Lecture 10 notes
A. Different national styles of business organization
US vs. Japanese corporations
The main difference between Japan and the US, is stability versus change: cartelization
is illegal in the US; most people change employers several times in their careers; corporate
takeovers, both friendly and hostile, and much more frequent; new business startups are much
more frequent; planning tends to be short-term, with stockholders wanting profitability on a
quarter-by-quarter or year-by-year basis, rather than long-term.
The Chinese family business.
In very sharp contrast to the Japanese model, the Chinese
business model favors the small rather than the gigantic. In Japan, large business organizations
were promoted by the State from the mid-nineteenth century in an effect to promote rapid
industrialization; in China, by way of contrast, the traditional State did not favor businesses at
all, but looked on them as things to be taxed and kept in their place. The typical business is
family-centered, which cultivates trust among business partners, the ability to keep private things
private, and tamping down conflicting ambitions and labor disputes. One Sino-American
example is Wang Computers, which was an important computer company in Phase 2 of the
computer industry, back in the 1980s: founded by an MIT professor named Wang, and passed
along to his son.
Why these differences may become less important.
My thesis is that these different
models could subsist in the days when most economies were national, but under conditions of
globalization it will be found that some of these models are better fits and others are worse fits to
the requirements of globalization. Additionally, the idiosyncracies of each model that work less
well under conditions of globalization will be worn away over the course of time. In other words,
and unlike Reading 9.1, I expect something like a general convergence of business models over
the course of time. This is not to deny, however, that a fairly long time may be required before
the convergence is complete.
Let me briefly suggest two ways in which existing models may be poor fits to the
demands of globalization. First, the keiretsu. Obviously funding R and D and financing new
projects in these giant organizations is not a problem, but the question is whether these gigantic
organizations, sometimes including tens of thousands of separate companies—not tens of
thousands of employees but of companies—will be able to sustain high levels of innovation, or
whether innovation will tend to get lost in the giant bureaucracies needed to run these huge