Document Type

Article

Publication Date

1998

Center/Program

Center for Contract and Economic Organization

Center/Program

Center for Law and Economic Studies

Abstract

For the last ten years, Japanese corporate governance has served as a distant mirror in whose reflection American academics could better see the attributes of their own system. As scholars came to recognize that the institutional characteristics of the American and Japanese systems were politically and historically contingent, other countries' approaches became serious objects of study, rather than just way stations on the road to convergence. One learned about one's own system from the choices made by others.

As it came to be conceived, the Japanese corporation of the 1980s represented quite a different method of organizing production. Styled the "J-form" by Masahiko Aoki, the Japanese corporation combined an interlocking set of governance arrangements that supported a different kind of industrial organization. The main bank relationship, coupled with cross shareholdings, supported a management commitment to lifetime employment for an important subset of employees who, in turn, had the proper incentives to invest in the firm specific human capital necessary for a production system geared to horizontal coordination and information sharing. Central to the J-form was a commitment to organizational stability, consistent with what was said to be a Japanese focus on process technologies.

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