Japanese Multinational Enterprises: The Paradox of High Efficiency and Low Profitability

Abstract

The fundamental characteristic of Japanese MNEs is revealed in the paradox between their high-performance operational efficiency, as reflected in quality control and inventory management, on the one hand, and their low-performance profitability, on the other. The key to unraveling this paradox lies in the organizational features of those Japanese corporations that emphasize the accumulation and utilization of managerial resources to increase operational efficiency. The paradox and the type of business management are characteristics that Japanese corporations at home and abroad share. Moreover, features that have come to be considered characteristic of Japanese MNEs, such as the high ratio of Japanese expatriates, a home country-oriented style of management, and the importance of informal information networks, have a common root with the paradox. These features can be explained by the endeavors of Japanese MNEs to compensate for the insufficient transfer of their organizational characteristics which are preconditions for high operational efficiency.