The new economic history argues that firms and individuals attempt to create new institutional forms when the existing forms are no longer an efficient way to organise their transactions relationships (North 1994). These approaches have been applied by other scholars to the establishment, but not the continued existence, of trading firms (Jones and Ville 1996). It is often argued that the old forms sometimes trap economic actors as the environment changes, making them incapable of adjusting to new environments. Yet institutional forms are often surprisingly durable. Many Japanese general trading companies (GTCs) were formed well over a century ago, and remain important actors on the world economic scene in the 1990s, a period of very rapid environmental change. How can we explain such a phenomenon? It is tempting, especially in the light of the current Japanese economic troubles in the late 1990s, to agree with those who say the GTC and its trading partners are trapped in an institutional relationship which is no longer appropriate, but they simply see no way to disengage.
This is a familiar story, since Japanese authors have been forecasting the demise of these economic institutions for several decades (Misono 1974). Other chapters in this volume also present a similar story to these pessimistic analysts. In some chapters, the colonial past traps a trading firm in the trading rights of that area—trapped in either geography or commodity. It is not able to adjust to the new reality when firms have open access to geographical or commodity markets. Yasumuro in Chapter 10, this volume, on Japanese GTCs also comes in this group, since he argues that the Japanese investments in the United States are not likely to persist as the conditions change. Alternatively, authors of other chapters argue that the only alternative is to ignore history totally, taking the leap from trading to retailing or other downstream activities, taking primarily the profits from the trading company operations. This approach, what strategic management theorists call ‘unrelated diversification’, implies a strange combination of extreme efficiency and flexibility of the firm: a firm can give up all its old traditions and relationships and yet be successful in a very different area against seemingly more appropriate institutional forms. These approaches seem to ignore the middle ground. Far from guaranteeing success, history can still provide important experience and