Abstract
This paper contends that the distinguishing feature of the subcontracting system for the manufacture and distribution of auto-parts in the Japanese automobile manufacturing industry can be explained by the opportunism hypothesis of transaction cost theory. Opportunism may arise when the parts-supplier uses its information advantage to obtain more favorable contract terms with the manufacturer. It is argued that in response to this kind of ‘informational opportunism’, the automobile manufacturer institutes a special form of vertical arrangement, called the kigyo keiretsu group. The kigyo keiretsu group consist of an association of vertically related parts-makers held together by a high degree of sales and technological interdependence, by partial stock ownership, by interlocking boards of directors and by long-term contract. This study raises the possibility of mitigating opportunism among the kigyo keiretsu group firms throughout the core automaker's shareholdings of its parts-supplier.
Similar content being viewed by others
REFERENCES
Aoki, M. 1987. The Japanese firm in transition. In Y. Yamamura and Y. Yasuba, (eds) The Political Economy of Japan. pp. 469–515. CA: Stanford University Press.
Asanuma, B. 1984a. Nihon ni okeru buhin torihiki no kozo: Jidosha sangyo no jirei. Kiezai Ronso (English translation: The contractual framework for parts supply in the Japanese automotive industry). Japanese Economic Studies (Summer), 131: 137–158.
Asanuma, B. 1984b. Jidosha sangyo ni okeru buhin torihiki no kozo: Chosei to kakusinteki tekio no mechanism (English translation: The organization of parts purchases in the Japanese automotive industry). Japanese Economic Studies (Summer), 58: 38–48.
Asanuma, B. 1989. manufacture-supplier relationships in Japan and the concept of relation-specific skill. Journal of the Japanese and International Economies 3: 1–30.
Asanuma, B. 1992. Japanese manufacturer-supplier relationships in international perspective: The automobile case. In P. Sheard (ed) International Adjustment and the Japanese Firm, pp. 99–124. Australia: Allen & Unwin Pty. Ltd.
Auto Trade Journal-sha (ed) 1987. Nihon No Jidosha Buhin Kogyo (English translation: The Auto-Parts Industry Yearbook). Tokyo: Auto Trade Journal Sha.
Caves, R. and Uekusa, M. 1976. Industrial Organization in Japan. Washington D.C.: The Brookings Institution
Coase, R. 1937. The nature of the firm. Economica, 4: 386–405: repr. (1991). In O.E. Williamson and S.G. Winter (eds) The Nature of the Firm. Oxford: Oxford University Press.
Dodwell Marketing Consultants. 1986. Industrial Groupings in Japan. Tokyo: Dodwell Marketing Consultants.
Flath, D. 1989. Vertical integration by means of shareholding interlocks. International Journal of Industrial Organization, 7: 369–380.
Flath, D. 1993. Shareholding in the Keiretsu, Japan's financial groups. Review of Economics and Statistics, 75: 249–257.
Flath, D. 1996. The Keiretsu puzzle. Journal of Japanese and International Economies, 10: 101–121.
Fruin, M. 1992. The Japanese Enterprise System. Oxford: Claredon Press.
Gujarati, D. 1995. Basic Econometrics, Third edition. Singapore: McGraw Hill.
Imai, K. and Komiya, R. (eds) 1994. Business Enterprise in Japan. MA: The MIT Press.
Inaba, F. S. and Tabeta, N. 1996. The structure of vertical relationships and transaction costs: Evidence from Japanese automobile manufacturing. Nanyang Technological University, working paper series, No. 29-96, 1–26.
Ito, K. 1993. Kabusiki Mochi Ai (Economic roles of cross-shareholdings). In Itami et al. (eds) Nihon No Kigyo Shisutemu (English translation: The Japanese enterprise system), Vol. 1, Ch. 6. Tokyo: Yuuhikaku.
Joskow, P. 1985. Vertical integration and long-term contracts: The case of coal-burning electric generating plants. Journal of Law, Economics, and Organization, 1: 33–80.
Joskow, P. 1990. The performance of long-term contracts: Further evidence from coal markets. Rand Journal of Economics, 21: 251–274.
Joskow, P. 1991. Asset specificity and structure. In O.E. Williamson and S.G. Winter (eds) The Nature of the Firm. pp. 117–137. Oxford: Oxford University Press.
Klein, B. 1980. Transaction cost determinants of ‘unfair’ contractual arrangements. American Economic Review, 70: 356–362.
Klein, B. 1991. Vertical integration as organizational ownership; The Fisher Body-General Motors relationship. In O.E. Williamson and S. G. Winter (eds) The Nature of the Firm. pp. 213–226. Oxford: Oxford University Press.
Klein, B. Crawford, R. and Alchian, A. 1978. Vertical integration, appropriate rents, and the competitive contracting process. Journal Law and Economics, 21: 297–326.
Klein, B. and Leffler, K. 1981. The role of market forces in assuring contractual performance. Journal of Political Economy, 89: 615–641.
Laurence, R.Z. 1993. Japan's different trade regime: An analysis with particular performance to Keiretsu. Journal of Economic Perspectives, 7: 3–19.
Martin, S. 1993. Industrial Economics. New York: Macmillan.
Matsushita, M. 1990. Introduction to Japanese Anti-monopoly Law. Tokyo: Yuhikaku Publishing Co. Ltd.
Ministry of Finance, (ed) 1987. Yuka Shoken Hokokusho Soran (English translation: Annual. Corporation Reports, various companies). Tokyo: Ministry of Finance Press.
Monteverde, K. and Teece, D. J. 1982a. Supplier-switching costs and vertical integration. Bell Journal of Economics, 13: 206–213.
Monteverde, K. 1982b. Appropriate rents and quasi-vertical integration. Journal of Law and Economics, 25: 321–328.
Nakatani, I. 1984. The economic role of financial corporate grouping. In M. Aoki (ed) The Economic Analysis of the Japanese Firm. pp. 227–258. Amsterdam: North-Holland.
Nishiguchi, T. 1993. Strategic Industrial Sourcing: The Japanese Advantage. New York: Oxford University Press.
Tabeta, N. 1989. The mechanism of vertical integration: A case study of the Japanese automobile manufacturing industry. Ph.D. Dissertation. WA: Washington State University.
Tabeta, N. and Rahman, S. 1997. Testing for the risk-absorption hypothesis in the Japanese automobile manufacturing industry. Asian Economies, 26: 52–76.
Toyo Keizai Shinpo Sha (ed) 1988. Kigyo Keiretsu Soran (English translation: Survey of Corporate Groups). Tokyo: Toyo Keizai Shinpo Sha.
Toyo Keizai Shinpo Sha (ed) 1995. Kigyo Keiretsu Soran (English translation: Survey of Corporate Groups). Tokyo: Toyo Keizai Shinpo Sha.
Uekusa, M. 1987. Industrial organization: The 1970s to the present. In Y. Yamamura and Y. Yasuba (eds) The Political Economy of Japan. pp. 469–515. CA: Stanford University Press.
Williamson, O.E. 1971. The vertical integration of production: Market failure consideration. American Economic Review, 61: 112–123.
Williamson, O.E. 1979. Transaction cost economics: Governance of Contractual relation, Journal of Law and Economics, 22: 233–261.
Williamson, O.E. 1985. The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. New York: Free Press.
Williamson, O.E. 1993. Opportunism and its critics. Managerial and Decision Economics, 14: 97–107.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Tabeta, N. The Kigyo Keiretsu Organization and Opportunism in the Japanese Automobile Manufacturing Industry. Asia Pacific Journal of Management 15, 1–18 (1998). https://doi.org/10.1023/A:1015428707475
Issue Date:
DOI: https://doi.org/10.1023/A:1015428707475