The industrial groupings also foster efficient

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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.

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