The Development Process of the Civil Engineering Industry in Peripheral Areas of Japan

Abstract

After the late 1960s, the national government shifted its key policy from further economic development to one of reducing the economic disparities which widened during the era of rapid economic growth. As a result of this shift, the government came to favor peripheral areas in the allocation of public investment, and the local civil engineering industry thus developed rapidly in these areas. The purpose of this paper is to examine the development process of the civil engineering industry in the peripheral areas of Japan, focusing on the formation of leading companies and their management strategies. Based on a case study of Shimane prefecture, one of the most remote regions in Japan, some important findings were uncovered and are summarized below:(1) In the urban areas of Shimane, most of the leading civil engineering companies had reached the top of the industry before 1973. Some of the companies were formed by a government-mandated merger policy known as kigyo-seibirei under the wartime regime of World War II.On the other hand, in the remote rural areas of Shimane, few civil engineering companies were acknowledged as leading companies in 1973. However, several companies succeeded in catching up with the leading urban-based companies in terms of sales volume by the early 1980s. Most of these were companies with foresight and good management abilities, and had originated from urban areas or other industries after World War II. These companies rapidly increased sales by developing new markets both regionally and technically in the 1970s.(2) In the urban areas, there were many newcomers in the civil engineering industry even after the 1980s, and sales volumes of the companies there polarized between a few leading ones and many medium and small ones, most of which were strongly dependent on subcontracting works.In the remote rural areas, newcomers in the civil engineering industry decreased after the 1980s because of the slowdown of public investment and strong market barriers. On the other hand, during this period, local civil engineering companies developed evenly irrespective of their sales volume due to suitable work allocation arrangements.(3) In Shimane, leading civil engineering companies have applied two management strategies for further development. The first strategy is one of business expansion into the architecture industry. Unlike civil engineering, most of the market demand for architectural works comes from private households and companies. Therefore, market barriers are relatively weak and it is easy for leading civil engineering companies to expand their business into architecture. Today, half of the eight companies with top architecture sales in Shimane are such civil engineering companies.The second strategy is the acquisition and breakup of companies in various territories. With the current condition of territorially-divided markets in Shimane, the acquisition and breakup of companies in various territories is the only effective strategy for further development in civil engineering.