Japanese Cotton Spinning Industry Research Articles

Designing wartime economic controls: Productivity and firm dynamics in the Japanese cotton spinning industry, 1937–9

AbstractIn 1937, the Japanese government accelerated the expansion of its military expenditure and began to impose controls on the economy to maintain the balance of international payments. The controls were developed through trial and error. The cotton spinning industry was one of the industries most deeply affected by these controls. Initially, the government simply reduced the allocation of foreign exchange for raw cotton imports. However, because this measure prevented the export of cotton products, especially to countries outside the yen bloc, a new scheme of control, the ‘export–import link system’, was adopted from the second half of 1938. This scheme was intentionally designed to give firms incentives to export to non‐yen bloc countries and to incorporate elements of market mechanisms into the system of economic controls. Analysing firm‐level data, we find that under the link system, firms with higher labour productivity (LP) tended to grow faster, as occurs under a market economy. This relationship was not observed during the early stage of the controls. This difference is reflected in the pattern of change in aggregate LP. Under the export–import link system, the positive reallocation effect was substantial, similar to a market economy, whereas it was almost zero under the early controls. These findings indicate that the design of controls matters for the performance of controlled economies.

Centers of gravity: The effect of stable shared leadership in top management teams on firm growth and industry evolution

AbstractResearch SummaryWe study the processes of firm growth in the evolution of the Japanese cotton spinning industry during 1883–1914 by integrating strategy and historical approaches and utilizing rich quantitative firm‐level data and detailed business histories. The resultant conceptual model highlights growth outcomes of path dependencies as firms evolve across periods of single versus shared leadership, establish stability in shared leadership, or experience repeated discord‐induced top management team (TMT) leader departures. While most firms do not experience smooth transitions to stable shared TMT leadership, a focus on value creation, in conjunction with talent recruitment and promotion, enabled some firms to achieve stable shared leadership despite discord‐induced departures, engage in long‐term expansion, and emerge as “centers of gravity” for output and talent in the industry.Managerial SummaryWe demonstrate stable shared leadership is at root of firms who emerge as centers of gravity in an industry and account for the lion's share of output. Stable shared leadership enables growth strategies such as talent recruitment, product diversification, downstream integration, and acquisitions. Stable shared leadership, however, is extremely difficult to maintain. Most firms experience discord‐induced departures in TMTs due to politics and power struggles. Firms that deviate from this norm to become industry leaders achieve stable shared leadership by adhering to fundamental principles related to long‐term value creation as opposed to short‐term gain, adoption of merit‐based promotion systems in defiance of stereotypes, sharing of power within TMT leadership to enable efficient division of labor, and honorable resolution of conflicts and ethical breaches.

Centers of Gravity: The Effect of Shared Leadership and Stability in Top Management Teams on Firm Growth and Industry Evolution

We study the processes of firm growth in the evolution of the Japanese cotton spinning industry in the late 19th-early 20th century, the first episode of successful industrialization outside of Western Europe and the United Sates. By integrating strategy and historical approaches and utilizing rich quantitative firm-level data and detailed business histories, we examine the effect of top management teams’ (TMT) shared and stable leadership in the emergence of “centers of gravity” for output and talent in the industry. Shared and stable TMT leadership enabled long term expansion, innovative product choices, and the accumulation of talent and physical assets. Additionally, a focus on value creation, in conjunction with talent recruitment and promotion enabled TMTs to weather discord related disruptions.

Endogeneity in panel stochastic frontier models: an application to the Japanese cotton spinning industry

ABSTRACTWe present a panel stochastic frontier model that handles the endogeneity problem. This model can treat the endogeneity of both frontier and inefficiency variables. We apply our method to examine the technical efficiency of Japanese cotton spinning industry. Our results indicate that market concentration is endogenous, and when its endogeneity is properly handled, it has a larger negative impact on the technical efficiency of cotton spinning plants. We find that the exogenous model substantially overestimates efficiency in concentrated markets.

History and nanoeconomics in strategy and industry evolution research: Lessons from the Meiji‐Era Japanese cotton spinning industry

This paper uses nanoeconomics and historical methodology to advance strategic management research, focusing on the coevolution of firms and industry. We demonstrate the power of these methods through a study of Meiji Era Japanese cotton spinning industry from its state‐supported founding through its development into a sustained, globally competitive presence. We shed light on the role of superior human and organizational capabilities of industry leaders. In particular, we demonstrate that these helped the industry leaders to overcome deep, systematic structural factors to make a few firms highly productive and able to move the entire industry into high growth and to respond to and thrive in dynamic environments on the world stage. Copyright © 2015 John Wiley & Sons, Ltd.

Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry

We explore how changes in ownership affect the productivity and profitability of producers. Using detailed data from the Japanese cotton spinning industry at the turn of the last century, we find that acquired firms' production facilities were not on average less physically productive than the plants of the acquiring firms before acquisition. They were much less profitable, however, due to higher inventory levels and lower capacity utilization—differences that reflected problems in managing the uncertainties of demand. After acquisitions, less profitable acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels. (JEL D24, G32, G34, L11, L25, L66, N65)

Knowledge diffusion and industry growth: the case of Japan’s early cotton spinning industry

The diffusion of technological knowledge is key to industry growth. But not all knowledge is created equal. I use a nanoeconomic approach to examine knowledge diffusion-based growth in the Meiji-era Japanese cotton spinning industry, which enjoyed remarkable success after a decade of initial failure. By tracing sources of technological knowledge to individual engineers, I find that successful technology diffusion required the right kind of human capital embodying and transmitting knowledge, and a competitive environment that rewarded talent while weeding out incompetence

Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry

We explore how changes in ownership affect the productivity and profitability of producers. Using detailed data from the Japanese cotton spinning industry at the turn of the last century, we find that acquired firms’ production facilities were not on average less physically productive than the plants of the acquiring firms before acquisition. They were much less profitable, however, due to higher inventory levels and lower capacity utilization—differences that reflected problems in managing the uncertainties of demand. After acquisitions, less profitable acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels. (JEL D24, G32, G34, L11, L25, L66, N65) The influence of changes in corporate control of assets on productivity has been a focus of theoretical and empirical research for some time. In principle, mergers and acquisitions can reallocate control of productive assets to entities that are able to apply them more efficiently. Besides increasing the productivity of the individual production units that are merged or acquired, a broader process of such reallocations can also lead to aggregate productivity growth. Such a mechanism therefore has the potential to explain patterns of productivity at both the micro- and macro-levels. Implicit in the story of this mechanism—though not often treated explicitly in the empirical work on the subject—is the notion that productivity growth occurs when changes in ownership and control put assets in more able managers’ hands. 1

Japanese cotton spinning industry mergers and acquisitions during the Showa Depression: the case of Toyo Spinning Co., Ltd. and Osaka Godo Spinning Co., Ltd.

Japanese cotton spinning industry mergers and acquisitions during the Showa Depression: the case of Toyo Spinning Co., Ltd. and Osaka Godo Spinning Co., Ltd.

Framework for the Empirical Analysis of Institutional Changes and Its Applications: Towards Understanding Institutional Changes

This paper presents a framework to decompose institutional changes into some factors representing a change in the population and changes in behavior. Then, this framework is applied to two cases, that of the main bank system in postwar Japan and that of the corporate organization in the prewar Japanese cotton spinning industry. A substantial part of the institutional changes in these cases is explained by changes in the firm populations, which suggests that, at least in some cases, the evolutionary game approach is valid for understanding institutional changes.

Entrepreneurial ability and market selection in an infant industry: evidence from the Japanese cotton spinning industry

In this paper we develop a new insight into the process of learning in an infant industry, in a setting where entrepreneurs are differentiated by talent. The learning rate depends on the quality of ideas, not on the scale of the industry, and a competitive open economy regime may furnish a better environment for innovation-led industrial growth even in the presence of industry-wide increasing returns to scale. Competitive market selection of ablest entrepreneurs forms a crucial condition for successful industrialization. The model is tested against the evidence of the industrial revolution in Japan, which presents a unique historic experiment in which an internationally competitive textile industry was eventually set up without government protection after earlier experiments with subsidized firms had failed.

Co-operation and competition in the rise of the Japanese cotton spinning industry, 1890–1926

This study examines competition and co-operation in the modern Japanese cotton spinning industry through analysing the practice of production curtailments implemented by the Japan Spinners Association. These temporary cutbacks of output became common after 1900. Through a long process of trial and error, they gradually achieved a complex blend of cooperation and competition. Contrary to critics' views, the curtailments served a constructive purpose in providing stability to an industry vulnerable to abrupt swings in the world prices of raw cotton and of yarn. As a strategy devised to meet specific challenges at a particular time, the curtailments became central to the Japanese cotton spinning industry and provided a precedent for aspects of Japan's industrial policies later on.

The Establishment of Oligopoly in the Japanese Cotton-Spinning Industry and the Business Strategies of Latecomers: The Case of Naigaiwata&Co., Ltd.

The Establishment of Oligopoly in the Japanese Cotton-Spinning Industry and the Business Strategies of Latecomers: The Case of Naigaiwata&Co., Ltd.

The distribution approach to the aggregation of putty-clay production functions

The point of departure of the distribution approach is the efficiency distribution of the production units in an industry. From this distribution the full-capacity production function and the short-run aggregate production function of the industry are derived. The long-run production function of the industry then is derived from the full-capacity function and the short-run production function. Hence, in the context of the distribution approach the relation is analysed between the short-run, full-capacity and long-run aggregate production functions of the industry and the efficiency distribution (and related capacity distribution) of the production units in that industry. Finally, the distribution approach is applied for the case of the Japanese cotton spinning industry.

Productivity Change and Labor Absorption in Japanese Cotton Spinning 1891-1935*

Accounting for productivity change and labor absorption, 196.—Data and data sources, 199.—The estimation of the Japanese cotton-spinning industry production function, 200.—Results on the conventional production function, 204.—The estimation of the fundamental equations, 209.—Summary and conclusion, 218.

企業金融の比較史的研究

The twelfth annual meeting of the Business History Society of Japan was held on October 23rd and 24th, 1976, at Senshu University in Tokyo. The meeting was organized by Professor S. Yonekawa, Professor K. Sugiyama, and myself on the common subject of “Comparative Studies in the History of Business Finance.” The meeting was arranged to compare and discuss business finance in English and Japanese cotton spinning firms and American and Japanese iron and steel mills. The period before World War I was selected for the study of the cotton industry and the inter-war period for the iron and steel industries. The objective of this commontopic session was to investigate how each firm raised long-term and short-term capital and how it used the capital resources thus obtained. Professor Naosuke Takamura of University of Tokyo examined the financing of the five leading companies in the Japanese cotton spinning industry ; Professor Masaji Arai of Kansai University, Oldham Limited in the Lancashire cotton industry ; Professor Yoshimitsu Imuta of Hosei University, the Japan Steel Tube (Nihon Kokan), the Kobe Steel Works (Kobe Seikosho), and other steel mills ; and Professor Junko Nishikawa of Tokyo Commercial College, the electric-power and the iron and steel industries in the United States. The major conclusions of this commontopic session were as follows : (1) Fixed capital in the cotton spinning firms was raised in Japan by issuing new stocks and bonds whereas in England it was supplied by loan capital borrowed from the working class living in the neighborhood of the mills. A considerable part of the working capital in the Japanese cotton mills was supplied by the Bank of Japan by discounting the promissory notes issued by the mills. (2) The nature of a holding company in Japan and the United States was notably different, and in addition the kind of financial institutions that supplied resources directly to manufacturing firms were also different in the two countries : in Japan it was mainly banks, whereas in the United States it was mostly investment trust companies. The nature and the method of raising working capital in iron and steel mills both in Japan and the United States were left for future examination.