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 ?
Once Japanese companies started expanding abroad, they exported their vertical keiretsu method.
But recent studies suggest emergent American practices differ from traditional Japanese vertical keiretsu practices.
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.
1995] explores whether location of other Japanese firms in a US state or neighboring states by firms of the same vertical keiretsu affects subsequent FDI for a Japanese MNE.
For example, contingent, project-based contracting in American employment systems may involve limited domination and formal coordination, at least relative to traditional bureaucracies (see Barley and Orr, 1997), while the extent of domination and formal coordination in vertical keiretsu is quite extensive (Aoki, 1988).
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.
Unlike the horizontal keiretsu, the vertical keiretsu are usually composed of a major industrial corporation and its suppliers or distributors/retailers in a particular industry such as automobiles and electronics[26].
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.

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