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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