Yoshitaka Suzuki

Hierarchies and Federations in the Post-war Era

This chapter presents an overview of the development of resource allocation and the coordination of economic activity among large-scale companies in post-war Japan. We will examine particularly the business groups, which have been the major form of federation for the larger part of the period. Cartels were another form of federation, but they were related to particular groups of industries such as fabricated basic materials, and, therefore, are best be dealt with in later chapters.

Management Resources and their Development

This book has examined the development of managerial hierarchies of large-scale Japanese firms. We started with a hypothesis that a firm is formed when the market or other forms of outside transactions is substituted by an internal allocation of resources. A firm can develop through the internalisation of one kind of resource such as labour, capital, and the flow of goods.

Holding Companies and Corporate Control, 1920–40

The previous chapter examined the development of the management structures of large-scale Japanese manufacturing firms. Though hierarchical structures from top to lower management were investigated, our discussion focused on the middle and lower management. The main functions of these two hierarchical levels were in coordinating the flow of goods and allocating and controlling labour. However, the top management functions of large-scale firms were not fully examined, and the financial resources of these companies were not investigated, either. Furthermore, these companies did not always make use of the market mechanism even when they did not internalise the transactions of resources. Thus the following questions still remain to be discussed. Generally, can the individual companies be regarded as independent firms which are themselves responsible for resource allocation? If their strategic decisions were made by other firms, they should not be regarded as independent firms, and analysing their management structures separately makes no sense. Was it the individual large-scale companies, the Zaibatsu or other sorts of institutions external to the individual firm that were responsible for top management functions? Did the Zaibatsu intensify their control over large-scale industrials in the inter-war years?

Management Resources and the Structures of the Modern Firms

The modern business enterprise is equipped with a highly developed managerial hierarchy. It allocates resources by making use of the line of authority which is operated through this hierarchy. While resources can be allocated and economic activities coordinated through other sorts of institutional arrangements such as the market mechanism, it may be asserted that the business enterprise or the firm with managerial hierarchies appears when the markets or other kinds of institutional arrangements do not effectively fulfil the function of the allocation of resources.

The Traditionally Established Companies in Fabricated Basic Materials

The first group of companies consists of traditionally established firms which supplied fabricated basic materials in the pre-war era and continued to supply the same sort of products in the post-war period. The industrial branches of these firms ranged over textiles, paper and pulp, iron and steel, non-ferrous metals and metal fabricating, and ceramics and other materials. Companies in these industry groups are widely found among the largest pre-war firms, but have gradually declined after the war.

The Formation of Managerial Hierarchies, 1920–40

Managerial hierarchies are, as in big business in the West, essential characteristics of modern Japanese enterprises. This chapter deals with the organisational structures of Japanese large-scale companies throughout their formative period.

The Development of Large-Scale Manufacturing Firms, 1950–80

In the previous chapters we have found that most large-scale Japanese firms made decisions regarding the allocation of resources in the inter-war period. These firms formed managerial hierarchies and became independent of holding companies. For most companies the internalisation of labour and of labour’s technical skills was important, and these factors were reflected in their managerial hierarchies. This chapter presents an overview of the development of large-scale firms and their management structures in the post-war period.

New Companies in the Post-War Mass Market

Companies in food, oil, automobiles, household electrical and other endurable consumer goods developed dramatically in the post-war period. There were only two concerns in oil, one in automobiles, and one in household electricals among the largest 121 firms in 1935, and only one of them remained in the ranks of the largest firms of the post-war era. By 1970 the number of the concerns had increased to eight in oil, 11 in automobiles, and five in household electrical equipment. In food, the large pre-war firms, which had mostly supplied semi-finished materials, were overtaken by new firms which produced finished consumer goods. These companies supplied new products to the Japanese market and developed rapidly along with their major product lines. A market for consumer goods appeared and developed rapidly after 1960, and the growth rate of these companies was generally high, probably the highest among all the industrial branches in the 1960–80 period.

New Industries in the Traditional Companies

Companies in chemicals, electrical equipment, and heavy engineering developed along similar lines in their organisational structures. Most of them manufactured producer final goods, except for some companies that specialised in cosmetics, films, or household electrical equipment. This chapter deals with the development of management structures in 27 firms which mainly supplied producer final goods.