Cwl. Hill, NATIONAL INSTITUTIONAL STRUCTURES, TRANSACTION COST ECONOMIZING AND COMPETITIVE ADVANTAGE - THE CASE OF JAPAN, Organization science, 6(1), 1995, pp. 119-131
Japans economic success since World War II has been striking. Modern J
apan was the first major industrial economy to emerge from outside the
Western tradition. Economically devastated in 1945, by 1990 Japan had
the world's second largest economy and a GDP per head 20 percent grea
ter than that of the United States. In this paper it is argued that on
e reason for Japan's success is that the costs of achieving cooperatio
n and specialization ate lower in Japan than in the West. Cooperation
and specialization have been acknowledged to have a beneficial impact
upon productivity ever since Adam Smith wrote about cooperative specia
lization in the context of the division of labor. Modern economic theo
ry, however, suggest that in a world of self-interested individuals th
e costs of achieving cooperation and specialization are substantial. I
n this paper it is argued that the cultural value system that Japan ha
s inherited from its preindustrial past, and particularly the Tokugawa
period, helps facilitate cooperation between individuals and encourag
es them to undertake productivity-enhancing investments in specializat
ion. This lowers the costs of achieving cooperative specialization. In
turn, the lower costs of achieving cooperative specialization have he
lped Japanese enterprises adopt practices such as self-managing work t
eams and long-term supplier relations that are consistent with obtaini
ng a productivity-based competitive advantage in the world economy.