The Effect of Keiretsu Affiliation and Resource Dependencies On Supplier Firm Performance in the Japanese Automobile Industry

Zusammenfassung

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Resource dependence theory was used to develop hypotheses on whether keiretsu affiliation, mutual dependence between the automaker core and supplier firms, and internationalization level of the affiliate firm have an effect on its performance. The hypotheses were tested on archival data from the entire population of 470 first-tier automobile components suppliers in Japan. Results indicate that lower levels of supplier-firm dependencies on the automaker firm and higher levels of automaker firm dependencies on the supplier firm had a positive effect on the performance of the supplier firm. Interestingly, keiretsu affiliation was not found to have an impact on supplier firm performance.

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Auszug

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The Effect of Keiretsu Affiliation and Resource Dependencies On Supplier Firm Performance in the Japanese Automobile Industry

Introduction

The Japanese automakers successfully increased their share of global automobile production from 3.6 percent to 25.5 percent between 1969 and 1985 (Richard 1992). What was the cause for this phenomenal success? Japanese-built cars were extremely reliable, had superior quality, and were very competitively priced and an excellent value for the growing number of middle-class buyers all over the world. Since the 1970s, some of these models became permanent fixtures on the top ten lists compiled by rating agencies such as J. D. Powers & Associates and Consumer Reports.

Prior research has indicated two broad reasons for this success: a) the flexible production system pioneered by Toyota, and b) the "keiretsu" style automobile parts contracting system unique to the Japanese automobile and electronics manufacturing industries (Dyer 1994, Fruin 1992, Nishiguchi 1994, Womack/Jones/Roos 1990). According to the Ministry of International Trade and Industry (MITI), the "Japanese manufacturing industry owes its competitive advantage and strength to its subcontracting structure" (Cole/Yakushiji 1984, p. 151). Dore (1983) coined the phrase "relational subcontracting" to describe this unique nature of the buyersupplier relationship in the Japanese automobile industry. The importance of this unique partnership between Japanese automakers and their first-tier suppliers cannot be overemphasized in a system where more than 70 percent of the parts in a car are manufactured by ancillary manufacturers (Mitsubishi Research Institute 1987). The excellent quality and low cost of Japanese cars could not have been achieved without the support of their suppliers (Dyer 1994, 1996c).

The success of this unique partnership had an isomorphic effect (DiMaggio/ Powell 1983) on the American automobile industry. In the 1990s, leading manufacturers such as Chrysler successfully re-organized their supplier network on Japanese lines (Dyer 1996b, Putnam/Chan 1998). During the same period, Japanese transplants in the United States, such as Honda, have also built up their keiretsu networks in the United States (Martin/Mitchell/Swaminathan 1995, 1998, MacDuffie/Helper 1997). This has helped them to achieve productivity and quality levels similar to plants in Japan (Pil/MacDuffie 1999). The benefits emanating from a "keiretsu" network to the automaker are well documented (Dyer, 1996b, Helper/Sako 1995, Dyer/Cho/Chu 1998, Pil/MacDuffie 1999).

However, what is not clear is how do the suppliers benefit when it participates in a keiretsu network. Is the proliferation of Japanese-style buyer-supplier relationships good for both parties as they become intertwined together in a mutually supportive, albeit difficult-to-exit, relationship or is it an exploitative one based on the gigantic automaker taking advantage of the smaller suppliers? While the success of the major Japanese automakers has been well documented (Cusumano/ Takeishi 1991, Fruin 1992, Odaka/Ono/Adachi 1988, Womack/Jones/Roos 1991) surprising little research has been done on the performance of supplier firms in Japan. The purpose of this paper was to investigate whether supplier firms benefited financially from a keiretsu relationship with their Japanese automakers.

Prior studies have looked into various non-financial aspects of the buyer-supplier relationship. These include shifting product development responsibili...

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