The effect of keiretsu affiliation and resource dependencies on supplier firm performance in the Japanese automobile industry

Abstract

■ 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. Key Results■ 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.

Foreign direct investment and local linkages: An empirical investigation

“…Much of the research on linkages and spillovers is centred on developing or transitional countries (Blomström 1989, Grosse 1988, Svetlicic/Rojec 1994, McIntyre et al 1996, Kokko et al 1996, Sun 1996, Khawar 1997, De Mello 1997, Figueroa 1998, Aitken/Harrison 1999, Lall 2001, Narula/Sadowski 2002, Giroud 2003 or large, developed economies or regions (Globerman 1979, Dunning 1998, Cantwell/ Piscitello 2002, Sambharya/Banerji 2006. Some studies consider how FDI-led upgrading might occur in developed countries where firms can compete on a more even footing, services and knowledge based industries predominate, and cooperative activities are common (Girma et al 2001, Liu et al 2000.…”

Do Keiretsu Really Hinder FDI into Japanese Manufacturing?

“…In contrast, vertical keiretsu are organised around a core firm (i.e. dominant manufacturing assemblers) with links along supply and distribution networks that generally operate within one industry (Sambharya and Banerji, 2006), where intermediate goods and services are supplied through an extensive use of vertical subcontracting arrangements (Coffey and Tomlinson, 2003). A core firm plays a leading role as an apex of a hierarchical system and a spider of an industrial web, controlling large production and technological value added activities through upstream and downstream supply chains (Ruigrok and Van Tulder, 1995).…”

“…This focuses on the dominance of firms from the electric machinery and motor vehicles sectors. Sambharya and Banerji (2006) and Kimura and Pugel (1995) argue that electronics and motor vehicle manufacturers occupy the central and dominant positions among vertical keiretsu system. Resource and information flows are channelled from core firms at the hub of vertical keiretsu to various other members of the keiretsu.…”

“…At the same time, the shift to overseas production begun by many Japanese MNEs in the 1980s has accelerated the so called 'hollowing out' process (Bailey, 2003;Bailey and Sugden, 2007;Sambharya and Banerji, 2006). As a result, the growth in outsourcing has created a demand crisis for keiretsu networks, weakening the traditional links between Japan's core assemblers and suppliers in vertically linked keiretsu (Cowling and Tomlinson, 2000).…”

Spillovers from FDI and local networks

“…In examining this, we also distinguish between vertical keiretsu, which are structured around a core manufacturing firm and its network of buyer-supply linkages in the same industry, and horizontal keiretsu, which are conglomerate centred on financial institutions spanning numerous unrelated industries (Sambharya and Banerji, 2006). Conceptually, one would expect such networks to be important determinants of spillovers.…”