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

  • Hodaka Morita

    (University of New South Wales and Cornell University)

  • Hirohiko Nakahara

    (Ministry of Economy, Trade and Industry)

'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://econwpa.repec.org/eps/io/papers/0207/0207009.pdf
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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
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Klemperer, Paul, 1999. "Auction Theory: a Guide to the Literature," CEPR Discussion Papers 2163, C.E.P.R. Discussion Papers.
  2. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
  3. David Lucking-Reiley & Daniel F. Spulber, 2000. "Business-to-Business Electronic Commerce," Vanderbilt University Department of Economics Working Papers 0016, Vanderbilt University Department of Economics.
  4. 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.
  5. 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.
  6. 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.
  7. Flath, David, 1996. "The Keiretsu Puzzle," Journal of the Japanese and International Economies, Elsevier, vol. 10(2), pages 101-121, June.
  8. 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.
  9. 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.
  10. Ulrich, Karl, 1995. "The role of product architecture in the manufacturing firm," Research Policy, Elsevier, vol. 24(3), pages 419-440, May.
  11. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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