Working Papers

Shukko (Employee Transfers) and Tacit Knowledge Exchange in Japanese Supply Networks

The Electronics Industry Case


Purchase-supply relations in Japanese electronics are less close and cooperative than in the automobile industry and involve less formal knowledge sharing. Our interviews with a number of major Japanese electronics firms reveal that suppliers are less involved in manufacturers’ product development processes and are brought in at later stages. However, too much attention to such formal knowledge sharing events may blind one to patterns of cross-firm learning and sharing that transfer the most tacit kinds of organizational knowledge, such as the normative and affective elements of a corporate culture. Using interview information, we discuss the phenomenon of shukko (employee transfers) among Japanese companies. Shukko is often viewed as a downsizing device, although firms claim they do it mostly to exchange knowledge with partners. Our view is that it serves both purposes. However, the volume of shukko varies with the electronics firm. It is most common where customers and suppliers are bound to one another in equity and other “keiretsu” relationships. Shukko is an effective mechanism of cross-firm socialization, so we might expect that firms that shukko extensively are also more likely to develop network-wide cultures of obligation and reciprocity. An example supporting that hypothesis is “Kigyo Denki,” our pseudonym for a large, old-line electronics company with strong ties to one of Japan’s “bigsix” horizontal keiretsu groups. However, some companies, such as Matsushita, have a corporate culture that appears to coordinate and motivate suppliers even in the absence of shukko and other keiretsu ties.