Document Type
Article
Publication Date
5-1-2000
Abstract
Corporations are organized differently from country to country in terms of their management structures, stakeholder power, and nature of corporate control. For the past decade, policymakers, business leaders, institutional investors, and scholars have debated differences among these structures and their implications for corporate competitiveness. Increased global integration of economic activities has heightened awareness of these cross-country differences in the structures of corporate governance and financial markets. The Keiretsu system, which means the long-term relationships between parent companies and subsidiaries or affiliated firms, or historic linkage between companies, is the "core" of the Japanese corporate governance model. On one hand, Keiretsu is a "dynamic network of corporations," where continuous improvement in tehcnology and developing products are efficiently achieved, and transaction costs as well as agency costs are significantly saved. Keiretsu is basically the core competitivie strength of the Japanese corporate model. On the other hand, Keiretsu is uniquely Japanese, exclusionary, collusive, anti-competitive, and even discriminatory against outsiders, and yet not illegal. Keiretsu seems like the "mother" of protectionism and the source of Japan's current economic troubles. This thesis, therefore, deals with the "viability" of Keiretsu, which is critically important in determining what the future corporate governance system in Japan should be. applying relevant theories, including game/cooperation/negotiation theories, transaction cost economics theory, agency theory, and trust/interdependence theories, to the data of the six major Keiretsu groups, the economic rationale of the Keiretsu system and its evolution for the past decades are analyzed. Finally, the report comes up with some specific recommendations regarding the renovation of Japan's corporate governance system. Because the Japanese corporate governance model has its unique competitive strengths that have been historically constructed with its deep-rooted institutional backgrounds, it is neither desirable nor feasible for Japan to adopt a single model of governance as the world standard. Japan should be cautious against blindly introducing U.S. or European ways of governance, as it would cause confusion in the Japanese business community and possibly lead to the situation where Japan will "throw the baby out with the bathwater."
Keywords
corporate governance -- Japan
Rights
© The Author(s). Kelvin Smith Library provides access for non-commercial, personal, or research use only. All other use, including but not limited to commercial or scholarly reproductions, redistribution, publication or transmission, whether by electronic means or otherwise, without prior written permission is strictly prohibited.
Department/Center
Design & Innovation
Recommended Citation
Kagami, Shigeo, "Theoretical Aspects of the Japanese Institutional Relations Model and Its Effectiveness for Corporate Governance in the Context of Globalization" (2000). Student Scholarship. 501.
https://commons.case.edu/studentworks/501