Large Japanese Firms Research Articles

Gaijin invasion? A resource dependence perspective on foreign ownership and foreign directors

While boards around the globe are becoming more international, the reasons behind this internationalization are not fully understood. In this study, we suggest that foreign ownership increases the presence of foreign directors on boards. Based on resource dependence theory, we argue that the dependence on foreign owners makes foreign nationals an important resource for firms. Using data from large Japanese stock market firms and employing logistic regression analysis, we find empirical evidence that greater dependence on foreign, i.e. gaijin, owners is associated with a higher probability to have foreign directors on the board. We also demonstrate that the link between foreign ownership and foreign directors is positively moderated by a firm’s foreign market exposure. We conclude that firms consider foreign directors a viable response to the deviant expectations of foreign owners.

Corporate Transfers for Dual-Career Couples: From Gendered Tenkin to Gender-Equal Negotiations?

Abstract This qualitative-research-based article discusses corporate transfers of dual-career couples in large Japanese firms. In Japan’s internal labour market, inter-regional transfers, or tenkin, are de rigueur in many companies for purposes of training and promotion of long-term employees. Their implementation is often taken for granted because of the gendered assumption that only men are subject to tenkin. Women, who take responsibility in domestic roles, are not able to accept tenkin. Rather, they are either exempted from tenkin regardless of their wishes or forced to remain in secondary positions that require no tenkin. This gendered division of labour in tenkin has hampered women’s promotion in Japanese workplaces and hindered dual-career couples from achieving dual careers through tenkin. Using Acker’s (1990) theory of gendered organisations and Nemoto’s (2016) study of gendered practices in Japanese firms, this article elucidates the processes by which these cultural, gendered corporate transfers (a) reproduce gendered organisations, (b) are changing from dictates to negotiations in some companies where female workers are given more opportunities alongside intensification of the firms’ global competition, but (c) nevertheless continue to be in tension with dual-career families in contemporary Japan. To make a dual-career-couple model mainstream, the labour market structure that views corporate transfers as an absolute necessity needs radical change.

国内大企業の新卒採用における学校歴の位置づけ

国内大企業の新卒採用における学校歴の位置づけ

The real effect of mandatory disclosure in Japanese firms

This study replicates the effects of mandatory segment disclosures on corporate real investment decisions in a Japanese setting. We focus on the mandatory segment disclosure changes implemented in Japan since 2011 and find that unlike the case with US firms, these disclosures have not affected the corporate investment decisions of large Japanese firms. Mandatory segment disclosures were introduced in Japan in 2011, coinciding with Great East Japan Earthquake, explaining the subsequent increase in investments. Therefore, we estimate that, based on the learning model, Japanese mandatory disclosures might be confounded by the revelatory price efficiency crowding-out effects that led to a decrease in the corporate investment of US firms.

The regional nature of Japanese firms: antecedents and consequences

ABSTRACT This article examines the regional nature of Japanese firms, in line with the framework suggested by Collinson and Rugman in 2008. By analysing 52 of the largest Japanese firms, it argues for the regional nature of Japanese firms even in the 2010s, clarifying the inevitable consequences (as well as antecedents) of firms being global. Its findings and contributions are twofold. Firstly, it confirms that Japanese firms have continued to maintain region bound advantages in the Asian region, even in the face of macro challenges, such as the financial crisis and the rise of China. This sharply contradicts the underlying assumptions in the current literature that Japanese firms are moving to being global. Secondly, it shows that the selection of case studies in the current literature is still biased towards global and bi-regional large Japanese firms, rather than reflecting the majority of Japanese firms, which are regional. This underlying tendency to focus on an unrepresentative sample explains why international business scholars wrongly assume a single path of firms becoming global. This article, albeit limited to only Japanese firms, redirects our attention to how firms move dynamically in and between regions, alerting scholars to the need to avoid the possible pitfall of selecting large established manufacturers, typically global firms.

Policy Generosity, Employer Heterogeneity, and Women’s Employment Opportunities: The Welfare State Paradox Reexamined

Scholars of comparative family policy research have raised concerns about potential negative outcomes of generous family policies, an issue known as the “welfare state paradox.” They suspect that such policies will make employers reluctant to hire or promote women into high-authority jobs, because women are more likely than men to use those policies and take time off. Few studies, however, have directly tested this employer-side mechanism. In this article, we argue that due to employer heterogeneity, as well as different modes of policy intervention such as mandate-based and incentive-based approaches, generous family policies may not always lead to employer discrimination. Adopting a quasi-experimental research design that classifies employers based on their differential receptivity to family policy changes, we compare their hiring and promotion of women before and after two major family policy reforms in Japan, one in 1992 and another in 2005. Our analysis using panel data of large Japanese firms finds little evidence of policy-induced discrimination against women. Instead, we find that employers who voluntarily provided generous leave benefits prior to government mandates or incentives actually hired and promoted more women after the legal changes, and employers who provided generous benefits in response to government incentives also increased opportunities for women.

Germany: Lanxess – Organic & soluble polymer dyes

While boards around the globe are becoming more international, the reasons behind this internationalization are not fully understood. In this study, we suggest that foreign ownership increases the presence of foreign directors on boards. Based on resource dependence theory, we argue that the dependence on foreign owners makes foreign nationals an important resource for firms. Using data from large Japanese stock market firms and employing logistic regression analysis, we find empirical evidence that greater dependence on foreign, i.e. gaijin, owners is associated with a higher probability to have foreign directors on the board. We also demonstrate that the link between foreign ownership and foreign directors is positively moderated by a firm’s foreign market exposure. We conclude that firms consider foreign directors a viable response to the deviant expectations of foreign owners.

China: Lomon Billions – TiO2

While boards around the globe are becoming more international, the reasons behind this internationalization are not fully understood. In this study, we suggest that foreign ownership increases the presence of foreign directors on boards. Based on resource dependence theory, we argue that the dependence on foreign owners makes foreign nationals an important resource for firms. Using data from large Japanese stock market firms and employing logistic regression analysis, we find empirical evidence that greater dependence on foreign, i.e. gaijin, owners is associated with a higher probability to have foreign directors on the board. We also demonstrate that the link between foreign ownership and foreign directors is positively moderated by a firm’s foreign market exposure. We conclude that firms consider foreign directors a viable response to the deviant expectations of foreign owners.

Morgan Stanley Group, Inc.: Initial Public Offering

This case involves the analysis of the price at which Morgan Stanley proposes initially to offer its shares. The required analysis includes various valuation techniques, as well as the qualitative assessment of strategic and environmental factors. A student Lotus worksheet file is available on computer diskette for use with this case. Excerpt UVA-F-0719 MORGAN STANLEY GROUP, INC.: INITIAL PUBLIC OFFERING On February 14, 1986, the investment bank of Morgan Stanley & Co. issued a preliminary prospectus for the sale of 4,500,000 shares of its own common stock to the public at a price estimated to be between $ 42 and $ 46 per share. This move signaled a new era in the firm's history, as previously Morgan Stanley had been organized as a “partnership” consisting of 111 managing directors and 143 principals. The offering raised numerous questions: Why had Morgan Stanley chosen to go public rather than sell to a large and well-capitalized buyer? Why did Morgan Stanley need external capital at all? Securities Industry Morgan Stanley competed with an array of firms providing underwriting, financial advice, distribution, and trading/market-making functions. Exhibit 1 provides general financial information on major domestic investment banks but, in addition, Morgan Stanley regarded itself as an international securities firm and included in its realm of competitors merchant banks (for example: S. G. Warburg & Co.), universal banks (for example: Deutschebank), the London investment banking subsidiaries of U.S. money center banks, and large Japanese financial services firms (for example: Nomura Securities). Several trends were changing the competitive structure of the securities industry. Exhibit 2 suggests the magnitude and avenues of change. The trends included increasing concentration of competition, technological change in information support systems, rising demand for a highly specialized work force, innovation in the design of financial securities, the advent of globalized trading and underwriting, inter-market trading (for example: between futures, options, and stocks), and quasi-merchant banking activities. Of special significance was the introduction of Rule 415 in 1982, which allowed corporations to keep registration statements “on the shelf” and quickly (i.e., in two days) issue securities. This rule was credited with eroding investment banking relationships and motivating issuers to seek bids for underwriting business. More recently, investment bankers had begun to bid for the entire underwriting issue in “bought deals” that were then sold directly to investors and distributed to other firms. The new levels of competition in underwriting required more capital. . . .

An American hedge fund in Japan: Exploring the role of investor relations as a form of false signalling

Focusing on the case of Shinsei Bank Limited, this article explores the role of Investor Relations (IR), which has become a major activity among large Japanese firms. This is an iconic case of the recent, controversial, intrusion of Shareholder Value Added (SVA) management into corporate Japan since the bank’s takeover by an American investment fund, Ripplewood Holdings LLC. Qualitative interview data with current and former employees of Shinsei demonstrate that drastic changes to corporate form and practice have occurred since the takeover. However, although Shinsei’s public claims were based around a move towards SVA management, the actual processes of the restructuring do not, in reality, seem to be genuinely associated with SVA. The bank’s IR act as a form of ‘false signalling’ intended to hide an undisclosed business model: effectively a form of ‘narrative management’ used to obscure their true style of restructuring. Interestingly, this smoke-screening did not work effectively, and criticism from employees and outsiders became severe.

"Imitation? Environmental Signals and Similarity of Behavior in Hiring by Japanese Firms, 1974-2011"

Organizations often undertake take similar behaviors. The observation of the phenomenon is usually interpreted as a sign of imitation—organizations refer to each other and behave in the similar way. However, similarity of behavior can occur without reference to other's behavior: it can occur when organizations look at the same signals and consequently take similar behavior. Developing theories about environmental signals and socialization in organizational decision-making, we introduce two concepts of primary signal and secondary signal and explicitly distinguish the two different mechanisms generating organizations similar behavior. Then, drawing from recent literature demonstrating the conditional nature of environmental signals, we explore the conditions under which each type of signals will be most relevant. We test our theory using a 38-year panel of annual hiring of graduating students by about 400 large Japanese firms. Our analyses show that organizations often imitate peers, yet at the same ti...

Information Technology Tools in New Product Development: The Impact of Complementary Resources*,†

Emergent research has examined the antecedents to using information technology (IT) in the new product development (NPD) process and the impact of IT on NPD performance. Based on the resource‐based view (RBV) of the firm, this study hypothesizes that particular resources create IT capabilities that significantly enhance NPD outcomes. More specifically, this research extends previous work by investigating whether three complementary resources, namely an executive champion for IT, global engagement, and organizational innovativeness, influence IT capabilities (IT use frequency and IT replacement frequency), which in turn affect NPD outcomes (NPD task proficiency and NPD performance).To test the conceptual model, survey data were collected from 220 NPD and IT managers in a variety of large Japanese firms. The results show that an executive champion for IT and global engagement are predictors of both IT tool use and replacement frequency while organizational innovativeness contributes only to IT tool replacement frequency. The results also indicate that both IT tool use and replacement frequency have a positive effect on NPD task proficiency, which improves NPD performance.This research contributes to the literature by adding understanding of the role of IT in NPD at the firm level in four ways. First, it examines particular organizational complementary resources and their relationship to IT capabilities. Second, it examines the RBV and IT in the context of NPD, an important business process. Third, it measures IT usage in a more granular fashion (i.e., IT tool use frequency and IT replacement frequency) rather than simply IT usage as a dichotomy. Finally, through testing the proposed model with data collected from Japanese firms, this study provides empirical evidence from an Asian country to answer the call for more NPD research to be conducted in countries other than North American and Western European contexts.The findings of the study also provide implications for managers. Importantly, they indicate that an executive level champion for IT is a key influencer in facilitating IT usage and replacement, and likely can help generate awareness of and support for greater IT investments so the firm can create IT capabilities for effective NPD.

Innovation Process and Outcomes for Large Japanese Firms: Roles of Entrepreneurial Proclivity and Customer Equity

The authors investigate the structural relationships among entrepreneurial proclivity, innovation process characteristics (technological strength, marketing strength, and marketing–R&D integration), and customer equity in achieving business growth and financial return in the Japanese context.Following field interviews and a pilot test, survey data are collected from 207 pairs of marketing and R&D executives from strategic business units (SBUs) of large manufacturing companies in Japan. Based on the partial least squares analysis of data, the authors find nuanced effects of organizations' entrepreneurial proclivity on the critical organizational process, resource, and business performance. The study theorizes and empirically supports the idea that customer equity is a potent intermediary outcome that contributes to both top‐line (growth) and the bottom‐line (ROI) of a business. Specifically, the study shows that: (1) entrepreneurial proclivity directly and positively influences technology strength, marketing strength, and marketing‐R&D integration; (2) entrepreneurial proclivity's effect on business growth and financial return is positive and mediated by customer equity; (3) marketing–R&D integration has a moderating effect on the positive impact of technology strength on customer equity; and (4) customer equity is a strong driver of business growth and financial return.There is a dearth of research on entrepreneurship in Asia; very few empirical studies have been reported from Japan in particular. This study contributes to boundary testing of the theoretical relationships. Although entrepreneurial proclivity appears to be an inspirational concept, its actual adoption remains an important question for many Japanese companies. Those Japanese firms that aspire to be entrepreneurial need to be mindful what innovation processes and resources it takes to fulfill the positive influences of entrepreneurship.

CORPORATE GOVERNANCE IN ESTABLISHED JAPANESE FIRMS: WILL THE OLYMPUS SCANDAL HAPPEN AGAIN?

After the Second World War, manufacturing establishments in Japan experienced vigorous growth from the 1960s through 1970s, and they achieved international success in the 1980s, during which they developed their own way of running firms, called Japanese style management, and a unique corporate governance system called the insider-type of corporate governance. Under this system, the main banks monitor and check the behaviors of corporate executives, who have usually had a long career in the companies. The Japanese style of management and the insider-type of corporate governance system stopped working well in the 1990s, however, when Japanese businesses experienced the collapse of the asset-inflated economy in the domestic market, began to receive a large number of foreign investors in their stock market, and found that they had to be involved in global competition. The country, therefore, from the late 1990s, shifted its strategies, restructured organizations, and tried to change its management style and corporate governance system to ones better fitted to the new business environment. A key to the Japanese manufacturers' resurgence is an entrepreneurial challenge to promote innovation in modular-technology-core industries, as well as maintenance and strengthening of their traditional competitive advantage in integral-technology-core industries. The challenge imperatively requires a more transparent and nimble governance system for global financing and agile decision making. However, despite efforts to restructure, the core structure of the traditional governance system still remains intact, as was demonstrated by the Olympus scandal of 2011. The reason that large Japanese firms cannot change their creaky governance system is not because it still shows efficiency or effectiveness, but because Japanese business society still holds to orthodox views regarding the large, established companies. As long as the people concerned hold to orthodox views of large traditional firms, big banks, and bureaucracy, the traditional insider-type of corporate governance will survive, and another corporate scandal is liable to happen in the near future.

Organizational linkages in Japan’s female labor market: Information exchanged in networks

The form of institutional linkages between schools and employers changed during the decade-long economic recession in Japan. This article explores why institutional linkages between women’s colleges and large Japanese firms in the secondary labor market have survived, despite a long-term restraining of labor demand. From a network theory perspective, employers value information about applicants’ residency status, as it is conducive to reducing personnel management costs; information can be reliably obtained via these institutional linkages. Employers expect schools to use such information to select nominees. By using the data from the school’s applicant pool, the results from logistic regression analysis showed that schools tend to nominate candidates who are living with their parents, and no candidates who lived without parents were hired. Additionally, a candidate’s academic performance and personality evaluation, which can also be obtained through the linkages, as well as more formal recruitment processes, did not have a significant impact on employee selection.

An internet-inspired electricity grid

Japan's plan to phase out its nearly 50 gigawatts of nuclear capacity over the next two to three decades has opened a window for renewable energy in the country. But swapping wind and solar power for that nuclear generation, which produced 30 percent of Japan's electricity prior to the 2011 Fukushima crisis, could also lead to major disruptions in energy supply, warns Rikiya Abe, a University of Tokyo professor. The problem, says Abe, who came to academia after working in the electrical generation industry for 30 years, is that Japan's grid-and indeed that of many developed countries-is set up to be centrally controlled. The utilities have to carefully regulate the grid's frequency and voltage by maintaining a fine balance between power generation and changing demand. A diverse group of large Japanese firms is starting to explore a solution-a gradual reorganization of the country's power system so that in the end it resembles the Internet, routers and all.

Determinants of the Timing of Downsizing Among Large Japanese Firms: Long-Term Employment Practices and Corporate Governance

This paper analyses the relation between corporate governance and employment adjustment behaviour among Japanese firms. The results are summarized in the following two points. First, in the period before 1997, although main banks were likely to allow firms' employment maintenance until they experienced 2 consecutive years of losses, they tended to press firms to downsize once firms faced financial distress. Second, the reduced function of main banks and the increased influence of foreign owners have changed the timing of downsizing since 1997. Changes in corporate governance have brought about slight but non-negligible changes in Japanese employment practices.

Rethinking the effectiveness of asset and cost retrenchment: The contingency effects of a firm's rent creation mechanism

This paper posits that the efficacy of different retrenchment strategies depends upon the firm's core rent creation mechanism. We focus on two distinct mechanisms of rent creation: Ricardian rent creation based on the exploitation of resources and Schumpeterian rent creation based on explorative capabilities. We argue that cost retrenchment may have detrimental effects on firms with a relatively high Schumpeterian rent focus. On the other hand, asset retrenchment may erode the basis for future rent creation for firms with a higher Ricardian rent focus. Our findings based on a sample of large nondiversified Japanese firms highlight the differing degrees of fragility and recoverability of the two rent creation mechanisms in the context of different retrenchment strategies. Copyright © 2012 John Wiley & Sons, Ltd.

The Firm as a Legal Entity: What Distinguishes Wholly Owned Subsidiaries from Internal Divisions in Japan?

We argue that the legal boundaries of the firm have more substantial effects on the Japanese multi-business organization than on its U.S. counterpart. The standard economic, management, or legal view is that distinguishing between an in-house division and a subsidiary, in particular, a wholly owned subsidiary, does not make sense: Although it is the subsidiary who owns its assets, and the parent firm only owns the subsidiary as a legal thing, the parent firm, as the dominant shareholder, can hire or fire the subsidiary's managers at will, or even dissolve the subsidiary and sell off all the assets. However, subsidiary companies appear to have very different roles in the U.S. and Japan. Although the traditional approach to diversification in the U.S. is to organize businesses as divisions, most large Japanese firms maintain a network of affiliated firms many of which are subsidiaries, and the core firms actively separate activities from the main body, in part for the purpose of diversifying and developing new businesses. What then distinguishes a subsidiary from an in-house division? We argue that separating a business as a subsidiary has an economic impact on the firm that attempts to make a commitment in delegation of authority to some of the divisions but fails because of the 'multilateral' nature of relationships between the head office of the firm and the in-house divisions. Although the ultimate control right resides with the head office of the firm, it may attain delegation of authority by making a credible promise to rubber-stamp the decisions made by the divisions in repeated relationships. Whether this 'informal delegation' is sustained as an equilibrium depends on the strategies of the relevant parties. We argue that in the stylized Japanese firm, the managers identify themselves with the firm rather than the divisions they belong to, and hence everyone expects that deviation from informal delegation at a specific division will be met with punishment from all the divisions. If such a multilateral arrangement is well established and prevails in the Japanese firm, it faces difficulties in differentiating its internal units: either informal delegation granted to all the units or delegation to neither unit is sustainable as an equilibrium. This inflexibility makes room for a role of legal boundaries. Even if separating a unit as a subsidiary only changes its 'label', it enables the Japanese firm which cannot sustain partial informal delegation to distinguish among the businesses and attain informal delegation to those outside the boundaries while maintaining centralization internally.

United States Securities Regulation and Foreign Private Issuers: Lessons from the Sarbanes-Oxley Act

United States Securities Regulation and Foreign Private Issuers: Lessons from the Sarbanes-Oxley Act