Organizational learning and purchase-supply relations in Japan: Hitachi, Matsushita, and Toyota compared

California Management Review

Volumn , Issue 3, 1998, Pages 241-264

  Lincoln, James R ^a   Ahmadjian, Christina L ^a   Mason, Eliot ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0040086124     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.2307/41165953     Document Type: Article

References (66)

1. Michael J. Piore and Charles F. Sabel, The Second Industrial Divide: Possibilities for Prosperity (New York, NY: Basic Books, 1984); Charles Perrow, "Small Firm Networks," in Nitin Nohria and Robert G. Eccles, eds., Networks and Organizations: Structure, Form, and Action (Boston, MA: Harvard Business School Press, 1992), pp. 445-470.
2. Michael J. Piore and Charles F. Sabel, The Second Industrial Divide: Possibilities for Prosperity (New York, NY: Basic Books, 1984); Charles Perrow, "Small Firm Networks," in Nitin Nohria and Robert G. Eccles, eds., Networks and Organizations: Structure, Form, and Action (Boston, MA: Harvard Business School Press, 1992), pp. 445-470.
3. Ronald Dore, Flexible Rigidities (Stanford, CA: Stanford University Press, 1986); James R. Lincoln, "Japanese Organization and Organization Theory," in Barry M. Staw and L. L. Cummings, eds., Research in Organizational Behavior, Vol. 12 (Greenwich, CT: JAI Press, 1990), pp. 255-294.
4. Ronald Dore, Flexible Rigidities (Stanford, CA: Stanford University Press, 1986); James R. Lincoln, "Japanese Organization and Organization Theory," in Barry M. Staw and L. L. Cummings, eds., Research in Organizational Behavior, Vol. 12 (Greenwich, CT: JAI Press, 1990), pp. 255-294.
5. By keiretsu we mean a network of independently managed firms with close and stable business ties, often cemented by such governance mechanisms as presidents' councils, partial cross-ownership, and interlocking directorates. Michael L. Gerlach, Alliance Capitalism: The Social Organization of Japanese Business (Berkeley, CA: University of California Press, 1992); James R. Lincoln, Michael L. Gerlach, and Peggy Takahashi, "Keiretsu Networks in the Japanese Economy: A Dyad Analysis of Intercorporate Ties," American Sociological Review, 57 (1992): 561-585; James R. Lincoln, Michael L. Gerlach, and Christina Ahmadjian, "Keiretsu Networks and Corporate Performance in Japan," American Sociological Review, 61 (1996): 67-88.
6. By keiretsu we mean a network of independently managed firms with close and stable business ties, often cemented by such governance mechanisms as presidents' councils, partial cross-ownership, and interlocking directorates. Michael L. Gerlach, Alliance Capitalism: The Social Organization of Japanese Business (Berkeley, CA: University of California Press, 1992); James R. Lincoln, Michael L. Gerlach, and Peggy Takahashi, "Keiretsu Networks in the Japanese Economy: A Dyad Analysis of Intercorporate Ties," American Sociological Review, 57 (1992): 561-585; James R. Lincoln, Michael L. Gerlach, and Christina Ahmadjian, "Keiretsu Networks and Corporate Performance in Japan," American Sociological Review, 61 (1996): 67-88.
7. By keiretsu we mean a network of independently managed firms with close and stable business ties, often cemented by such governance mechanisms as presidents' councils, partial cross-ownership, and interlocking directorates. Michael L. Gerlach, Alliance Capitalism: The Social Organization of Japanese Business (Berkeley, CA: University of California Press, 1992); James R. Lincoln, Michael L. Gerlach, and Peggy Takahashi, "Keiretsu Networks in the Japanese Economy: A Dyad Analysis of Intercorporate Ties," American Sociological Review, 57 (1992): 561-585; James R. Lincoln, Michael L. Gerlach, and Christina Ahmadjian, "Keiretsu Networks and Corporate Performance in Japan," American Sociological Review, 61 (1996): 67-88.
8. Thomas Roehl, "A Comparison of U S.-Japanese Firms' Parts-Supply Systems: What Besides Nationality Matters?" in Kichiro Hayashi, ed., The U. S. Japanese Economic Relationship: Can It Be Improved? (New York, NY: New York University Press, 1989), pp. 127-154; James P. Womack, Daniel T. Jones, and Daniel Roos, The Machine that Changed the World (New York, NY: Macmillan, 1990). Indeed, despite our contention that Toyota's electronics effort has subjected its keiretsu to strains, the continuing cohesion and effectiveness of that network was showcased by the Toyota supply chain's rapid and smooth recovery from the disruption of a recent fire in an Aisin Seiki parts plant. Valerie Reitman, "Toyota Motor Shows Its Mettle after Fire Destroys Parts Plant," The Wall Street Journal, May 8, 1997.
9. Thomas Roehl, "A Comparison of U S.-Japanese Firms' Parts-Supply Systems: What Besides Nationality Matters?" in Kichiro Hayashi, ed., The U. S. Japanese Economic Relationship: Can It Be Improved? (New York, NY: New York University Press, 1989), pp. 127-154; James P. Womack, Daniel T. Jones, and Daniel Roos, The Machine that Changed the World (New York, NY: Macmillan, 1990). Indeed, despite our contention that Toyota's electronics effort has subjected its keiretsu to strains, the continuing cohesion and effectiveness of that network was showcased by the Toyota supply chain's rapid and smooth recovery from the disruption of a recent fire in an Aisin Seiki parts plant. Valerie Reitman, "Toyota Motor Shows Its Mettle after Fire Destroys Parts Plant," The Wall Street Journal, May 8, 1997.
10. Thomas Roehl, "A Comparison of U S.-Japanese Firms' Parts-Supply Systems: What Besides Nationality Matters?" in Kichiro Hayashi, ed., The U. S. Japanese Economic Relationship: Can It Be Improved? (New York, NY: New York University Press, 1989), pp. 127-154; James P. Womack, Daniel T. Jones, and Daniel Roos, The Machine that Changed the World (New York, NY: Macmillan, 1990). Indeed, despite our contention that Toyota's electronics effort has subjected its keiretsu to strains, the continuing cohesion and effectiveness of that network was showcased by the Toyota supply chain's rapid and smooth recovery from the disruption of a recent fire in an Aisin Seiki parts plant. Valerie Reitman, "Toyota Motor Shows Its Mettle after Fire Destroys Parts Plant," The Wall Street Journal, May 8, 1997.
11. In other sectors - e.g., financial services and distribution - a positive economic rationale for keiretsu is harder to discern, and Japanese managers and policy makers are far less inclined to defend them.
12. Richard R. Nelson and Sidney Winter, An Evolutionary Theory of Economic Change (Cambridge, MA: Harvard University Press, 1982); Ikujiro Nonaka and Hirotaka Takeuchi, The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation (New York, NY: Oxford University Press, 1995).
13. Richard R. Nelson and Sidney Winter, An Evolutionary Theory of Economic Change (Cambridge, MA: Harvard University Press, 1982); Ikujiro Nonaka and Hirotaka Takeuchi, The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation (New York, NY: Oxford University Press, 1995).
14. Ken-ichi Imai, Ikujiro Nonaka, and Hirotaka Takeuchi, "Managing the New Product Development Process: How Japanese Companies Learn and Unlearn," in Kim B. Clark, Robert H. Hayes, and Christopher Lorenz, eds., The Uneasy Alliance: Managing the Productivity-Technology Dilemma (Boston, MA: Harvard Business School Press, 1985), pp. 337-376, 351.
15. George Herbert Mead, Mind, Self, and Society, edited and with an introduction by Charles W. Morris (Chicago, IL: University of Chicago Press, 1962).
16. Gregory P. Stone, "Appearance and the Self," in Arnold M. Rose, ed., Human Behavior and Social Processes: An Interactionist Approach (Boston, MA: Houghton Mifflin Co., 1962), pp. 86-118.
17. Nelson and Winter, op. cit.; Nonaka and Takeuchi, op. cit.
18. Nelson and Winter, op. cit.; Nonaka and Takeuchi, op. cit.
19. Charles Perrow, Normal Accidents: Living with High-Risk Technologies (New York, NY: Basic Books, 1984). Karlene H. Roberts, "Managing High Reliability Organizations," California Management Review, 32/4 (Summer 1990): 100-113.
20. Charles Perrow, Normal Accidents: Living with High-Risk Technologies (New York, NY: Basic Books, 1984). Karlene H. Roberts, "Managing High Reliability Organizations," California Management Review, 32/4 (Summer 1990): 100-113.
21. Our informant said: "When a worker is shukko'd, the kanren gaisha (affiliate) pays 80% of the original wage and Hitachi pays 20%. If there is a lot of shukko, the company has to pay a lot of additional wages. So workers' salaries do not go down. The 20% is a nontrivial cost."
22. Takeo Hoshi, Anil Kashyap, and David Scharfstein, "The Role of Banks in Reducing the Costs of Financial Distress in Japan," Journal of Financial Economics, 27 (1991): 67-88; Lincoln, Gerlach, and Ahmadjian, op. cit.
23. Takeo Hoshi, Anil Kashyap, and David Scharfstein, "The Role of Banks in Reducing the Costs of Financial Distress in Japan," Journal of Financial Economics, 27 (1991): 67-88; Lincoln, Gerlach, and Ahmadjian, op. cit.
24. Banri Asanuma, "Japanese Manufacturer-Supplier Relationships in International Perspective: The Automobile Case," in Paul Sheard, ed., International Adjustment and the Japanese Firm (New York, NY: Allen & Unwin in association with the Australia-Japan Center, 1991).
25. Oliver E. Williamson, The Economic Institutions of Capitalism (New York, NY: Free Press, 1985).
26. Even keiretsu practices that appear driven chiefly by labor cost concerns were argued by the Japanese managers in our interviews to perform a cross-firm innovation and learning function. Shukko to suppliers and customers, for example, gives the dispatching firm's employees on-the-job training in the processes of the receiving firm. In the trough of the recession, Toyota was moving significant numbers of people to its automobile dealerships. The company argued that workers would thereby acquire expertise in the sales end of the business, making them more sensitive to customer needs when they returned to the factory.
27. Clearly our informant had in mind Japanese competitors. Japanese firms go to considerable lengths to contain knowledge and skills from spilling over to competitors. Labor market rigidities, keiretsu obligations, and nontransparent auditing and reporting practices facilitate such secrecy. Obviously, Japanese firms have long been adept at borrowing and learning from Western competitors.
28. Susan Helper, "How Much Has Really Changed between U.S. Automakers and Their Suppliers?" Sloan Management Review, 32 (Summer 1991): 15-28.
29. Masahiko Aoki, Hugh Patrick, and Paul Sheard, The Japanese Main Bank System: An Introductory Overview (Stanford, CA: Center for Economic Policy Research, Stanford University, 1993).
30. Asanuma (1991), op. cit.
31. See also Christina Ahmadjian, "Japanese Auto Parts Supply Networks and the Governance of Interfirm Exchange," paper presented at the PRISM (Pacific Rim Industry, Strategy, and Management) Conference, San Diego, CA, February 1997; Lincoln, Gerlach, and Ahmadjian, op. cit.
32. See also Christina Ahmadjian, "Japanese Auto Parts Supply Networks and the Governance of Interfirm Exchange," paper presented at the PRISM (Pacific Rim Industry, Strategy, and Management) Conference, San Diego, CA, February 1997; Lincoln, Gerlach, and Ahmadjian, op. cit.
33. Imai, Nonaka, and Takeuchi, op. cit.
34. Raymond E. Miles and Charles C. Snow, Fit, Failure, and the Hall of Fame: How Companies Succeed or Fail (New York, NY: Free Press, 1994).
35. Glenn R. Carroll, "The Specialist Strategy," in Glenn R. Carroll and David Vogel, eds., Strategy and Organization: A West Coast Perspective (Marshfield, MA: Pitman, 1984); Michael T. Hannan and John Freeman, Organizational Ecology (Cambridge, MA: Harvard University Press, 1989).
36. Glenn R. Carroll, "The Specialist Strategy," in Glenn R. Carroll and David Vogel, eds., Strategy and Organization: A West Coast Perspective (Marshfield, MA: Pitman, 1984); Michael T. Hannan and John Freeman, Organizational Ecology (Cambridge, MA: Harvard University Press, 1989).
37. Gary Hamel and C. K. Prahalad, Competing for the Future (Boston, MA: Harvard Business School Press, 1994).
38. Kim B. Clark and Takahiro Fujimoto, Product Development Performance (Boston, MA: Harvard Business School Press, 1991).
39. Konosuke Odaka, Keinosuke Ono, and Fumihiko Adachi, The Automobile Industry in Japan: A Study of Ancillary Firm Development (Tokyo: Kinokuniya, 1988).
40. Bennett Harrison, Lean and Mean: The Changing Landscape of Corporate Power in the Age of Flexibility (New York, NY: Basic Books, 1994); Edgar Hoover and Raymond Vernon, Anatomy of a Metropolis (Cambridge, MA: Harvard University Press, 1959); Piore and Sabel, op. cit.; AnnaLee Saxenian, Regional Networks: Industrial Adaptation in Silicon Valley and Route 128 (Cambridge, MA: Harvard University Press, 1994).
41. Bennett Harrison, Lean and Mean: The Changing Landscape of Corporate Power in the Age of Flexibility (New York, NY: Basic Books, 1994); Edgar Hoover and Raymond Vernon, Anatomy of a Metropolis (Cambridge, MA: Harvard University Press, 1959); Piore and Sabel, op. cit.; AnnaLee Saxenian, Regional Networks: Industrial Adaptation in Silicon Valley and Route 128 (Cambridge, MA: Harvard University Press, 1994).
42. Bennett Harrison, Lean and Mean: The Changing Landscape of Corporate Power in the Age of Flexibility (New York, NY: Basic Books, 1994); Edgar Hoover and Raymond Vernon, Anatomy of a Metropolis (Cambridge, MA: Harvard University Press, 1959); Piore and Sabel, op. cit.; AnnaLee Saxenian, Regional Networks: Industrial Adaptation in Silicon Valley and Route 128 (Cambridge, MA: Harvard University Press, 1994).
43. Bennett Harrison, Lean and Mean: The Changing Landscape of Corporate Power in the Age of Flexibility (New York, NY: Basic Books, 1994); Edgar Hoover and Raymond Vernon, Anatomy of a Metropolis (Cambridge, MA: Harvard University Press, 1959); Piore and Sabel, op. cit.; AnnaLee Saxenian, Regional Networks: Industrial Adaptation in Silicon Valley and Route 128 (Cambridge, MA: Harvard University Press, 1994).
44. Mark Fruin, The Japanese Enterprise System: Competitive Strategies and Cooperative Structures (Oxford: Oxford University Press1992).
45. Hiromi Shioji, "Itaku' Automotive Production: An Aspect of the Development of Full-Line and Wide-Selection Production by Toyota in the 1960s," Kyoto University Economic Review, 65 (1995): 19-42.
46. Lincoln, Gerlach, and Takahashi, op. cit.; Williamson, op. cit.
47. Lincoln, Gerlach, and Takahashi, op. cit.; Williamson, op. cit.
48. The sensitivity of Toyota's microelectronics effort for Toyota's relationship with Denso was made clear to us when in 1996 we contacted the Hirose plant about an interview. The management told us we could visit the plant only on the condition that no questions about Denso be asked.
49. The practice of using subcontractors and suppliers as product market buffers by subcontracting when demand exceeds capacity and in slack times taking production in-house is also claimed to have a learning rationale. Toyota managers told us that when Toyota takes back production, it innovates and redesigns the product in preparation for the next round of subcontracting. When the component is out-sourced again, the specifications are different, and the suppliers must learn the innovations that Toyota introduced during the in-house production phase.
50. With some justification. One Toyota manager told us candidly that if Denso relied only on Toyota's business, Denso would die. However, he quickly followed up by saying that the relationship with Denso remained very important to Toyota.
51. MITI, 1994.
52. Asanuma (1991), op. cit.
53. Odaka, Ono, and Odachi, op. cit.
54. Indeed, although Denso's direct role in Toyota's electronics learning has been less than might be expected, Toyota's keiretsu relations with Daihatsu, Hino, and Kanto Auto Works are enabling these companies to acquire knowledge of electronics that they would have had difficulty developing on their own. Toyota says it has no formal program to raise the electronics capability of Toyota keiretsu firms, but insofar as its affiliates are codesigning and assembling Toyota products, Toyota must help them with the electronics. Toyota supplier, Aisin Seiki, is independently moving into electronics and is producing car navigation systems in competition with Denso.
55. Michael L. Gerlach, "Twilight of the keiretsut? A Critical Assessment," Journal of Japanese Studies, 18 (1992): 79-118.
56. Ahmadjian, op. cit.
57. Banri Asanuma, "Jidosha sangyo ni okeru buhin torihiki no kozo" ["The Structure of Parts Transactions in the Automotive Industry: The Mechanisms of Adjustment and Innovative Adaptation"] Gendai Keizai [Modern Economics], 59 (Summer 1984); Mark Fruin, Knowledge Works: Managing Intellectual Capital at Toshiba (New York, NY: Oxford University Press, 1997), p. 99.
58. Banri Asanuma, "Jidosha sangyo ni okeru buhin torihiki no kozo" ["The Structure of Parts Transactions in the Automotive Industry: The Mechanisms of Adjustment and Innovative Adaptation"] Gendai Keizai [Modern Economics], 59 (Summer 1984); Mark Fruin, Knowledge Works: Managing Intellectual Capital at Toshiba (New York, NY: Oxford University Press, 1997), p. 99.
59. Yet Fruin's account [(1997), op. cit., Chapter 4] of Toshiba's management of the kyoryoku-kai or supplier association at its Yanagicho Works (e.g., through supplier grading and development) is similar to Matsushita's strategy for its kyoei-kai. The difference is that Toshiba's program dates back to the mid-eighties. Also, unlike Matsushita, Toshiba maintains equity stakes in a number of affiliated suppliers. At the other extreme, Sanyo has no supplier cooperative association and manages its purchasing relationships in one-on-one and arm's-length fashion. See also Roehl, op. cit., p. 136.
60. Yet Fruin's account [(1997), op. cit., Chapter 4] of Toshiba's management of the kyoryoku-kai or supplier association at its Yanagicho Works (e.g., through supplier grading and development) is similar to Matsushita's strategy for its kyoei-kai. The difference is that Toshiba's program dates back to the mid-eighties. Also, unlike Matsushita, Toshiba maintains equity stakes in a number of affiliated suppliers. At the other extreme, Sanyo has no supplier cooperative association and manages its purchasing relationships in one-on-one and arm's-length fashion. See also Roehl, op. cit., p. 136.
61. See Masahiro Shimotani, "Matsushita Denki 'Kyoei-kai' no rekishi togenzai" ["Matsushita Electric's 'Kyoei-kai:' Past and Present"], Kyoto University Economic Review (1997).
62. See Michael Beer and B. A. Spector, "Matsushita Electric," Harvard Business School Case #9-481-146, 1981. Based on H. Ishida and K. Takahashio, "Matsushita Electric Industrial Co. Ltd.: Management Control Systems," Keio University, Japan.
63. See Michael Beer and B. A. Spector, "Matsushita Electric," Harvard Business School Case #9-481-146, 1981. Based on H. Ishida and K. Takahashio, "Matsushita Electric Industrial Co. Ltd.: Management Control Systems," Keio University, Japan.
64. However, this commitment is not universally shared at Matsushita. Because of ever-rising competitive pressures to shorten product development times, some managers, we were told, were frustrated with the kyoei program. They felt that Matsushita could design and build products faster if it abandoned the effort to develop the kyoei-kai and (as in the past) made the high-tech parts itself.
65. Womack, Jones, and Roos, op. cit.
66. Jeffrey H. Dyer, "Specialized Supplier Networks as a Source of Competitive Advantage: Evidence from the Auto Industry," Strategic Management Journal, 17 (1996): 271-291.