Governance, Control & Co-Ordination in Network Context: The Cases of Japanese Keiretsu and Sogo Shosha
Business Clusters, Networks and Economic Development
January 28, 2006
Journal of International Management, Vol. 11, pp. 87-109, 2005
This paper examines the arguments raised by scholars on the comparative advantages of the stock-market capitalism and Anglo-American 'shareholder' system for corporate governance and the 'relational-insider' system of the welfare capitalism in Germany and Japan, and whether the 'superiority' of the former may be based on false assumptions of the sources for productivity growth and managerial efficiency. It is an established fact in the literature that specific governance relations exist in different markets, and the mechanisms for financing and co-ordination of business operations and control of assets and resources are shaped by the local institutional environment. The modern corporation in its present organisational form is a multinational enterprise that in most cases controls assets in multiple markets, and is therefore tied in contractual relationships with local governments, suppliers, customers, and institutions beyond the reach of its home governance structure. The adversarial competitive relationships in one market are not replicated in another, where different context of the competitive environment applies.
The paper offers two cases of corporate networks (the Japanese Keiretsu and Sogo-Sosha) that differ from the multidivisional form (M-form) of organization. The analysis of the cases tests some of the premises established in the corporate governance debate and leads to conclusions that governance, control and co-ordination mechanisms focused on interdependent relationships and optimization strategies generate specific advantages in the value-creation process.
Number of Pages in PDF File: 23
Keywords: Corporate governance critique, Japanese business networks, Keiretsu, Sogo-Shosha, Shako-kai, collaborative governance, managing interdependencies, coordination and optimisation strategies
JEL Classification: L2, L14, P12, P52
Date posted: August 22, 2009 ; Last revised: August 26, 2009
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