Patterns of Inter-Firm Control in Japanese Business*

Abstract

Studies of inter-firm relations in modern capitalism have often relied on either an exchange theory or a structural theory of control. Both paradigms prove inadequate in explaining non-Western patterns of inter-firm relations. This study adopts an institutional theory of power to explain the peculiar patterns of horizontal control that obtains in inter-firm relations within and among large Japanese business groups. We develop our argument in four steps. First, we review and assess the adequacy of three different theories of power in capitalist business; second, we describe our case study: two major types of Japanese business groups, third, we identify forms of vertical and horizontal control through our analysis of patterns of inter-firm shareholding, and we show how additional means of control are adopted to reinforce the existing organizational patterns; fourth, we compare and contrast the highly structured and cohesive inter-firm relations in Japanese business with the more loosely organized pattern that is characteristic in the U.S., and we conclude that the current research on capitalist organizational forms will advance by emphasizing not the unchanging, universal nature of capitalist domination, but rather its varied institutional nature and its apparent cross-cultural diversity.