Power and mutualism in Japanese supply networks

This dissertation examines the structure of networks of customers and suppliers in the Japanese automotive and electrical machinery industries, and analyzes the implications of network affiliation for supplier performance. The dissertation presents analyses of a sample of 122 suppliers of eight large firms: Toyota, Nissan, Mitsubishi Motors, Honda, Toshiba, Hitachi, Mitsubishi Electric and NEC, and a smaller sample of suppliers and customers of 17 key auto parts. Interviews of managers of customers and suppliers complement the quantitative research.;Transaction cost economics and resource dependence theory inform the analyses. I examine how effective these theories are in helping us to understand the structure of Japanese supply networks, and how they can be extended to account for the embeddedness of economic relations--the social, cultural and institutional factors specific to the Japanese economy (Granovetter, 1985).;The analyses of network structure indicate that interpersonal trust and mutual self interest are not sufficient to manage purchasing relations, as has often been claimed in the literature. Rather, formal governance structures in the form of equity and director linkages are required. The patterns of these linkages suggest a transaction cost economic logic--large manufacturers extend equity and director ties to suppliers that are most dedicated to them. These ties serve as credible commitments that a customer will not take advantage of this dependence and behave opportunistically. The structure of supply networks, however, differs across industries and between firms. Suppliers in the electrical machinery industry tend to be less dedicated to a single customer, and hence, are less likely to be linked to their customers through equity and directors. In the automobile industry, Toyota and Nissan are more likely than other manufacturers to be tied to their suppliers in a web of equity and dependence.;Analyses of supplier performance show evidence of risk sharing. Suppliers linked to their customers through equity sacrifice higher profits for more stable performance. In the automobile industry, risk-sharing seems to occur through continuous adjustment of supplier sales and profits. In the electrical machinery industry, evidence points to a "bail-out" effect--poor performing suppliers are rescued at the expense of the highest performers.