Strategic spinoffs and organizational change in the Japanese electric and electronic equipment industry

This research examines the way firms in Japan's electric and electronic equipment industry use spin-offs to continually re-organize and focus resources on developing new products. It also examines variations in the rate of spin-offs and use of networks of related firms across industries in Japan and across firms with different levels of diversification.; I argue that large Japanese electric machinery firms spin-off businesses and divisions that are not essential to the development of new products. Parent firms spin off businesses that have become less important strategically, that use widely known technology, or that provide support or services to the parent organization. The spun-off firms become part of the parent's network of supporting firms. By reducing the number of activities through spin-offs, parent firms can concentrate resources on developing new products instead of managing activities better handled by separate organizations.; The research focuses on five large electric and electronic equipment manufacturers and their related firms. This study includes data on the origins, dates of establishment, and main business activities of 780 related firms. This data was compiled and coded from a variety of sources in Japanese including Japan's Ministry of Finance reports and company histories. Information from interviews, conducted in Japanese, with company officials provide qualitative context for the spin-off phenomenon. Data from the Nikkei NEEDS database are used to statistically analyze the differences in the use of spin-offs and related firms among industries and between firms with different diversification levels.; Results support the conclusion that spin-offs are used strategically by Japanese firms to control organizational growth, shift product focus and transfer products using widely known technology or that provide services to the parent firm out of the parent firm. While motivation cannot be determined directly, the data and interview materials indicate that the spun-off firms are almost entirely support or supplier firms or firms that provide customer support. At the same time, we observe that increasing resources are being allocated to R&D activities. In addition, results show that the rates of related firm use differ by industry and diversification level.