Working Papers

Strategic Alliances in the Japanese Economy

Types, Critiques, Embeddedness, and Change

This paper reviews the role and consequences of strategic alliances in Japanese business. I am not aware of another paper in English that takes a similarly broad look at Japanese firms’ embrace of and utilization of strategic alliances.

Some readers may disagree and point out that a very large literature in fact deals with the cooperative customer – supplier relationships that are seen as an integral feature of the Japanese “lean production” model of manufacturing success (Dyer, 1996; Helper, MacDuffie, and Sabel, 2000; Liker and Choi, 2004). From the perspective of this paper, however, those vertical partnerships housed within the durable governance structures known as “keiretsu” are not strategic alliances in the usual sense of the term. Admittedly, alliances such as the keiretsu that form and persist for other reasons may at times take on strategic purpose. Much of the focus of this paper is on the interplay between Japan’s keiretsu networks and the strategic alliance creation process in its domestic economy. Japan has also been a major player in international strategic alliances, and I devote some space to that topic. However, the broad involvement of Japanese firms in alliances with foreign partners appears to be matched by relatively little strategic alliance activity at home, particularly if government-led research consortia and the keiretsu themselves are excluded.

My approach is less descriptive than analytical and critical. I wish to understand how Japanese strategic alliances reflect the structure and strategies both of individual Japanese firms and of the Japanese economy as a whole. Moreover, because of rapid ascent to the front ranks of global economic powers and also, perhaps, because Japanese business and government are often carried out in ways that depart to some degree from Western norms, Japan has come in for a good deal of Western criticism. That is as true of its strategic alliances, particularly the international ones, as of other facets of its economic organization and behavior. I review some of those criticisms and attempt to assess their validity and origin. I then focus on one broad issue regarding Japanese domestic interfirm alliances: that to a degree arguably unhealthy for the Japanese economy in the long run, Japanese strategic partnerships have often required embeddedness in preexisting network infrastructure for their launch, persistence, and success. The scholarly literature has shown strategic alliances in other countries likewise utilizing such network infrastructure particularly in the early stages of the alliance life cycle. But Japan is distinctive in that it has had such elaborate interorganizational networks in the form of government-run consortia, trade associations, and keiretsu groupings in place. Building on other writers who have addressed similar themes, I suggest that, while such network or community infrastructure has served a useful purpose in the past, Japanese firms need to move beyond them and, according to my own empirical analysis of the Japanese electronics industry, they are in fact doing just that. Recent strategic alliances, particularly the technology-based ones, are less embedded in keiretsu than was true of the alliances of the past.