Abstract
Management practices and orientation need to change when the climate of the time in which firms operate changes. In the 1980s–early 1990s when the world enjoyed a broad economic growth on a global scale, Japanese management practices were admired in awe around the world. Despite such admiration, however, Japanese firms, on average, tended to have much lower financial performance (measured as ROEs) than U.S. and European firms. Since the Japanese economy began to slip into a decade-long recessionary environment in the late 1990s, many Japanese firms experienced profit losses and even lower ROEs, but their change in management practices to address the new climate of the time has since been slow. Consequently, the world’s admiration of Japanese management began to wane. This article explores how and why, and offers broader implications to management practices in general.
This work significantly expands on my earlier publication, Masaaki Kotabe, “Japanese Management and the Climate of the Time,” Asian Business & Management, 19 (1), February 2020, 25–35, and elucidates a clear distinction between Japanese and U.S. business practices and their respective vulnerability to the change in the climate of the time.
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Notes
- 1.
Focusing on the U.S. academic research environment, Eleanor Westney laments that U.S.-based academics had challenges and difficulties in balancing the importance of the Japanese-specific context with the pervasive demand to develop general theory. As a result, while many Japanese management concepts were revered, they were considered “unique” and rarely went into general theory development.
Let me dig deeper to complement her point. The reason why Japanese management practices stopped short of going beyond being unique has to do with how theory was developed in Japan as opposed to the U.S. In the U.S., the pragmatic approach to empirical research, often called, logical empiricism, has been the primary modus operandi for business research. Simply stated, the literature review-hypothesis development-empirical research paradigm has become the standard in U.S. academic research. As a result, whenever a theory is constructed, researchers pay due attention to the measurability of constructs, which statistically makes it possible to quantify the (causal and/or associative) relationship between the constructs. In Japan, however, Hegelian dialectical approach to research had set the standard for academic research since the nineteenth century. First, a logical thesis is developed, followed by a search for contradiction (“antithesis”) of the thesis, and then the synthesis is attempted to resolve the differences between the two opposing points to reach a higher level of truth. Although U.S.-style empirical research has gained popularity in many parts of the world, including Japan, Japanese academics still espouse the dialectical approach, or its variants, that emphasizes logical consistency through acute observation more than quantitative measurements. Much of the well-known research in Japanese management practices falls in this category. From the U.S. logical empiricism point of view, most theoretical arguments related to Japanese management practices are not conducive to quantitative empirical investigation. Thus, many Japanese management concepts remain “unique” as they are not easily quantifiable.
- 2.
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Kotabe, M. (2024). Reflecting on Japanese Management in the Changing Climate of the Time. In: Makino, S., Uchida, Y., Kasahara, T. (eds) Transformation of Japanese Multinational Enterprises and Business. Springer, Singapore. https://doi.org/10.1007/978-981-99-8616-3_2
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