Varieties of Capitalism: Production and Market Relations in the USA and Japan

Abstract

During the 1980s, Japan’s macroeconomic strength encouraged widespread interest in the competitive advantages associated with its organizationorientated micro-level institutions. However, with Japan’s more recent macroeconomic difficulties and prolonged stagnation, and in the light of America’s relative success, pressure for institutional reform in the direction of the American model is mounting. Liberalization of trade and capital movements has contributed to increasing economic interdependence and integration of the world’s advanced nations. Customers and investors in Japan and the USA alike are demanding that firms be increasingly responsive to changes in technologies and market requirements and that they deliver consistently high quality products and services at low prices. At the same time, the increase in foreign equity investment in Japan means that, like their American counterparts, Japanese firms are being urged to prioritize shareholder interests, deliver continuous improvement in short-term financial results and be transparent in their reporting. However, despite very similar pressures to those faced by American firms, Japan is evolving incrementally and developing a hybrid system that continues to maintain its emphasis on a resource-based approach to productive system effectiveness and organizational competitiveness. Focusing on the contrasting cases of Japan and the USA, The Embedded Corporation: Corporate Governance and Employment Relations in Japan and the United States describes developments in corporate governance and human resource management (HRM) — analysing the influence of globalization, shifts in macroeconomic performance and declining union strength on employment practices, the strategic role of HRM and the professional status of the HR executive in this context. Traditionally, Japanese firms have been what Jacoby describes as ‘organisation oriented’ while American firms have been more ‘market oriented’. This is reflected in the dominant features of their respective systems of corporate governance and work organization, where despite movement towards the American model, the Japanese system