A
JAPANESE SUBCONTRACTING:
"POST-COMMODITY" CONTRACTING MODEL
Toshihiro Nishiguchi
April 1989
A
JAPANESE SUBCONTRACTING:
"POST-COMMODITY" CONTRACTING MODEL
Toshihiro Nishiguchi
April 1989
Research Fellow
International Motor Vehicle Program
Building E40-213
Massachusetts Institute of Technology
Camb.rige, MA 02139, U.S.A.
Paper originally presented at the Political Economy Seminar
Series, Center for International Studies, Massachusetts
Institute of Technology on February 13, 1989.
I would like to thank Richard Locke for his invaluable
comments on an earlier version of this paper. My thanks
also to Michael Cusumano, Ronald Dore and Charles Sabel.
E
I
S
I
1
Problem Setting
Traditionally, the problem of manufacturing has been understood in
terms
of a narrow range of
technical indicators:
economies of scale,
production cost, scheduling, factory lay-outs, inventory management, and
so on.
in
While each of these indicators may constitute an important part
the
business
operations,
curriculum
technical knowledge
understanding as
Even if
school
to what
as
well
alone does
as
day-to-day
not lead
to an
the present-day manufacturing is
the problem of manufacturing
is
discussed
in
factory
insightful
all about.
broader
academic
terms, it still tends to be looked at in the light of a simplistic facet
such as labour process control, transaction cost, culture or technology.
I
argue
instead
manufacturing activity
in
that
the
industrial
current
successes
or
crises
of
societies can be fully understood
only when they are placed in the context of historical evolution through
which various institutions in each society have emerged and disappeared.
I
argue
further
institutions
and
that
when
changing
a
structural
externalities
mismatch
develops
between
in
a
existing
society,
its
viability is at stake.
History has shown us numerous examples of once dominant industrial
powers being superceded by new entrants.
When we look closer at them,
we invariably find institutional rigidities being irrevocably developed
in defeated models.
The current crises of many industrial societies may
thus be understood as organizational impotence to change.
I claim, more specifically,
product
market
define
that the characteristics
production
organization.
change, the latter must also adapt to that change.
Should
of the final
the
former
If there persists a
mismatch between the market and production organization in a firm or an
2
economy,
the viability of the firm or the economy itself
many firms or economies
in
This is
what we see today in
world.
Their current crises are structurally defined.
Galbraith's
claim (1972)
once popular
that
is
at stake.
the
industrial
can be
the market
controlled by large firms' demand management, particularly by the art of
This
advertisement working on 'the mass' (p.213), has lost its ground.
is because phenomena from the
last two decades or so have turned the
Large industrial corporations, once
concept of the mass itself dubious.
hailed as 'accomplishments themselves', have been found utterly impotent
in
--
the face of the emergence of the 'micromasses'
(1986)
uniform
as relatively small social groupings with unique but
purchasing
disaggregated
the
patterns.
final
Affluence
product
in
advanced
market
to
characteristics of large-firm industrial systems
technology,
dedicated manpower,
the Galbraithian
failure
prescription
structural
change.
of
their
of
Tendencies
their
towards
increasingly
requiring
manufacturers
must
degree
that
-- such as large-scale
--
can in
techniques
volatile,
large
advertisement
Their plight is not so much due
production
flexible
provide
and
as
productive
in
lack
the
organization
fragmented
variety
to
to
markets
small
have
volumes
been
Today,
in
much
Only those who
this and altered their production organization
end can survive competition successfully.
of
external
responses.
shorter lead times and product cycles than in the past.
have understood
has
the
demand management
marketing
of
adaptation
societies
planning and long lead times
manipulation alone have been in crisis.
the
internally
Many firms which have continued to rely on
fact be counterproductive.
to
defined by Fujioka
to this
3
Having
thus
set
activity takes place
evolution
of
today,
Japanese
selected because it
out
responded
larger
context
This
not only exemplifies
well
to
in which manufacturing
I now proceed to my central
subcontracting.
ever-changing environments
has
a
issue
is
the
specifically
an evolutionary adaptation
but also represents
the
question:
present-day
to
a successful model that
disaggregation
of
the
final
product market, while retaining competition, innovation and flexibility.
As will be demonstrated,
my evolutionary approach
covers
what other paradigms have missed
1979;
Berger
&
Piore,
1980),
--
cultural
t-o the problem
be they dualism
preferences
(Edwards,
(Dore,
1987),
transaction cost economics (Williamson, 1985) or flexible specialization
(Piore & Sabel, 1984).
Furthermore, results of my international research suggest that the
evolution of Japanese subcontracting is not so
Japan as is
generally thought.
specific
a problem to
Rather, it entails a range of universal
issues relevant to all industrial societies today, once looked at as an
alternative organizational response to changing environments.
In what follows, I will provide a brief review and critique of the
four major
inquiry:
arguments
dualism,
--
have just mentioned
which I
transaction cost economics,
flexible specialization.
--
pertinent
to my
cultural preferences
and
Then, I will give a summary of my alternative
evolutionary account induced from historical evidence from Japan.
First,
1980,
there
are
and many others).
familiar
Large
arguments of dualism (Berger
firms utilize
buffer against fluctuations in demand.
former
business
internalize
and
outside
operations
regular workers
at
the
& Piore,
small subcontractors
as a
When the economy contracts, the
so
as
to
cost
of
subcontractors.
protect
their
own
Cheap
4
labour and lack of unionization in the latter sustain the system.
There
always remains unequal treatment of economic agents in different sectors
of the economy irrespective of their objective worth.
of this dualist approach
(Edwards,
firms exploit subcontractors
1979)
claims
A radical twist
that managers
of large
the working class;
so as to fracture
that
opportunities to exploit advanced technology are limited to large firms;
and that there will be a decline of the small,
sector due to
peripheral
large firms' spillover into new markets and new industries.
Evidence from Japan indicates, however,
absorber'
elements of subcontracting
continue
to
account
for
more
the
'shock
can by no means be negated,
parts
Small firms have not declined.
of the above argument are not tenable.
They
that, while
than
two-thirds
of
the
working
population and one-third of the total industrial value added (Figure 1).
The availability of advanced technology has not been restricted to large
firms.
The
diffusion
of
microchip
technology
as
exemplified
by
numerically controlled (NC) machines has narrowed the gap between large
and
small
firms.
Interscale
wage
differentials
have
substantially
narrowed to the international average as well (Figure 2), making it less
attractive
to
Subcontractors
use
subcontractors
were
not
during the
hardest
analytical
leverage
cheap
labour
indiscriminately forced out
recessions.
for
for
these
The dualist
facts.
There
reasons
of business
account
must
alone.
provides
even
little
extra-dualist
be
factors to be taken into account.
The
1985)
second argument of transaction cost economics
claims that,
bounded rationality,
(Williamson,
due to human nature's proclivity to opportunism and
recourse to hierarchies or vertical
integration is
an appropriate measure to foreclose market failure and to economize
on
5
transaction
This
costs.
being
so,
the
continuation of obligational contracting
as
durable
investments
in support
only
is
major
reason
for
asset specificity,
the
defined
of specific transactions.
Without
asset specificity, however, there is no logic for continuous contracting
relations which
are
prone
to be
dysfunctional.
simply reiterates what is observable ex post.
in
the first
place
such risky investments
This view, however,
It does not explicate wby
of a durable kind should be
made by, allegedly,
intrinsically opportunistic economic
agents.
does
sufficient
the
claimed
1987)
proposes
kind
--
it
provide
evidence
to
support
Nor
dysfunctionality of obligational contracting.
The third argument of cultural preferences
that
it
is
a
Japanese
trait
predisposition
to
prevalence
relational
of
goodwill
of
(Dore,
a non-opportunistic
and benevolence
contracting
--
that
in Japan,
and
their
accounts
for
that
is
it
the
this
cultural quality that explains moralized trading relationships and lower
degrees of transaction costs and opportunism in
concomitants:
dutifulness,
in
friendliness,
bargaining
collective
that benevolence
because
of
relationships;
kind that compensates
such a
risk-sharing
cultural view
is
Japanese
and
Japan.
There are four
long-term
advantage;
perceived and performed as a duty;
predisposition
and economic
efficiency
for price distortion.
(particularly strong
to
shun
adverse
of a non-allocative
A more popular version of
in Europe)
holds
that
the
inclination of the Japanese to accept a greater degree of obedience to a
superior power has resulted
in strikingly
pervasive
and hierarchical
subcontracting structures.
Interesting as these claims may be, historical evidence shows that
subcontracting was not an essential part of the Japanese economy earlier
6
It was only after the explosion of munitions
in the twentieth century.
4
progress of the Manchurian Incident,
demand concomitant with the
Sino-Japan Incident and World War II
time
--
emerged
as
a
for the first
prominent part
of
the
It then largely disappeared with the end of World War
took the Korean War
It
--
state
promoted by the
wartime economy.
II.
that subcontracting
the
subcontracting,
and
economic boom to
dualism
at
in
large,
see
the
resurgence
Japan.
Although
of
the
predisposition of the Japanese may or may not have played a nontrivial
role in
that it
which suggests
prerequisite
that
there is
the diffusion of subcontracting,
the
is
regardless
issue
so powerful as
of context.
should
be
It
examined
no convincing evidence
to constitute
a consistent
seems to me imperative,
in
broader
then,
socioeconomic
and
historical perspectives.
The
1984)
fourth argument of flexible specialization
provides
a
based
technologies
larger
on
view:
production
mass
(Piore & Sabel,
product-specific
special-purpose,
and
principles
and
machines
semi-skilled labour to produce standardized goods are crumbling, because
they
have
'flexible
is
lost
their
adaptability
specialization'
to
external
change.
Instead,
--
should provide a viable alternative
which
derived from the once-lost craft mode of production and which draws
on skilled workers using general-purpose machinery flexibly to turn out
for
goods
shifting
international
economy
today:
institutions and their ability
and
the
choice
of
Thus,
markets.
the
a
there
mismatch
are
two
between
crises
existing
to connect production and
technology
itself.
What
is
for
the
regulatory
consumption,
increasingly
observable in industrial societies is the emergence of a new industrial
order,
as exemplified by the 'Third
Italy' and other regions in
Europe,
7
in
which there is
the
former
latter's
with
the reversal of roles between small and large firms,
the
might
of
flexible
specialization
upturning
the
traditional superiority.
This argument directly addresses an important question concerning
linkages
between
the final product market and production methods
draws our attention to the fact that adaptation takes place in
socioeconomic context.
of production
economies.
a macro
It further emphasizes that the deliberate choice
technology
Their
and
is
the
argumentative
key
to
relaunch
plane
is
thus
growth
in
broader
advanced
than
the
aforementioned approaches and deserves close examination.
However,
evidence
from Japan,
again, may
cast
doubt
on
the
sustainability of the claimed reversal of roles between small and large
firms.
If we ask whether high volume producers such as Toyota, Nissan
and Hitachi are breaking up due to the emergence of flexibly specialized
small businesses, the answer is clearly no.
characterization
principles
and/or
of
examination, which
mass
production
methods
does
suggests
not
that
vs.
stand
these
Moreover,
the dichotomous
flexible
up
to
two models
specialization
careful
are
empirical
in fact
often
usefully combined as a pragmatic corporate response to shifting markets.
Traditional accounts thus told, let me now turn to a summary of the
major findings of my research.
explanatory
refutation
of
This summary itself constitutes a self-
the
existing
paradigms
and
proposes
an
alternative evolutionary account.
Major Findings and Arguments
Gradually
in
the
1960s
and
decisively
after
the
mid-1970s,
tendencies towards the fragmentation of final product markets in Japan
8
--
concomitant with her rapid arrival at affluence and fierce interfirm
--
competition
necessitated a fundamental productive
from
adaptation:
mass production to 'post-commodity' production (a term I will explicate
other
such adaptation may or may not be equally observed in
While
below).
Traditional subcontracting institutions
some intriguing consequences.
--
--
produced
specificity
historical
Japanese
societies,
industrial
originally developed as a temporary measure in the dualistic context
began
to
a
assume
new,
role
long-term
for
various
organizing
to provide large variety in small volumes
manufacturing units
to this
Extensive conversion of the existing mechanisms
final market.
And this
end took place.
change crucially
in the
influenced the subsequent
I shall come back to this point
evolution of Japanese subcontracting.
shortly.
'Post-commodity' production can be defined as a productive response
to
a
final market
situation where,
due
to
saturation
and diminished
marginal utility, commodities are no longer marketable without useful
of product differentiation can
The advantage
product differentiation.
be maintained only when a product is provided for the market in limited
quantities
for
a
goods
standardized
in
as
the
period.
traditional
mass
--
or
are
thus
Commodities
market
--
assuming new essential attributes of variety and volatility.
fractured,
suitable
intelligent
involving
production
facilities for a long production run of a single
in
Massive investments
product,
short
relatively
for
a
investments
subcontractors
of
large
on
--
variety
smaller
that
in
market,
mass
stable
manufacturing
are
small
are
better
volumes.
now
replaced
units
suited
for
Evidence
--
by
often
flexible
indicates,
however, that this shift neither points to the end of mass production
9
nor a return to the craft mode of production.
Rather, what we see today
in competitive firms or economies is a pragmatic synthesis of the two, a
third form of production organization which combines the principles
of
repetitive manufacturing with the elements of flexible specialization in
adaptation to the rise of the post-commodity markets.
As
generated
Japanese
stated,
Japanese
subcontracting
from wartime political needs and dualistic
economy
--
historically
infrastructure
went through a marked evolution after.the
although it did not happen overnight.
manufacturers
--
systems
during
1960s
of
--
The original purpose of Japanese
the period of postwar growth
(and
in
this
regard
during the period of World War II as well) may have been an attempt to
imitate American mass production.
same mass
markets
as
But they had no luxury of having the
in the U.S.
What
they had,
instead, was much
smaller domestic markets where competition was fiercely fought amongst
many producers.
Korean War
Capacity problems
(through to the early
in
1960s)
subcontractors and temporary workers.
after the mid-1950s helped this.
the booming economy
after
were resolved by resorting
the
to
The resurgence of postwar dualism
A historical irony, however, is that
what seemed like a temporary arrangement
turned out to become almost a
permanent characteristic of the Japanese economy.
On the one hand,
Japanese prime
their own mass production
the other hand,
in
facilities
contractors
invested heavily on
from the late 1950s onwards.
order to manage increasing variety in
On
small volumes
and retain market share, and yet to maintain flexibility, they began to
delegate their small-lot assembly and subassembly operations -merely
partial
manufacturers.
machining
or
surface
Having seen the viability
treatment
- -
to
of this strategy,
and not
outside
they then
10
started to transfer their internal operations on a larger
to
external
manufacturing
units.
Contract
assembly
scale intact
and,
further,
contract product development came increasingly to play an important role
see Fuji
(For a long-term trend of this,
in subcontracting relations.
Electric's case in Table 1.)
vans)
auto
by
Toyota
Nissan, became
and
an
of
feature
such
as
production
see
2.)
Table
contract development of these specialty products also came
Furthermore,
to be undertaken by
Components
contract assemblers.
fabrication
were
increasingly
assigned
and
Components
subassembly went through a similar organizational evolution.
suppliers
of
special-purpose
their
assembly,
contract
assembly
assemblers
volume-oriented
essential
Toyota's
(For
organizations.
for
suppliers
body
sports cars,
(e.g.,
specialty motor vehicles
small-lot,
example, contract
industry, for
the automotive
In
for
responsibilities
the
development and manufacture of systems components.
In the electrical appliances and electronics industries, change was
had
example,
workers
lines
contractor.
the
long
assembly
at the prime
assembly
main
the late 1950s,
A typical television set factory in
more dramatic.
staffed with
contractor (Figure 3).
workers
and
They were
firm's
lines
subsidiaries
and
in
female
assembly
Over time, however, the
the
from
disappeared
largely
found instead
many
for
much smaller units
subcontractors
were
prime
elsewhere;
turned
into
contract assemblers, each responsible for a narrow and specialized range
of models.
By contrast,
the prime contractor's own factory,
with more
engineers but fewer workers, now focused on product development, process
innovation and
production
products (Figure 4).
of
highly
value-added
or
state-of-the-art
The general rule was that, when new products were
11
developed and all the teething problems with early production lots and
new processes were resolved on the in-house experimental
'dried out'
testing,
as
the
industry terminology
says),
packaging and shipping operations
the
line
actual
(or were
assembly,
tended to be transferred to
contract assemblers.
The domain of production operations that the prime
contractor
in-house
expertise
retained
of a highly
was
for
strategic
proprietary kind or for
products
genuinely mass produced
items which yielded straightforward economies of scale.
of
labour
contract
and
'locked-in' subcontracting
assemblers
(and
to
a
relations
lesser
entailing
extent
Clear division
emerged.
systems
Since
components
suppliers) were by definition concerned with customer specific products,
contract
specific
proportion
of
investments
assets.
naturally
Consequently,
spread
and
became
a
subcontracting relations
high
became
more long-term and symbiotic.
This new system relieved the prime contractor from managing a large
part
of
increasingly
complex
operational
concomitant with its rapid growth.
resources to more strategic use
and
administrative
tasks
The firm could allocate its internal
including,
as mentioned above,
product
development, process innovation and state-of-the-art manufacturing.
system also
allowed the
firm to proliferate
incurring the level of costs
involved in
The
its product lines without
all in-house operations.
The
simultaneous diffusion of various development and production activities
to external units shortened lead times and product cycles on the whole.
This greatly helped the prime contractor adjust to shifting demands and
get
ahead
flexibility.
of
the
competition,
all
the
while
maintaining
overall
12
One extreme example which illustrates the magnitude of contract
set
television
for
assembled
in
manufacturer
about
ten
one monochrome
there remained only
is that by the mid-1980s
assembly
which
Japan
under
customers
contract-
exclusively
names
brand
their
without
producing any of its own!(l)
One significant consequence
subcontracting
for
reasons
of the foregoing
varied
more
became
is
that,
than
at
of
capabilities
technical
machining, surface
treatment or
a
the
kind
coordinating
than
Therefore,
'preforming'.
outset.
obviously required
Contract assembly and systems components manufacture
higher
over time,
simple
the overall
technical capabilities of subcontractors, in addition to price and other
indicators
prime
of performance,
obliged to become
capabilities
second-
those
made
checking
Periodic
contractor.
or lower-tier
better
tier
structure
status
based
on
--
subcontractors
Periodic checking, however, also institutionalized
Those with
mobilities.
inter-tier
inferior
with
Here, elements of
or otherwise to change or go out of their business.
dualism persisted.
monitored by the
came to be systematically
all-round
A
business.
expanded
or
good records
performance
and
were
promoted
well-defined
tiering
was
capabilities
a
to
thus
brought into subcontracting mechanisms.
Furthermore,
entailed
unexpected
the
effects.
innovation, placed the
transaction
costs,
above
right
promoted
changes
They
in
subcontracting
fostered
entrepreneurship
diffused
information
sharing,
the right
group
and
stimulated competition while keeping
and
place,
technology in
loyalty
mechanisms
it coordinated,
and changed
function of the prime contractor's purchasing organization.
the
Further,
9
(1) Interview with Professor M. Ikeda of Chuo University, spring 1986.
13
they
even
spread
the
wealth
progressive human relations.
mechanisms
in
society
All
at
large
and
promoted more
these effects were embedded in the
of the new subcontracting systems.
Let me explain these in
seriatim.
It was in the interest of subcontractors to innovate.
defined enriched status
innovated,
the
'locked in'
stirred their entrepreneurship.
greater the chance
subcontracting
for
spread,
Their newly
The more they
growth and profitability.
their
proposals
for new
As
methods,
components and products or for improvements on existing ones came to be
regularly encouraged and monitored by their customers.
Those with good
records became preferentially treated and expanded their business in the
Over time,
long run.
fair profit-sharing rules became established for
such innovations.
In
this process,
the choice
Edwards')
of
subcontractors came to find their own niches in
technologies.
predictions,
Unlike
not
all
Galbraith's
technologies
(and to
some
became
large-scale,
technocratic and expensive even in the most advanced industries.
always
remained a
simple
technologies
Galbraith's
domain of production
example
in
which
of
superhighway
extent
There
activities better performed by
smaller
firms
excelled.
construction
Drawing
(1972:42),
it
on
is
unrealistic to assume that every construction activity can be performed
by bulldozers
suitable
and heavy earth-moving equipment.
for picks and shovels
--
i.e.,
There always are tasks
inexpensive, highly mobile &
redeployable, general-purpose tools readily available from the market.
Would not small
subcontractors with scant capital have
resort to and specialize in
such simple tools?
incentives
to
14
In
the world of the post-commodity market where
changes, small
quantities
frequent
per product line, shortened lead
design
times and
product cycles are the norm, some recourse to picks and shovels may turn
out
to
be
far
bulldozers
better
than
an
and heavy equipment
applications.
Furthermore,
--
if
combined with the large-scale,
place in
large firms,
exclusive
reliance
on
depending of course
the
simple
array
of
on purposes
technology
complex technology --
an
were
and
usefully
which has its
the end result would be far more viable in
own
a world
of increasing uncertainty than single-minded devotion to one technology.
This
is
exactly
what
the
new
subcontracting
systems
in Japan
have
first-tier
suppliers
and
achieved.
It
was
the
responsibility
of
subcontractors
to coordinate second-tier subcontractors,
to coordinate
third-tier subcontractors,
lower
the
tier,
the
smaller
the
size
and so
of
for the latter
on.
firm
In general,
and
the
simpler
the
the
technology employed.
In this system, control and coordination functions
were
delegated
hierarchically
clusters.
through
these
semi-autonomous
tiering
Such mechanisms may be called 'hierarchical cluster control'
in contrast with 'arms length control'.
Transaction costs for the prime
contractor were thus gradationally transferred to its external partners.
With
prime
contractors
on
top,
many
first-tier
suppliers
and
subcontractors below cross-serving multiple customers, and far many more
lower-tier
subcontractors
subcontracting
overlapping one
with its
structure
another.
occupying
resembled
Hence,
the
a
lower
the
range of
'Alps'
semi-autonomous manufacturing
flexibility as a whole (Figures 5 & 6).
niches,
pyramids
structure
constituents
--
the
whole
or mountains
which yields
--
organizational
4
15
The fine-tuned division of labour amongst subcontractors and their
relatively stable memberships within 'clusters' promoted group loyalty.
They were
organized
customer,
which fostered information sharing.
into a subcontractors'
association under
Serving other
a single
customers
with a varying degree of dependence helped these subcontractors maintain
their bargaining power too.
through
periodic
Organized competition was also brought in
checking
on
subcontractors'
preferential treatment of better performers.
performance
and
The key function of the
prime contractor's purchasing organization shifted from cost haggling to
coordinating, checking and fostering subcontractors.
human relations was promoted in this process.
spread of
The attention to
Lastly, a more pervasive
the wealth in society at large was brought about.
interest of symbiosis, large firms did not crush small firms.
them, and vice versa.
with
multiple
without
They used
The end result was a fairly synergistic economy,
players
sacrificing
In the
flexibly
control,
adjusting
freedom,
to
changing
autonomy,
externalities
competition,
trust,
innovation and entrepreneurship.
Government
policy
--
which was
promoted by a
desire
of the
ruling Liberal Democratic Party (LDP) to secure electoral constituencies
--
to
support
small businesses and to
subcontractors,
themselves.
and
the
helped
the
above
ameliorate unfair treatment of
mechanisms
Government-backed small business
institution
infrastructure
for
subcontractors
--
disappeared.
the
a
of
small
survival
large
business
sustain
financing
of
which
reinforce
organizations
cooperatives
and continuation
part
and
of
small
might
have
provided
firms
and
otherwise
16
The marked prevalence and prosperity of subcontracting in Japan can
thus be understood as an evolutionary product of a complex interaction
amongst
historical,
factors.
political
of
mechanisms
meaningfully
the
socioeconomic,
organizational,
The
review
foregoing
Japanese
present
analyzed
in
terms
of my
study
dualism,
that
suggests
cannot
systems
subcontracting
of
and
technological
bargaining
be
relations,
technology or culture alone.
How specific,
then,
the Japanese experience?
is
The last several
all over
decades have seen a remarkable diffusion of Japanese products
image of Japanese products
The general
the world.
has turned into 'high quality'.
as
'cheap
and bad'
Simultaneously, the competitiveness and
flexibility of Japanese production organizations have become an object
Given this, do tendencies towards the post-
of international attention.
commodity markets
economies
--
--
which
also indicate
appear
to
be
prevalent
that non-Japanese
subcontracting
institutions
--
a
advanced
can benefit
competitors
from adopting Japanese production organization?
Japanese
amongst
More specifically,
are
of
the
curious
product
idiosyncratic trajectory of Japanese capitalism and common properties of
capitalism
in general
--
Does it make sense to do
transferable
to
other industrial
Do competitors want
so?
societies?
to do that?
Or do
they have their own solutions and alternatives?
These are both hypothetical and empirical questions.
are open questions too.
the
automotive
ventures
and
industry
As yet, they
Recent evidence on international encounters
--
'transplants'
questions is probably yes --
through
--
the
indicates
in
increasing
number
of
joint
the
answer
to
these
that
with qualifications, however.
9
17
Across
differences
industrial
in
societies
unionization,
the
institutions,
government policy
technologies,
and
differences
seriously
fertilization.
other
on
there
degree
affect,
of
small
infrastructural
are
of
course
dualism,
businesses,
factors.
circumscribe
subcontracting
availability
To be
or
substantial
sure,
these
promote
cross-
Moreover, the constitution of capitalism itself --
neocorporatist, 'statist' or 'laissez-fairist' --
of
be it
critically defines the
viability of subcontracting institutions.
Given these qualifications,
however,
results from my international
field research on automotive components supply indicate that adaptations
to
the
hierarchical
cluster
control
model,
with
its
purposively
redefined division of labour moving away from arms length relationships,
are
Fuji
--
or are
going to be
Electric
with
--
fairly
Daimler-Benz
widespread.
in
Figures
(For example,
7
&
8.)
compare
Even
if
manufacturers are not currently achieving all the desired results, they
are striving for them.
stripped
of
Japanese
production
represent
a
These observable tendencies suggest that, once
idiosyncratic
fairly
and
attributes
and
subcontracting
universal
response
to
cultural
myths,
organizations
changing
so-called
may
environments
indeed
that
industrial societies face today.
In this connection, Kenny and Florida (1988:147) note:
[Japan] currently stands at the center of a far-reaching process
of technological and economic restructuring that will affect both
the future trajectory of the international economy and the
position of nation-states within it as well as the role and wellbeing of workers in yet another phase of capitalist development.
18
Or, perhaps, it is too early to claim such a thing, while too late
to
discuss
the
subject
matter
merely
in
terms
of
narrow
analytical
theories such as dualism, transaction cost economics, and the like.(2)
9
(2) Professor Charles F. Sabel of the Massachusetts Institute of
is too late to
Technology once commented in private communication: 'It
new
system'.
write off dualism, but too early to write on a
a
s
Figure 1.
U
W
Share of Value Added by Small
Firms (1962-1982)
50403020
10
O'-
' -'
'
' -21962 63 64 65 66 67 68 69 70 71 72 73 74 75 67 77 78 79 81 82 Y
2
1 Small firms refer to firms with
20-299 employees.
2 The year 1980 is missing in the
source.
Source: Small and Medium Enterprise Agency (SMEA), the Ministry of
International Trade and Industry (MITI) (1985a:97), Chusho Kievo Hakusho
(Small and Me dium Enterprise Whi te Paper). Original Source: MITI, K
Tokei Hvo: Ki gvo Hen (Statistics on Industries: Enterprise Edition).
Figure 2.
Interscale Wage Differentials 'in
Manufacturing Industries (1958-83)
80 t
701
4
E
"T
0
I
1960
I
1965
I
1970
I
1975
I
1980
Year
1 Refer to a percentage of average regular salary in cash for males at
firms with 10-99 employees as opposed to the same at firms with 1,000 or
more employees (-100).
Source: Small and Medium Enterprise Agency (SMEA),
the Ministry of
International Trade and Industry (MITI) (1985b:23), Small Businesses in
Japan.
Original Source: The Ministry of Labour, Basic Statistical
Research on Wave Structure.
4A
ft
1
Table 1.
BREAKDOWNS
SUBCONTRACTING AT FUJI ELECTRIC'S TOKYO PLANT
OF
OF SUBCONTRACTING AT FUJI ELECTRIC'S TOIKYO PLANT
(1965-90)
(Percentage/Value Based)
Years
Processes*
Subassembly**
Finished Products
Assembly
1965***
*
**
45
28
27
74
23.7
31.6
44.7
80
19.0
40.5
27.8
85
18.3
33.7
48.1
15.0
24.3
60.7
Machining, stamping, sheet metals, a nd surface
treatment ( e.g., painting, p lating) .
Primarily, electrical boards subassembly.
Figures for this year are estimates.
Projected.
Source: Fuji Electric's Tokyo Plant, 1986.
Table 2.
TOYOTA'S CONTRACT ASSEMBLY (1987)
Cars
(incl. Vans)
Century
Crown
Mark II
Chaser
Cresta
Camry
Vista
Corona
Carina
Celica
Soarer
Supra
Corolla
Sprinter
Tercel/Corsa
Caribu
Starlet
Publica P/U
MR2
TMC
C
C
Cscl
Ch
C
C
C
Cscw2 Cl
Cl
C35
C
C
C
4
Dai
AAB
GAB
CB
CB
C
Csvw
Csh
Cshvw
Csh
C
C
Csvwr5
Cs
Cs
Cvwr5
Csc
Csc
Csvw
C345
C
Mini Vans
Hi Ace
Town/Master Ace
Lite Ace
Trucks
Dyna 2t
Toyo Ace 1.5t
Hi Ace
Town/Lite Ace
Hi Lux
Land Cruiser
Big Truck
Blizzard
Stout
Coaster
TAL
Assemblers
TAB KAW Cen HENM
C
C
C
F
F
F
F
Cpm
F
F
C
CB
CB
CB
CB
CB
Cp
CB
CB
C
F
F
C: Complete Assembly. F: Final Assembly.
CB
CB
CB: Cab Assembly.
TMC: Toyota Motor Corp. TAL: Toyoda Automatic Loom Works.
TAB: Toyota Auto Body. KAW: Kanto Auto Works. Cen: Central
Car. HNM: Hino Motors. Dai: Daihatsu Motors. AAB: Arakawa
Auto Body. GAB: Gifu Auto Body.
s: sedan. h: hardtop. c: coupe. v: van. w: station wagon. 1:
liftback. p: pickup. m: multi-purpose. 345: no. of doors.
r: rear wheel drive.
Source: Toyota Motor Corporation, 1987.
Figure 3.
Hitachi's Electron Tube Shop in the Late 1950s
V
.t ~
29
(
ik
Source: Hitachi (1960), Hitachi Seisakushoshi
(History of Hitachi), Vol. 2.
1
Figure 4.
Hitachi's Automated Video Cassette Recorder
Mechanism Assembly Line in the Mid-1980s
Source: Hitachi (1986), Guide to the Tokai Works, pp.10-11.
P
A
Figure 5.
The 'Ais' Structure of Jaanese Subcontracting
Prime
Contractors
1st-tier
Suppliers
2nd-tier
Subcontractors
3rd-tier
Subcontractors
4th-tier
iSubcontractors
Figure 6.
THE "ALPS" STRUCTURE ©
Hierarchical Cluster Control: Fuji Electric (1986)
Figure 7.
C;
I
F
"40
0
uR s
Individual Relationships
Now
Fuji Electric
Contract
Assembly
& Systems
Components
1st-tier
Suppliers
O%
2nd- tier
Subcontractors
000
bI,
0
Machining
& Stamping
Hierarchical Networking
Reduction in Direct Contacts
1st-tiers Control 2nd-tiers
Externalizing 'Dried Out' Production
Source: Interviews at Subcontracting Control Section, Materials
Department, Fuji Electric's Headquarters, and Subcontracting Section,
Materials Department, Fuji Electric's Tokyo Plant, 3 April 1986.
Figure 8.
Changing SuDnlier Relations at Daimler-Benz
(Veranderung der Zulieferbeziehungen) (1988)
Prime Contractor/
Manufacturer
(Hersteller)
00,/
%I
I
'
II
-
Suppliers & Subcontractors (Lieferanten)
After (Wird)
6
Prime contractor/
Manufacturer
(Hersteller)
-'%
I
6
I
I
oo
Concentration on Major Suppliers
(Konzentration auf
Hauptlieferanten)
'4o%
Cooperation Model of Subcontractors
(Lieferanten -- Zusanmenarbeitsmodelle)
Source: Interviews at the Department of Materials Management
(Materialwirtschaft) /Procurement Logistics (Beschaffungslogistik),
Daimler-Benz AG, Stuttgart, 14 September 1988.
4
BIBLIOGRAPHY
BERGER, Suzanne D. & PIORE, Michael J.
1980. Dualism and Discontinuity in Industrial Societies,
Cambridge University Press.
DORE, Ronald P.
1987. Taking Japan Seriously,
Stanford University Press.
EDWARDS, Richard C.
1979. Contested Terrain, New York: Basic Books.
FUJIOKA, Wakao.
1986. 'The Rise of the Micromasses', Japan Echo, 13,
No.1, pp. 3 1 -8 .
GALBRAITH, John Kenneth.
1972. The New Industrial State,
Penguin Books.
2nd ed.,
Harmondsworth:
KENNEY, Martin & FLORIDA, Richard.
1988. 'Beyond Mass Production: Production and the Labor
Process in Japan', Politics and Society, 16, No.1,
pp.121-58.
PIORE, Michael J. & SABEL, Charles F.
1984. The Second Industrial Divide, New York: Basic
Books.
WILLIAMSON, Oliver E.
1985. The Economic Institutions of Capitalism,
The Free Press.
New York: