Disaggregating the group effect: Vertical and horizontal keiretsu in changing economic times

Abstract

Horizontal keiretsu , Vertical keiretsu , Economic change, Regulatory change,

Whither Japanesekeiretsu? The transformation of verticalkeiretsuin Toyota, Nissan and Honda 1991–2011

“…Dow et al (2011) argue that there has been no empirical consensus regarding the evolution of the institution of keiretsu in the Japanese economy (see also Johnston and McAlevey 1998;Ahmadjian and Lincoln 2001;Kim et al 2004). In their literature review, McGuire and Dow (2009, p. 337) assert that the literature on horizontal keiretsu is far more extensive than that on vertical keiretsu.…”

“…Regarding the development of vertical keiretsu, the few existing studies have argued that keiretsu relationships are drifting from 'hybrid' or 'network' (i.e., keiretsu) governance modes toward the extremes of arms-length contracting and top-down administration (Ahmadjian and Lincoln 2001). As a response to the scarce empirical studies on vertical keiretsu, Dow et al (2011) did a comprehensive, overarching study on (horizontal and) vertical keiretsu, showing that vertical keiretsu weakened their ties from 1992 to 1997, while remaining stable from 1997 to 2002. Apart from the increasing competition in global product markets, pointed out by Lincoln et al (1998), Yoshikawa and McGuire (2008) and Dow et al (2011) hold that there are two Asia Pacific Business Review 71 other major factors that have had an impact on Japanese economic institutions: change in capital markets and shareholding patterns, and change in banking relationships, the latter of which is important first and foremost for the bank-centred horizontal keiretsu.…”

“…However, studies on keiretsu (both horizontal and vertical) do not go beyond studying the general change of keiretsu due to institutional pressures (Dow et al 2011). Being inspired by Yoshikawa and Phan (2001) and Yoshikawa et al (2007), we embark on a similar study on the strategic responses of different companies regarding their keiretsu.…”

“…Horizontal keiretsu or kigyo shudan are not covered by this study. Dow et al (2011) have already illustrated that there are differences in the response of vertically and horizontally linked groups to economic downturn and capital market change. In order to better understand changes in the institution of keiretsu in the Japanese economy, detailed case studies on strategic responses by each group in kigyo shudan, such as Mitsui, Mitsubishi and Sumitomo, will be needed.…”

Spillovers from FDI and local networks

“…changes in accounting rules and corporate governance), and financial consolidations (Lincoln and Shimotani, 2010). Japan is now more open to inward investment than at any time in its history, and these keiretsu enterprises have gradually become more outward looking than typical Japanese firms (McGuire and Dow, 2009;Dow et al, 2011).…”