Shifting Boundaries of the Firm: Japanese Company-Japanese Labour (review)

Mari Sako sets out to describe the development and interplay of Japanese corporate and labor organizations in the second half of the twentieth century as a prelude to understanding how Japan's firms and labor organizations will likely weather the twenty-first century. She addresses a significant shortcoming in the Western literature on Japan: far more attention has been given to management than to labor. Because Japan was the first country in Asia to industrialize and is one of the most advanced democracies in the world, describing and analyzing its industrial organization, corporate strategies, and associated labor relations and concerns are welcome, significant, and timely tasks.

Given the size and complexity of the intellectual task that Sako has set for herself, a key issue is where to begin. There are many Western-language studies of Japan's industrialization, the evolution of labor and management in Japan, Japan's industrial policies, and Japan's business and economic history. All of these topics impinge to a degree on corporate and labor organizations, and all have been extensively written about in Japanese-language materials as well.

Rather than attempt to introduce and synthesize one or several of the existing literatures on labor and management in Japan, Sako chooses to situate her study in the context of the work of the recently deceased Alfred D. Chandler Jr. and his masterful studies of the evolution of big business in the United States. She does so because "Chandler's strategy and structure framework has been used extensively to understand the historical evolution of work organization and labour-management relations in a comparative perspective" (p. 20).

Sako cites three authors who have applied Chandler's models to work organization and labor-management relations in comparative perspective. Unfortunately, none of them applied those models to Japan, which is unfortunate because a number of scholars, including myself, have attempted to do so. The results of those efforts have certainly been mixed, but most have concluded that Japan's big businesses are not organized and bounded like Western, particularly American, big firms. Therefore, using Chandler's models as a way to explore Japan's corporate and labor organizations seems ill advised.

The largest firms in any industry in Japan, compared with the largest U.S. firms in the same industry, are typically smaller in terms of sales, revenues, and number of employees; more focused in terms of number and scope of business activities; and more linked with other firms in performing value chain actions, the sequence of value-adding steps from the sourcing of raw and intermediate products to the marketing and sale of finished goods. The works of Masahiko Aoki, Ronald Dore, Mark Fruin, Michael Gerlach, Tadao Kagono, Yoshio Suzuki, James Lincoln and Michael Gerlach, and others have established these points historically and, given the resiliency of national patterns of industrial organization, Japanese firms are not likely to have become more like U.S. firms. Path dependency arguments suggest that once countries make certain technological and institutional choices, they are unlikely to abandon the directions taken.

Yet Shifting Boundaries of the Firm takes the U.S. firm, particularly Chandler's model of U.S. big business firms, as the model of what Japanese firms should look like and how they should behave. The behavioral part comes from Chandler's argument that strategy should precede structure or that firms should evolve structurally in light of the strategies they pursue. Thus, peculiarly American notions of firm strategy, structure, and behavior play defining roles in her analysis of the interplay between management and labor in Japan.

Chandlerian/American models of the firm are not appropriate for looking at Japanese firms. Not only was the U.S. experience different from that of Europe and, for this reason, American firms are at best only a partial model of what happened in the West, but also Japan's big firms evolved in an institutional environment and under conditions unlike those of the West...