E the evaluation of work performance on the basis of

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Unformatted text preview: Anglo-American firms. Aoki’s interpretation also provides an explanation for the extensive use of subcontracting in Japan. Though subcontracting involves the risk of hold-ups and requires a high degree of trust, Aoki suggests that it allows each firm to maintain a more homogeneous body of employees. This improves horizontal coordination and enhances the use of team contracts (i.e. the evaluation of work performance on the basis of group output). Finally, the main-bank system and cross-shareholding raise the effectiveness of the firm’s internal information system. By assuring managers of non-interference in normal business conditions, the system allows them to recoup returns from firm-specific investment in information processing (Sheard, 1991). Even in periods of poor performance, when managers may be removed, the firm-specific investments of permanent workers are not threatened (as they might be in an arm’s-length, takeover-based market for corporate control). Going further, Garvey and Swan (1992,...
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