Leveraging Torihiki-Jisseki through Japanese Small- and Medium-Sized Enterprises’ Overseas Businesses

: In response to arguments on the hollowing out of industries whereby an expansion in overseas production causes decreased domestic production, recent studies, primarily in the field of international economics, have pointed out the increase in domestic production due to an expansion in overseas production. Regarding specific mechanisms, Amano (2000) emphasized that when large companies with abundant management resources expand their overseas production, their spontaneous and induced conversion behaviors cause an increase in domestic production. Responding to this assertion, on the basis of case studies on small- and medium-sized enterprises (SMEs) with few management resources, this paper discovered a mechanism in which abundant management resources are not assumed. This mechanism was observed in the automotive parts industry in Japan, which faces difficulties in acquiring new customers because of fixed relationships. In this industry, it is possible to acquire new customers domestically through torihiki-jisseki (“track record of transactions” in Japanese) when overseas manufacturing sites conduct business with new customers. However, this strategy is a paradox for SMEs in Japan that wish to grow and survive domestically since it advocates overseas expansion rather than domestic expansion.


Introduction
This study discusses corporate domestic growth after an expansion in overseas production. In response to discussions about the hollowing out of industries, that is, domestic production decreases because of an expansion in overseas production (Nakamura & Shibuya, 1995), some recent studies, primarily in the field of international economics, have noted that domestic production increases with an expansion in overseas production (Hijzen, Inui, & Todo, 2007;Matsuura, Motohashi, & Hayakawa, 2008;Yamashita & Fukao, 2010). At the same time, focusing on international management, Amano (2000Amano ( , 2005 identified a mechanism wherein an expansion in overseas production leads to an increase in domestic production. In this phenomenon, domestic production increases through an expansion in overseas production, thereby promoting two conversion behaviors: spontaneous and induced (Amano, 2000).
However, Amano studied large firms with abundant management resources, making the study a poor fit for small-and medium-sized enterprises (SMEs) with few management resources. If one posits that SMEs experience expanded domestic production after an overseas expansion, then what are the success factors causing such a phenomenon? This study aims to identify these mechanisms by investigating an SME that witnessed growth in domestic production because of an expansion in overseas production. This paper studies an SME that manufactures production goods. Customers often determine the functionality and specifications of the products in this industry. This, in turn, helps determine what management resources and capabilities will be held by the company (Takashima, 1998). Entering into a business relationship with a new customer promotes the accumulation of company resources and capabilities and enables the company to grow (von Hippel, 1986). In Japan, where long-term, fixed relationships are a standard business practice 1 and keiretsu relationships usually dominate the automotive parts industry, 2 it is difficult for new companies to enter the market (Asanuma, 1997).
However, Japanese companies bound by fixed business practices domestically do not hold the same position overseas. In recent years, large firms expanding production overseas have demonstrated a tendency to procure parts locally (Kato, 2011). Unlike the situation in Japan, given a chronic shortage of suppliers in overseas markets, Japanese SMEs entering such markets find it possible to become suppliers with other firms even without precedents of such relationships in Japan. This paper concludes that as the global supply chains of Japanese firms expand, even SMEs can develop new customers among Japanese companies overseas. Japanese SMEs can even enter new relationships domestically if they can create a torihiki-jisseki ("track record of transactions" in Japanese) overseas, thereby expanding 1 It has been noted that companies placing purchase orders only with specific suppliers with whom they have accounts are examples of these fixed business practices (Inamizu & Wakabayashi, 2009, 2013. 2 Keiretsu transactions function to reduce costs and improve quality over the long term though frequent contact between automakers and suppliers. For example, Konno (2003Konno ( , 2007 covered details of automakers and suppliers in Japan. domestic production.

Case Study of Japanese SMEs in China
The case provided herein is of Company A, which expanded domestic production by first expanding overseas. Company A is a manufacturer of mainsprings, which are small springs used in car seats. The company has 130 employees in Japan and has a capital of 50 million yen. The company's primary customer is a 1st-tier Toyota Transactions with these joint ventures led to a further expansion in Company α's customer base. The Japanese partners in these joint ventures were not only involved in Chinese joint ventures but also were frequently expanding their own production. Thus, Company α was able to leverage its torihiki-jisseki with these Japanese-Taiwanese joint venture firms into Japanese firms making

Two Ways of Employing Torihiki-Jisseki Leverage in Japan
In the previous section, we stated that Company α was able to create torihiki-jisseki with a variety of companies in the mainspring industry in China. This section discusses the mechanisms that allowed an expansion in domestic production through this overseas torihiki-jisseki. Company A used its overseas torihiki-jisseki in the following two ways: 1) Domestic sales approaches via its overseas sites.
2) Increasing the recognition of Company A in the Japanese media by publicizing its Chinese subsidiary, Company α, as the leading company for springs.
(1) Sales from overseas sites

Conclusion
This paper presents the case of Company A and identifies a mechanism whereby the company developed new domestic customers by leveraging torihiki-jisseki with various customers in overseas markets. It must be noted that behind this mechanism is a characteristic particular to the Japanese automotive parts industry, wherein companies work to reduce costs through long-term relationships. In other words, it is possible that this mechanism would not be applicable outside of Japanese companies. At the same time, this mechanism, quite paradoxically, calls for SMEs in Japan, which may wish to grow and survive domestically, to strive for overseas, rather than domestic, expansion. Compared with SMEs in other countries, it is possible that those in Japan have different motivations regarding overseas expansion. Whether this mechanism can generally be applied to other SMEs in Japan requires further case studies and quantitative research.