Search results

Purpose – We investigate whether the partnership behavior of Japanese partners in their joint ventures (JVs) with European partners in Europe can be explained by the Trojan horse hypothesis (THH) view or by the cooperative specialization (CS) view. The THH view assumes that Japanese firms establish JVs to steal the knowledge of their partners and dissolve JVs as soon as they have achieved their goals. The CS view, on the other hand, argues that Japanese firms set up JVs to achieve CS and that these JVs will be stable.

Methodology – First, we derive implications of both the THH and the CS views for the longevity of JVs. Second, we make a census of all Japanese–European JVs manufacturing in 1987 and analyze their evolution to 1996. Third, we count how many of these JVs have evolved in ways that are predicted by the THH and the CS views. We argue that a particular view is supported if the number of JVs following the predicted path is larger than that following alternative paths.

Findings – We find that the partnership behavior of Japanese firms is more consistent with a CS view than with a THH view.

Limitations – This is a conservative test of THH behavior since JVs can dissolve for other reasons than the knowledge-stealing behavior of their Japanese partners.

Value of chapter – This is, as far as we know, the only study that has investigated the evolution of the population of Japanese–European JVs in Europe and has derived implications for the validity of the THH and CS views of JVs.

This study focuses on a survey of chief financial officers (CFOs) in public firms in Japan concerning the following six points: the importance of the definition earnings quality; higher quality earnings; the determinants of earnings quality; prevalence, magnitude, and motivation of earnings management; accounting that influences earnings quality; and misrepresenting of earnings. The results are following: first, Japanese CFOs define earnings quality as earnings accurately reflecting economic reality, earnings accurately reflecting the results of operations, and earnings backed by cash flows, earnings sustainability, recurring, and consistent, and earnings reflecting long-term trend importance. Second, Japanese firms consider earnings that reflect consistent reporting choices over time as higher quality. They do not consider that earnings having accruals that are eventually realized as cash flow as higher earnings quality. Third, Japanese CFOs indicate that 30% of earnings quality is impacted by firm characteristics such as firm’s business model, industry, and macroeconomic conditions. Surprisingly, the influence of the board of directors is greater than the impact of their internal controls. Fourth, as for the determinants of earnings quality, CFOs consider that more than 70% of Japanese CFOs do not allow the discretion and that accounting standards limit their ability to report higher earning quality. Fifth, Japanese CFOs consider that higher earnings are influenced by accounting principles such as policies that match expenses with revenues and policies that rely on fair value accounting as much as possible. Sixth, CFOs themselves predict that 50% of Japanese firms use discretions and that they use 20% of earnings per share (EPS). Since there is inside and outside pressure to hit earnings benchmarks, Japanese firms possess the motivation to use earnings to misrepresent economic performance, Japanese managers see a red flag when generally accepted accounting principle’s earnings do not correlate with cash flow from operations.

This chapter is aimed at filling two important gaps in the large literature on high-involvement work system (HIWS). First, the existing literature tends to focus on North America and Western Europe, and detailed information on HIWS outside of the two regions (especially Asia) is still limited. Second, while there is a large body of quantitative evidence, the literature is relatively scant on detailed account of exactly how specific HIWS practices are implemented in the real workplace. This chapter draws on our extensive field research at firms in Japan, the United States, and Korea, and presents real-world examples of HIWS of firms in Japan, Korea, and the United States. Our detailed account of the implementation of HIWS in the three countries points to an intriguing process of transnational diffusion of HIWS. Japanese firms as early experimenters of HIWS posed a challenge to U.S. firms in the global marketplace, resulting in the trans-pacific diffusion of HIWS which is modified to the U.S. corporate culture. Due to its geographical proximity and historical connections to Japan, Korean firms were initially heavily influenced by Japanese HIWS. However, with the rising link to the United States and Europe, Japanese influence appears to have been waning, and interest in U.S. style HIWS and European-style state-mandated works council has risen, suggesting that a hybrid model may be emerging in Korea.

This study examines the determinants of performance of foreign manufacturing subsidiaries in Japan. The study finds that a foreign parent’s size, the subsidiary’s age, and a complicated distribution system influence a subsidiary’s performance. There was little significant change in these determinants over a 20-year period. However, for subsidiaries that survived over the observation period of this study, some determinants changed. We also found that by forming joint ventures with Japanese firms, foreign firms can overcome the obstacle of distribution and circumvent the disadvantage of inexperience. Moreover, the mitigating effects of joint ventures vary, depending on the type of Japanese partner.

We examine bidder returns in Japanese mergers and find that shareholders of bidders experience a significant positive announcement return. Bidder returns are higher when firms acquire targets in the same industry, when their managers performed well before the merger, and when their managers acquire relatively large targets. Unlike non-keiretsu firms, returns to keiretsu firms are higher when they acquire firms operating in different industries. We also find that bidder returns increase with the bidder’s leverage and the bidder’s ties to financial institutions through borrowings. Our evidence is consistent with the view that managerial incentives affect firm value.

While mentoring plays an important role in Japanese working places, formal mentoring programs have only recently been introduced. This chapter provides an overview of the development of mentoring in Japan and presents a conceptual model to comprehend mentoring in Japan and beyond. The chapter begins with the illustration of how the characteristics of Japanese organizations and Japanese-style human resource management (HRM) promoted the naturally occurring informal mentoring in the Japanese workplace in early years. In response to the stagnating economy and declining demographics during the last few decades, many Japanese firms adopted Western-style HRM practices, including formal mentoring programs. We provide statistical data to demonstrate the widespread adoption of formal mentoring programs in recent years. We then report the results of the systematic review of the academic literature on mentoring in Japan, suggesting that research on mentoring in Japan is still in the early stage. Based on the historical overview, current data and the systematic review of the academic literature, we develop a conceptual model of how the socio-cultural and economic context as well as organizational characteristics influence the adoption of Japanese-style naturally occurring informal mentoring and/or Western-style formal mentoring practices. We conclude this chapter with practical and theoretical implications.

How did Japan rise to challenge the U.S. economic supremacy? We argue that the foundation of Japan's rise from a defeated nation in 1945 to an economic powerhouse is the raw materials that Japanese firms have turned into cars, ships, consumer electronics, and of other industrial products. A small island nation that lacked adequate domestic supplies of virtually all the raw materials essential to industrial production became a world leader in the production of steel and of products which required millions of tons per year of raw materials. Japanese firms and the Japanese state turned an apparent material and economic disadvantage, the need to import large volumes of raw materials, into a competitive advantage over the U.S., Europe, and the rest of the world economy by driving down the cost of importing raw materials over long distances. We argue that the strategies of Japanese firms and the Japanese state to resolve the problems of procuring bulk cheaply and reliably from multiple distant locales drove the technical and organizational innovations that underlay Japan's rapid industrial development and restructured the world economy in support of Japan's development. Contrary to claims that globalization supercedes the national state, we find that the actions of the Japanese state, in coordination with firms and industry sectors, were crucial in developing and applying these strategies. The linchpin of these strategies were the MIDAs (Maritime Industrial Development Areas) built on land reclaimed by the Japanese state. This economic success in Japan was also critically dependent on the extraction of billions of dollars of wealth from its raw materials peripheries, most notably Australia, Brazil, and Canada.

This paper presents an empirical analysis of trade credit supplied by Japanese manufacturing firms and General Trading Companies. After reviewing major trade credit models and relevant Japanese literature, empirical tests examine the applicability of existing trade credit theories. Results indicate existing trade credit theory has little power to explain the level of trade credit supplied by Japanese firms. Instead, support is found for the information and risk sharing models in the Japanese keiretsu literature and the financial channeling process by which lending institutions supply General Trading Companies with liquidity that is, in turn, supplied to manufacturing firms.

Of the 75 Asian firms with data on regional sales, only three are global whereas 66 have the majority of their sales in their home region. Why is this? Despite a large literature extolling the global success of Asian firms, especially the Japanese, why does the evidence suggest that most Asian firms operate regionally? This study explains how most large Japanese firms have firm-specific advantages, which are based in their home region.

We examine explicitly priced financial distress risk in post-1990 equity markets. We add a financial distress risk factor to Fama and French's (1993) three-factor model, based on Griffin and Lemmon's (2002) findings that financial distress is not fully captured by the book-to-market factor. We test three-factor and four-factor capital asset pricing models using both annual buy-and-hold analysis and monthly time series analysis across portfolios adjusted for common book-to-market, size, and financial distress factors. We find empirical support for an Ohlson (1980) O-score-based financial distress risk four-factor asset pricing model in the U.S. and Japanese markets.