Evolving patterns of keiretsu organization and action in Japan

This chapter gives an overview and analysis of the evolving structure and functioning of Japan's keiretsu business clustering. We view keiretsu as fluid, overlapping networks (not distinct and bounded groups) that pervade the japanese economy in a variety of forms. We review historically how informal clusters of direct and indirect business ties overlaid by cross-shareholding, management exchanges, and president's councils re-created (without holding companies) the prewar zaibatsu. We similarly analyze the economic interventionism of the Japanese state, not as top-down regulatory authority, but as free-lance keiretsu partner, leveraging relationships and information in the fashion of private sector network leaders. We also devote considerable space to the timely question of breakdown in Japan's corporate and financial networks and the prospect of their gradual replacement by less relational, more "American-style" markets. While change is indeed pervasive in the Japanese economy, we find strong "safety nets" for member firms. Finally, we contrast Japan's keiretsu system of interlinked banks and corporations with similar institutional arrangements in the United States and Germany. We suggest that the keiretsu display a higher degree of "network" organization-less formal and hierarchical coordination yet (particularly in times of crisis) greater overall cohesion and capacity for concerted action.