Japanese Business Practices
Industrial Relations, Corporate Groups and Corporate Control
While many aspects of firm behaviour are common for both North American and Japanese firms, there are certain types of business practices which distinguish Japanese firms from North American firms. These practices of Japanese firms sometimes lead to predictable differences in outcome for Japanese firms compared to North American firms.
For example, long-term risk sharing among corporations and incentive mechanisms for personnel management which favour long-term employment, combined with long-term stable shareholding, often allow Japanese firms to undertake projects they consider essential for their survival in the long run without worries about quarter-to-quarter changes in earnings or stock prices. Long-term business relationships among firms in Japan also imply sharing between a supplier and an assembler of the cost of unexpected price increases in the raw material for the supplier from whom the assembler firm purchases intermediate goods, even though the presence of a price contract between them means that, in a strictly legal sense, the supplier must absorb all the cost of the price increases. Similarly, the supplier is expected to absorb some of the cost reduction the manufacturer deems necessary to regain the competitiveness of the final product in the global market that it has lost for unforeseen reasons (e.g., a significant appreciation of