Abstract
Well-known core features of the Japanese-type corporate system, such as the main bank system, the stakeholder corporate governance system, the life-time employment system, and supplier networks have undergone significant changes in the long-lasting recession after the bursting of the bubble economy. Meanwhile, new institutional arrangements emerged through legal reforms, as well as innovations in corporate finance and the organizational architecture of firms. Many changes suggest a step toward more market-oriented models like the US or UK. However, less agreement exists over the underlying significance of these changes and the extent which they imply a departure from the past Japanese model. This article provides our understanding of the current process of institutional continuity and change in the Japanese-type corporate system, and addresses how main ingredients of this system have changed, and the inter-relationship between those changes. To begin with, we compare the 1990s recession with the 1970s recession by checking macro-economic indicators. Concerning the former one, we deal with two phases of both recessions after the bursting of the bubble and after 1997 banking crisis. Next, we provide empirical findings that the core elements of the Japanese-type corporate system have changed significantly after 1997 banking crisis. In this sense, the year 1997 represents a more dramatic turning point. Furthermore, we examine more precisely changes in both domains of finance and employment. Changes have not proceeded uniformly, and have been occurring unevenly across different groups of firms, leading to greater heterogeneity among firms within Japan. The result of this process of changes has been the emergence of new hybrid forms of firm organization, named the "New J-type Firm," which is a new recombination between the governance for shareholder value, merit (or performance)-based payment systems and the preservation of life-time employment practice. This hybridization refers to the innovative recombination of elements in ways that rejects both an economic determinism of a single best model, as well as societal determinism which suggests that practices intrinsic to each country can never be transferred. However, the emergence of new hybrid forms of firm organization in Japan presents some puzzling questions. One question we have to ask is whether new hybrid forms of firm organization can be stable and be sustained over a long period, or whether such hybrid model may represent only a transitional stage toward more fully market-oriented model. Fornow, the future of this hybrid model cannot be predicted precisely. Meanwhile, the emergence of new hybrid forms of firm organization certainly does not mean the abandonment of lifetime employment practices, especially in large Japanese firms. However, next another question we have to ask is whether the traditional arrangement of long-term formation of skill and competence by in-house training can be sustained, or whether the high functional linkage between the skill formation and labor productivity can be sustained. The answers to these questions also remain unknown.
