Keiretsu

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Keiretsu

A network of Japanese companies organized around a major bank. The term is also used outside of Japan to describe how a large corporation with many subsidiaries and associated firms can manipulate revenues. For example, firm A and B are controlled by firm C. Firm A is forced to buy its input from firm B at a high price. As a result, A is unprofitable and B is very profitable.

Keiretsu

In Japan, a number of independent but related companies centered on and financed by a single bank and/or a joint stock company. That is, the institution (and no other) provides financing for companies in the keiretsu. There are two main types of keiretsu. A horizontal keiretsu is essentially a diversified conglomerate; that is, it may have companies in several, completely unrelated industries so as to reduce the risk of loss if one industry or other has a bad year. A vertical keiretsu, on the other hand, is more centrally controlled such that companies in the same keiretsu provide all steps on 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. In Japan, these consumers are often employees of the very same keiretsu. Critics of this system contend that they are inefficient; proponents, however, argue that they are sustainable and have helped Japan recover from the post-war period. See also: Japanese miracle, Zaibatsu, Chaebol.

keiretsu

a Japanese term relating to a network of customers and their suppliers working within a related industry, or with a single customer. Developed by the multinational organizations in Japan initially with the idea of exercising control over suppliers. Kereitsu has developed to mean closer links between customer and supplier and includes the sharing of technologies, of skilled employees and of product development. See SUPPLIER DEVELOPMENT, LEAN MANUFACTURING.
References in periodicals archive ?
Unfortunately, many firms found it difficult to make the necessary changes--due, in part, to factors such as the rigidities imposed by keiretsu relationships, life-term employment practices, and corporate mindsets that emphasized growth over profitability.
Finally, since keiretsu investors have long-term strategic rather than short-term financial interests in their affiliated firms and given that workforce downsizing can result in the loss of valuable firm-specific employee skills, keiretsu firms are more likely to protect long-term human capital investments even when firm performance is low (Yoshikawa/Phan/David 2005).
The relationships identified in H1 to H9 will be more pronounced among non-keiretsu firms than in keiretsu firms.
Overall, our final sample consisted of a total of 157 firms with 70 keiretsu and 87 non-keiretsu firms.
Finally, firms were classified as a keiretsu firm if they were identified as a part of a manufacturing or horizontal keiretsu.
Table 3 presents the results as they relate to the relationships identified in Hypotheses 1 through 9 in subgroups of keiretsu and non-keiretsu firms.
Until late 1990s, keiretsu membership was largely determined by historical developments.
Ownership structure is also determined once the keiretsu membership is identified.
Sheard (1989, 1994) observes that the largest lender of a keiretsu company generally is one of the five largest shareholders.
The role of financial institutions in horizontal keiretsu groups is well documented.
Nakatani (1984) notes that a main bank will immediately provide both financial and administrative assistance to a keiretsu firm encountering financial difficulty.
Researchers consistently find that keiretsu firms maintain higher leverage than independent firms.