A Comparative Study of the Economic Activities of Sogo Shosha in the United States and Canada in the early 1990s

Abstract

The purpose of this paper is to clarify economic activities and strategies of sogo shosha, that is, the nine largest Japanese general trading companies, in response to different markets, namely the United States and Canada, during the early 1990s. This was a crucial period, due to the commencement of the North American Free Trade Agreement and the bursting of the Japanese bubble economy. The paper focuses on the characteristics of Japanese trading and investment patterns during the period in question, with particular attention to the activities of sogo shosha, in order to understand their current economic activities in North America. The American sogo shosha emphasize both offshore trade and domestic trade in the United States. The Canadian sogo shosha largely depend on the bilateral trade between Canada and Japan. Sogo shosha investment in the United States was more market-orientated, while that in Canada was more resource-oriented. The paper also includes exploration of the locational and functional implications of branches of sogo shosha. By changing their organizational operations and with concomitant functional changes in branches, four sogo shosha in the United States have pursued the localizing business strategies, while their counterparts in Canada have remained closer to the trading prototype. The examination of the different trading and investment patterns of sogo shosha in the United States and Canada reveals that they have recognized the United States and Canada as two distinct markets. It also shows the economic environments of the host and home countries have affected the economic activities of sogo shosha in North America.