Japanese Management in Evolution

New Directions, Breaks, and Emerging Practices

Tsutomu Nakano

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317199656
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

Japanese Management in Evolution illustrates the significant changes that have been taking place in Japanese business by focusing on "emerging industries" in the relatively neglected service and "creative" sectors as well as other key industries, and to put those changes in historical perspective by providing an overview of business development since World War II. By employing state-of-the-art research techniques and unconventional innovative approaches in analysing Japanese management – including network and discourse analysis, ethnographic explorations, and more – the book reveals historical developments and in-depth analyses of established and emerging composition of sectors and industries where cultural capital matters. Throughout the book, the common theme conveyed to readers is a consistently strong message that the change is ongoing and the evolution of management style is real in the Japanese context.

The book would be of great interest to researchers, academics and practitioners in fields of global management, international management, and Asian capitalism.

Part I

Overview and introduction

1 Japanese business and management in evolution

Tsutomu Nakano

1.1. Objectives and overarching themes

This is a book, by seasoned researchers, about Japanese management and its evolution. Its main themes and objectives are to introduce readers to Japanese management’s newly developing aspects as an evolving system and style, not only as breaks occur from the conventional past but also as practices emerge in the drastically changing environment of global competition today. The book presents information, knowledge, perspectives, insights, and interpretations, to academics and business practitioners alike, in order to understand how Japanese firms have managed uncertainties, contingencies, and disruptions amid their historical and contemporary developments.

This is also a book on a wide array of topical themes about Japanese business. The existing literature has focused mainly on three themes or topical areas in Japanese management. First, some studies have explained details of conventional systems, especially in the manufacturing sectors including quality management, supplier system, and HRM, or loyalty on the factory floor and employment system. Second, others have discussed technology, R&D and knowledge management, and organization designs in the Japanese context, including incremental innovations and technology platforms as part of the advanced manufacturing systems. Third, others have also pointed out changes in corporate governance and finance with relevance to the globalization of multinational enterprises (MNE) and changes in the capital market and ownership structures.

This book explains how the Japanese management system has changed and evolved since the beginning of the postwar, high-growth period. Japanese firms have experienced a lot of change in their environments over the years. Some adapted to the new environments well, and others could not survive in the age of fast-moving markets after the 1980s. Global competition has intensified its pressure in part due to the digitalization or advent of information and communication technology (ICT) infrastructure after the turn of the century.

Firms have to manage contingencies that generally involve risk and uncertainty in their external environments. Theoretically speaking, there is a long history of academic inquiries about the subject in organization studies. To begin with, Frank Knight (1921) made a clear distinction between risk and uncertainty. The former is calculable from past data, whereas the latter has contingencies that are not calculable with the historical data sets. As regards the calculable risk, managers have to face the “bounded rationality” problem (March and Simon, 1958), and therefore firms may take a so-called satisficing strategy –satisfactory enough because top management can never know whether the decision is the single best answer under the cognitive limits of incomplete information, as with the “visible hand” of middle managers in the multidivisional organizational structure (Chandler, 1962). Regarding the uncertainty, under the circumstances, firms may need a “garbage can,” or organizational slack, to prepare for contingencies as Cohan, March, and Oslen (1972) theorized. Moreover, Burns and Stalker (1961) specifically stylized appropriate organizational designs to deal with different levels of uncertainty in the environment as “mechanistic” or “organic” ideal types. Later “population ecology” (Hannan and Carol, 1992) empirically tested what type of firm can survive at the level of organizational populations as environments select the firms fit enough to survive.

Furthermore, after the turn of this century, the concept of “dynamic capabilities” (the capabilities of firms to dynamically respond to the rapid changes in the fast-moving environment) has become a key success factor as ITC infrastructure has increased the speed of innovations exponentially by creating disruptive, technological breakthroughs (Eisenhardt and Martin, 2000; Teece, Pisano, and Shuen, 1997). Actually, firms may need ambidexterity as a dynamic capability to respond to contingencies by exploration in order to create long-term competitive advantage in changing environments, all the while engaging in their existing core businesses in the exploitation of the competencies, knowledge, and skills that they have (March, 1991; O’Reilly and Tushman, 2008). In addition, location advantages and technology platforms have also become undeniable critical factors for the survival of firms in clusters (Porter, 1998) and in business ecosystems (Chesbrough, 2006). The list is not exhaustive, and it will probably get longer as the level of uncertainty gets higher in the future.

These arguments and theoretical constructs clearly show that the fast-moving, sometimes disruptive markets today demand changes in the management of organizations to dynamically adapt to the changing environments, and Japanese firms are no exception in facing enormous uncertainty or huge contingencies in the new paradigms.

In response, this collaborative book project offers in-depth knowledge extensively and comprehensively. It is a bound volume of important topics and critical issues, explaining various aspects derived from empirical investigations. In effect, this book is helpful in understanding contemporary key issues from the overarching perspective of the management system in evolution, especially for academics and managerial business practitioners who would like to update their understanding or to seek new knowledge and insights.

Furthermore, for researchers interested in distinctive management styles and cultural intricacies, this book brings rich information from state-of-the-art research techniques and sometimes unconventional, innovative approaches. The chapters take a variety of approaches as regards research method and analytical technique. They describe explanations about theories, data sets, analyses, debates or gaps in the existing literature, and the possibilities for explorations and extrapolations. For example, the chapters employ analytical methods such as advanced regression analysis, case description, discourse analysis, document analysis, ethnographic exploration into social interactionism, historical accounts, institutional logics, network analysis, and valuation and market studies, among others.

In brief, this book provides readers with a general overview, existing theories and controversies, the caliber of research techniques, and their applications to the business practices. Although the book takes different approaches, the common theme and perspective are kept intact in order to convey to readers a consistently strong message that the change is ongoing and the evolution is real in the Japanese context. It attempts to crack the hard shell to find the realities of the evolution in the seemingly slow-moving and conservative outer shell.

1.2. Flow of issues and topics

To summarize, the book carries a flow of 14 (remaining) chapters concerning four different categories to cover key contemporary issues. After this introductory chapter of overarching themes and objectives, Part II begins with changes in governance, ownership, and organizational design. Next, Part III presents breaks and evolution in the manufacturing and service sectors. These offer rich details of both the liabilities and the assets from the three papers of success, failure, and evolution respectively. Then, Part IV sheds light on the creative industries as emerging sectors in the new paradigms, from the point of view of cultural and social capital in transition. Finally, Part V discusses managerial innovations, new directions, and emerging practices in the Japanese context, from the viewpoint of ecosystems, institutional logics, and the management of organizations. This part provides balanced and comprehensive coverage of the management system with a smooth flow of themes and topics.

1.3. Chapter summaries and discussions

1.3.1. Governance, management system, and ownership

Part II has three articles on management system and governance structure. First, as the starting chapter of the book, Shim and Yoshikawa present changes in the corporate governance structure from the regression analysis of data sets for 50 years from the early 1960s in order to find a “big picture” of the long-term transitions. The constructed data set itself has great value as an extremely rare source of information for discussing the overall trends and epoch-making change events.

Shim and Yoshikawa found that firms that went public in the early 1960s show different ownership structures, firm performances, and characteristics from those in the 1950s. It is interesting that this period coincides with the beginning of the so-called high-growth period of the economy during the postwar “economic miracle.” Moreover, they also found that external events had tremendous impacts on a major transition of the system, what they call a “functional corporate governance mechanism,” from 1973 to 1990 where the “main bank system” worked well as the major city banks extensively supported their group firms. This demarcation goes along with the conventional view of corporate Japan, or the “convoy system,” which practically came to an end when the “bubble economy” started collapsing in 1990. Furthermore, Shim and Yoshikawa claim that the post-bubble period after the 1990s, which experienced many changes in the ownership and governance structures, including the so-called Financial Big Bang, made the Japanese management system leaner and more robust in certain ways while maintaining the lingering legacy of the past conventional facts and seemingly slow changes in the conservative mode.

Their findings clearly indicate that decisive moments and events have affected the governance structure and management practices in the 50-year period, and that the changes were driven by external events in the environments. As a matter of fact, the management system experienced fundamental changes, such as the fierce global competition especially from emerging economies, the waves of digitalization and emergence of ICT infrastructure, the sophistication of knowledge management and advanced and refined improvements in manufacturing, and the rise of the service and creative industries, among others.

The findings by Shim and Yoshikawa raise an intriguing question: While the growth patterns and changes appear to support the macroeconomic development stage model of a national economy, the post-bubble period, often referred to as the “lost 20 years” with very slow growth of the stagnant economy, may have made the Japanese firms more competitive in the underlying transition, with independence from the main banks and the firm–group network systems. Shim and Yoshikawa thus open the discussion in the following chapters in order to further inquire about and elaborate on the impacts of these changes and their evolutionary dynamics.

Second, Kato, Numagami, Fujiwara, and Karube argue that many Japanese firms lost their competitiveness in the early 1990s and that they still have problems from the lingering drawbacks. The authors call this “organizational deadweight,” based on their own biennial survey data sets intended to study the organizational designs of large-scale Japanese firms for the 10 years across industries. As a result, they insist that the fundamental problem is rooted in the organizational design of the communication and management systems, that is, “difficulty on the part of an organization to integrate its members’ behaviors in order to adapt to a changing product market.”

Revitalizing the classical “contingency theory” by “(Burns and Stalker, 1961; Lawrence and Lorsch, 1967) on the relationships between the environment and the system of management as a frame of analysis, they further sought to test explanatory variables from a range of organizational characteristics spanning vertical communication in a business unit, the size and “tallness” of an organization, standard operating procedures (SOP) and formal planning, the leadership behaviors of managers, and methods of conflict resolution.

They conclude that hybrids of mechanistic and organic structures were appropriate where traditional hierarchical, formal command control and a system of informal communications were both necessary in the Japanese cultural context to deal with the drastically changing, competitive environment. Many Japanese firms actually failed in producing good performance, being unable to adapt to the changing environment.

Third and last, the family business has been a growing field of study, getting a lot of attention in academia in recent years. One of the reasons is that in general they produce higher profitability and stability or robustness in the face of exogenous factors from the environment with better chances of long-term survival. In general, empirical investigations identified some distinctive reasons why these firms can possibly perform better and longer. One such argument is that the agency problem, or a conflict between ownership and managerial control, is not as much of a problem. Others have also pointed that the family members can handle pressing issues rather smoothly with their family traditions and styles of management, legitimacy and brand, and trust and commitment from their employees.

Tim Goydke writes of the Japanese family firm in tradition and transition, especially focusing on its longevity and the use of the adoption system to solve succession problems, among many of their peculiarities. The objective of the chapter, according to Goydke, is to review these studies and to introduce a comprehensive model that includes the many aspects and challenges that Japanese family firms face from the institutional and governance perspectives, probing ownership and management or principal–agent and principal–principal agency issues in management. The chapter provides an extensive review of relevant arguments in the existing literature in order to demystify family businesses in Japan. The chapter widely discusses the possibilities of modeling based on empirical evidence from tests on data by means of regression analysis with the aim of linking these contentious issues to the changes in management and governance practices.

1.3.2. Manufacturing and service sectors

After the groundwork of governance, ownership, and organizational design, Part III discusses breaks and evolution in the manufacturing and service sectors with three chapters. To begin with, the consumer electronics industry experienced a dramatic shift from the markets of quality products in the 1980s and 1990s. The Japanese firms then dominated a wide range of products by incremental innovations in the analog era. However, in the newly emerged “relentlessly-moving markets” (Eisenhardt, 1989; Eisenhardt and Martin, 2000) in the digital age, new competitors from emerging economies gained advantage with disruptive, quantum technologies and their quick responses to market needs.

It was the end of an era during which producers or sellers held the power in their hands to control consumer needs with mass advertising and the pull marketing of mass-produced products in a slower mode. In the new “information society,” as conceptualized by Peter Drucker (1988), the saturation of markets has made it possible for buyers or consumers to choose their favorite products from a wide range of choices in terms of brand name, color, design, style, function, and price, whereas before they had to choose from the mass-produced standardized products in a limited variety. With the advent of the ICT platforms in the 2000s, the power balance thus shifted into the hands of buyers so that manufactures or sellers now have to compete to catch the eye of demanding and smart buyers.

This meant a paradigm shift in manufacturing from mass production in the tradition of Frederick Taylor’s “scientific management” of sequential design, execution, and delivery [1947 (1911)] to small-lot, customized manufacturing in variety and then later to large-scale production of quality products in variety with “flexible manufacturing systems.” This new type of competition requires firms to employ advanced design and machining technologies of “concurrent engineering” (also known as “simultaneous engineering”) (Sabel, 1990; Sabel and Zeitlin, 1997), where these processes occur simultaneously in a feedback loop of design, execution, and delivery in order to respond to savvy, style-conscious, and price-sensitive consumers. In other words, the paradigm has shifted from sequential production to concurrent engineering, and further fully to the flexible manufacturing system, which requires firms’ dynamic capabilities to mobilize organizational resources to dominate the markets (Teece, Pisano, and Shuen, 1997).

At the turn of the century, Japanese manufacturing firms were still generally slow to respond to this paradigm shift. They therefore gradually lost their competitive edge in many consumer electronics product categories after the 2000s – mobile phones to iPhones, mobile digital music players to iPods, and the flat panel display TV sets to Samsung, for instance.

First, Derek Lehmberg elaborates on a failure in the Japanese consumer electronics industry, namely the development and commercialization of flat panel display (FPD). He argues that Japanese firms played a pivotal role in establishing FPD-installed products in business phones, laptop computers, and TV sets in the early stages, overcoming major technological hurdles to find their way to commercialization. Despite playing key roles in the development of the FPD industry, the Japanese firms eventually lost their competitiveness, and many of them exited from the markets.

Lehmberg examines the decline of Japanese firms’ competitiveness in the FPD industry from a historical, descriptive approach. His observations raise an intriguing question: What went wrong? It appears to be a case of managerial miscalculation in response to the rapidly moving environment, but his account considers more detailed explanatory factors, including dynamic capabilities and techno...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of contributors
• Preface
• Part I Overview and introduction
• Part II Changes in governance, management system, and ownership
• Part III Breaks and evolution in the manufacturing and service sectors
• Part IV Creative industries and cultural capital in new paradigms
• Part V Managerial innovations, new directions, and emerging practices
• Index