Akira Takeishi

Using the framework of contract economics, we assess the determinants of the choice of vertical integration, relational contracting (keiretsu sourcing) or market sourcing by seven Japanese automobile manufacturers (OEMs) with respect to 54 components. Our major findings are as follows. First, the specificity of a component significantly promotes keiretsu over market sourcing. This effect declines with the testability of the component, consistent with transaction cost economics. Second, the interdependency of a component makes vertical integration significantly preferred to keiretsu sourcing, while the specificity of the component does not. These results suggest that the hold-up risk due to specific investment can often be effectively controlled by relational contracting based on keiretsu sourcing, while accommodating non-contractible design changes may often require vertical integration. Third, high testability of a component significantly promotes the choice of keiretsu over market sourcing. One interpretation of this result is that a keiretsu supplier may have both the incentive to gather information for quality improvement in an environment of high testability, and the incentive to share the information with the OEM for its implementation.

This chapter analyses modularization in the world automotive industry. Modularization has involved architectural changes in product, production, and supplier systems in the industry. As an attempt to understand such multi-faceted, complex processes, this chapter proposes a conceptual framework that sees development/production activities as multiple hierarchies of products, processes, and inter-firm boundaries that are interlinked. Using this framework and drawing on case studies and questionnaire survey data, the chapter examines the ongoing processes of modularization in the industry and argues that tensions exist among the three hierarchies. Such tensions may lead to further changes in product, production, and supplier-system architectures.

This paper examines the development process of music businesses on mobile Internet in Japan and Korea, two leading countries in the world that have been enjoying rapid growth of mobile Internet businesses. Based on the 'Large Technological System' perspective (Hughes, T.P., 1983. Networks of Power: Electrification in Western Society, 1890-1930. John Hopkins University Press, Baltimore; Hughes, T.P., 1989. The evolution of large technological systems. In: Wiebe, E.B., Hughes, T.P., Pinch, T. (Eds.), The Social Construction of Technological Systems. MIT Press, Cambridge, MA, pp. 51-82), this paper sees music copyright management institutions as a 'reverse salient' in the large technological system of mobile music businesses. We argue that the development of mobile music business has been and will continue to be dependent on how to revise copyright management institutions in accordance with changes and advancement of technologies and other sub-components in the large technological system. (c) 2005 Elsevier B.V. All rights reserved.

Drawing on an empirical study on automakers' management of supplier involvement in product development in Japan, this paper shows that when the design of a component is outsourced to a supplier, how much automakers know about the component matters for them to gain a better outcome. While the actual tasks of designing and manufacturing components could be outsourced, automakers should retain the relevant knowledge to obtain better component design quality. The paper argues that knowledge partitioning should be distinguished from task partitioning, and provides some implications for the knowledge-based theory of the firm. The results indicate that effective pattern of knowledge partitioning differs by the nature of component development project in terms of technological newness. For regular projects. it is more important for the automaker to have a higher level of architectural knowledge (how to coordinate various components for a vehicle) than of component-specific knowledge, which is supposed to be provided by the supplier. However, when the project involves new technology for the supplier, it is important for the automaker to have a higher level of component-specific knowledge to solve unexplored engineering problems together with the supplier. In innovative projects, effective knowledge partitioning seems to demand some overlap between an automaker and a supplier, rather than efficient and clear-cut boundaries that are optimal for regular projects. Such "fluid" nature of knowledge boundaries contingent on the project types poses a challenge for firms seeking both technological leadership and efficiency in established products, Developing and maintaining knowledge about an outsourced component is by no means easy. When the actual design tasks are outsourced, automakers miss substantial opportunities to gain relevant knowledge through learning by doing. Also, obtained knowledge may be diffused among competitors through shared suppliers, Another problem for automakers is that component-specific knowledge is important for only limited cases (innovative projects). Even worse, component-specific knowledge has a trade off relationship with architectural knowledge. Such an inherent dilemma of managing knowledge, however, may provide some automakers with the opportunity to achieve sustainable competitive advantage, Additional analysis shows that one automaker managed both types of knowledge better than others in a manner that deals effectively with the dilemma. Its organizational mechanisms include career development policies. extensive documentation of technological information, internal training programs, and incentive schemes. The difficulty in implementing those mechanisms in a consistent and complementary manner seems to explain why there was a significant variance among automakers in knowledge level. even when the actual tasks were carried out by a shared supplier.

Outsourcing fins become an important strategy for many firms. Yet, firms need to complete with their competitors who also outsource and may share the same suppliers. This article explores how a firm could outperform others in managing the division of labor with a supplier in product development. Drawing on the empirical data collected from the Japanese auto industry, this paper shows that an automaker needs capabilities to coordinate various activities both externally with a supplier and internally within its own organization, in order to gain better component development performance. Overall, the results imply that outsourcing does not work effectively without extensive internal effort. Copyright (C) 2001 John Wiley & Sons, Ltd.

This paper analyses modularisation in the world’s auto industry. Modularisation in the industry has involved architectural changes in product, production, and supplier systems, with each region (Japan, Europe and the USA) emphasising different purposes and aspects. As an attempt to understand such multi-faceted, complex processes coherently, this paper proposes a conceptual framework that sees development and production activities as interlinked, multiple hierarchies of products, processes, and inter-firm boundaries. With this framework, drawing on case studies and questionnaire survey data, the paper examines the ongoing processes of modularisation in the industry. It is argued that tensions exist among the three hierarchies, and such tensions may lead to further changes in product, production and supplier- system architectures in the auto industry, in a dynamic and path-dependent manner. © 2001 Inderscience Enterprises Ltd.