Reflections in a Distant Mirror: Japanese Corporate Governance through American Eyes

Abstract

For the last ten years, Japanese corporate governance has served as a distant mirror in whose reflection American academics could better see the attributes of their own system. As scholars came to recognize that the institutional characteristics of the American and Japanese systems were politically and historically contingent, other countries\u27 approaches became serious objects of study, rather than just way stations on the road to convergence. One learned about one\u27s own system from the choices made by others. As it came to be conceived, the Japanese corporation of the 1980s represented quite a different method of organizing production. Styled the J-form by Masahiko Aoki, the Japanese corporation combined an interlocking set of governance arrangements that supported a different kind of industrial organization. The main bank relationship, coupled with cross shareholdings, supported a management commitment to lifetime employment for an important subset of employees who, in turn, had the proper incentives to invest in the firm specific human capital necessary for a production system geared to horizontal coordination and information sharing. Central to the J-form was a commitment to organizational stability, consistent with what was said to be a Japanese focus on process technologies

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