Academic journal article National Institute Economic Review

Transplanting Japanese Success in the UK

Academic journal article National Institute Economic Review

Transplanting Japanese Success in the UK

Article excerpt

Producing inside the European Community offers various advantages to Japanese firms, many of them related to costs. In manufacturing, for example, it enables them to avoid paying tariffs, to avoid quantitative restrictions, to reduce shipping costs and to obtain better market access.(1) To make the exploitation of those cost advantages worthwhile the production cost differences between a Japanese company's plant in Japan and a plant in Europe should not exceed the advantages to be reaped. It is thus reasonable to expect that while a Japanese transplant in Europe may not be able to achieve parity with cost and productivity levels in its parent it can nevertheless outperform many UK plants in the same industry if the parent was a competitive exporter.(2) Some of the better performance will come from purely technical factors such as more advanced and higher quality products, more efficient production processes and access to higher quality components, all of which can be brought in from outside Europe. However, even after taking account of those 'technical' factors efficiency differences remain, largely related to the quality and utilisation of the labourforce.(3)

In the research project discussed in this note we investigated the extent to which Japanese transplants were able to achieve improved productivity and lower costs in the UK by transplanting Japanese management methods which entailed changing how UK workers and firms behaved. We examined various of the aspects of Japanese labour force management which are widely believed to improve productivity performance, such as training, teamworking, lifetime employment and bonus payments.(4)(5)

The results are based on a series of interviews held with Japanese and UK managers in 10 transplants, primarily in consumer electronics, other electronic products and vehicle manufacturing. We also conducted some interviews with service companies, primarily financial institutions and hotels to gain some insight into the extent to which this transfer of management practices was largely dependant upon the specific nature of the manufacturing process. Although the sample is small it represented about a quarter of the relevant population. Selection of the sample was non-random, being chosen deliberately to give a wide product and geographical coverage. Seven of the companies were greenfield investments, while the remainder were acquisitions. The plants had been in production for between 3 and 15 years so that we could form a judgement about the rate at which the learning process could take place.

The plants were selected from the DTI and JETRO lists of Japanese investments in the UK.(6) The UK plants were approached directly (in Japanese), not through the head offices, and a 100 per cent response rate was achieved. The investigation was short. After collecting such published data as were available the plants were sent a brief questionnaire to prepare for a visit on the detail of the products, production processes and workforce. We then interviewed senior Japanese and British managers (each in their own language) using a structured interview schedule. With one exception, the interviews took place during October, 1991 to February, 1992, each lasted half a day and involved a minimum two and a maximum of five managers.

Productivity levels in the transplants and their parents

Each of the companies we visited were using Japanese machinery of the same type available in the Japanese plants. However, in some cases it was the previous vintage and the current plant in Japan had more modern equipment.(7) In others, although the equipment was identical, it was not necessarily run at the same speed (in one case a particular assembly process was run at half the Japanese rate). In all but three cases productivity was lower in the UK than in Japan and in only one were there examples of higher UK productivity. However, there was also only one case where the UK productivity levels more than 15 per cent lower. …

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