Vertical Keiretsu

Vertical Keiretsu

In Japan, a number of independent but related companies financed by a single bank and/or a joint stock company that controls every stage of the supply chain. For example, a mining company may sell a metal to a refinery in the same keiretsu, who then sells it to an auto company, who then sells cars to consumers. These consumers are often employees of the very same keiretsu because they have such strong company loyalty. Critics of this system contend that it is inefficient; proponents, however, argue that it is sustainable and has helped Japan recover from the post-war period.
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References in periodicals archive ?
But recent studies suggest emergent American practices differ from traditional Japanese vertical keiretsu practices.
While these structural responses bore similarities to vertical keiretsu arrangements, Ro, Liker, and Fixson (2008) identified striking contrasts between emerging American supplier arrangements and those of Japanese auto firms.
Constand, 2000, "Ownership Structure and Performance of Japanese Firms: Horizontal Keiretsu, Vertical Keiretsu, and Independents," Review of Pacific Basin Financial Markets and Policies 3, 535-556.
The focus of this study is on the financial performance of first-tier suppliers that are affiliated with a vertical keiretsu in the Japanese automobile industry in contrast to the mostly descriptive nature of previous studies.
Vertical keiretsu can be explained by emergence of a large manufacturer dominating integrated distribution system.
These groups of manufacturers and parts suppliers are often called vertical keiretsu.
Subsidiaries of parent companies that belong to a vertical keiretsu with strong intra-keiretsu supplier relationships also have a higher local content, in particular in ASEAN countries.
Third, Japanese companies are closely interrelated in both horizontal and vertical keiretsu, which means that vertical and horizontal links are not "up for grabs" by foreign investors.
The trading relationship between members of even a vertical keiretsu is not exclusive.
The evolution of corporate governance in Japan: the case of vertical Keiretsu groups, Nabyla Daidj
Vertical Keiretsu and International Market Entry: The Case of Japanese Automobile Ancillary, Journal of International Business Studies, 27, 1996, pp.
He remarks that both horizontal and vertical keiretsu are associated with quantitatively important reductions in imports, and that their impact inhibits entry rather than improving competitiveness.

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