Firm Growth in Prewar Japan

A Case Study of the Long-lived Firm

Abstract

This paper attempts to contribute to find the key of firm growth by analyzing business of a specific firm, using a management dataset from the business report of the long-lived firm that was in Fukui prefecture in the first half of the twentieth century.

The name of the firm that examined in this paper was Katsuyama Kigyo Kaytey Goshi Gaisya (Katsuyama Textile Brother's Joint-stock Company). In the mid-1920s, Kaytey was on the verge of bankruptcy due to a halt in financing from Katsuyama Bank. Katsuyama Bank was the main financing bank of Kaytey. That event triggered a change in the way of funding. After that, Kaytey increased the rate of raising money from company members instead of borrowings from a bank. By raising capital adequacy ratio, Kaytey could lower the rate of bankruptcy.

Furthermore, it is found that Kaytey worked together with an iron factory in Kanazawa prefecture to development new products. In 1930s, Kaytey could sell many rayon and silk crepe. It was the fruit of product development by crossover cooperation in 1920s. This finding indicates how important the continuous product development was. Management stability also supported this continuous product development and made successful result in 1930s.