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Unformatted text preview: structure, in combination with horizontal groupings (known as keiretsu, or the looser
kigyo shudan), is also supposed to form part of a
governance structure which has the merit of not
interfering with managers in normal times, but which
provides incentives to, and monitoring of, manage10 rial effort (Berglof and Perotti, 1994). The industrial
groupings also foster efficient investment in relationship-specific capital and work as a mechanism
for managing the extensive network of subcontracting links which might otherwise lead to problems of
hold-up or shirking (Kester, 1992). A feature of the
ties between firms in these groups is crossshareholding, the purpose of which is to cement
relationships, reinforce monitoring mechanisms, and
prevent hostile takeovers. Again, there is no unanimity of view on the merits of the system11 and
Japan remains a textbook example of a different
way of defining the boundaries of the firm, with
large firms embedded in a network of small ones.
Within the firm, a team-based, non-hierarchical
organizational structure delivers an effective production and technology management system which,
in its heyday, was a mode...
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This note was uploaded on 02/03/2014 for the course ECON 204 taught by Professor Devero during the Summer '13 term at American University of Sharjah.
- Summer '13