Academic journal article Advances in Competitiveness Research

The Economic and Sociological Dimensions of Business Networks: Examining Differences between Japanese and U.S. Structures

Academic journal article Advances in Competitiveness Research

The Economic and Sociological Dimensions of Business Networks: Examining Differences between Japanese and U.S. Structures

Article excerpt

INTRODUCTION

Over the past few years, organizational forms in the U.S. have been undergoing considerable change to cope with competition, and to create new and more effective competitive structures. While inter-organizational networks have existed for a long time in the U.S., these were most frequently in the form of vertical integration, or other forms of direct economic control. More recently, inter-organizational networks have been developing that, in many cases, are based on trust, non-contractual, and relational attributes (Zaheer and Venkatraman, 1995). This has changed the ways organizations deal with each other requiring academicians and practitioners to look for new and often more complex frameworks to better understand inter-organizational relationships. Current forms of inter-organizational conflict and cooperation are distinctly different from their earlier manifestations, and existing explanations of inter-firm relationships are often based on older paradigms. The older economics-based models are sometimes inadequate to explain inter-firm relationships, and new explanations have to be found. This paper is an attempt at exploring a sociologically-based framework that may provide a different perspective in understanding network dynamics.

For over a decade the importance of networks as an alternative organizational form has been under serious discussion and research, and the use of the network form has become widely prevalent in business. The term networks, as is discussed throughout this paper, refers to two or more organizations involved in long-term relationships (Thorelli, 1986). The impact of networks as an intermediate organizational form between markets and hierarchies (Williamson, 1975) has opened up a new and exciting stream of research that is being undertaken to better understand this variety of institutional arrangement (Powell, 1990). For expository purposes, we may think of business transactions in terms of a spectrum of arrangements, from loose to tight, from arms-length bargaining to total integration, from spot transactions via standing relations to internalization of markets (Thorelli, 1986). An important line of thinking, that follows an economics-based transactional perspective, suggests that firms have the option of choosing between an open market arrangement or internalizing transactions but not both in order to meet the criteria of economic efficiency and cost. As Thorelli points out, Williamson (1975) would "likely include as part of `markets' a number of in-between forms where we would rather apply the generic term networks" (1986, pp. 37). However, with the extensive research being done in this area and the unique characteristics of this organizational form, it is appropriate to treat networks as distinct organizational arrangements, quite separate from either markets or hierarchies.

A lot of network related research has studied Japanese networks with the aim of more clearly understanding their unique structures and processes (Lincoln, Gerlach, and Takahashi, 1992; Lincoln et al., 1996). An important outcome of the work of these researchers is the asking of the key question, "whether the keiretsu structures like those so common in Japan should be copied by Japan's leading competitors and trading partners?" (Lincoln et al., 1996, pp. 86). Another important body of research into networks has investigated the unique characteristics of these forms in the U.S. (Romo and Schwartz, 1995; Uzzi, 1996; Waldinger, 1986). Our aim is not so much to bridge the gap (and it is considerable) between the two network systems, but to in fact explore some important differences. The objective of this paper is essentially two-fold. One, is to briefly highlight the evolution, context, and nature of Japanese and U.S. networks, with the aim of highlighting the significant features and differences that characterize business networks in these two countries. Two, is to examine trends that are taking place both in Japan and in the U. …

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