Inter-firm Relationships

Abstract

The predominance of small businesses and the slimness of large firms are the two basic facts of the Japanese economy. As shown in the previous chapter, however, a firm is a legal fiction and its boundary is usually different from the effective boundary of the decision-making unit, hereafter referred to as an organization. Therefore these two basic facts do not necessarily imply that the effective boundary of the Japanese organization is small and that the Japanese economy is idiosyncratically decentralized. In this chapter we consider how organizations and inter-organizational relationships are formed and function, how the economic activities within each firm are coordinated and who assumes the leadership in designing the system for this coordination.