahiro, 2009. "Whither the Keiretsu, Japan's Business Networks? How Were They Structured? What Did They Do? Why Are They Gone?," Institute for Research on Labor and Employment, Working Paper Series qt00m7d34g, Institute of Industrial Relations, UC Berkeley.

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    Keywords

    Supplier Relations; Innovation; Keiretsu; Networks;

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