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Relational Governance in Japanese Vertical Relationships

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  • Kenji Kojima

    (Kobe University)

Abstract

The primary purpose of the study is to characterize significant features of relational governance in Japanese vertical relationships and to provide an economic rationale. Japanese vertical relationships, particularly in automobile industry, are examined in comparison with those in the U.S. Both buyers and suppliers have recognized the need to be interdependent and have responded by developing bonding mechanisms that build mutual trust. It could reduce transaction costs and enhance efficiency in trading relationships with relationship-specific investments in long-term relationships.

Suggested Citation

  • Kenji Kojima, 1999. "Relational Governance in Japanese Vertical Relationships," Kobe Economic & Business Review, Research Institute for Economics & Business Administration, Kobe University, vol. 43, pages 25-63, February.
  • Handle: RePEc:kob:review:feb1999::v:43:p:25-63
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    File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/researchseries/review.html
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    Keywords

    Incomplete contracts; Japanese firms; Long-term relationships; Procurement; Relationship specific investment; Vertical relationships;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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