Abstract

Reorganization of interfirm networks under globalization: Establishment of an international division of labor in the Japanese shipping industry

The interfirm networks have long been an important discussion point in business history. Many studies point to the benefits of reducing transaction costs and the dominance of stable relationships. Nevertheless, interfirm networks underwent significant reorganization during the globalization era, but their dynamics have remained understudied. Using the case study of the Japanese shipping industry, this research demonstrates how stable interfirm networks were transformed at a global scale from the 1970 to the 2000. The Japanese shipping industry is an important case in the study of the global shipping industry, not only because it is highly competitive internationally, but also because it has developed cooperative relationships with firms from other countries. This phenomenon coincides with the gradual disintegration of traditional interfirm networks (Keiretsu) in various industries under globalization in Japan. Through analyzing the relationships of ship chartering companies obtained from Japanese shipping firms, as well as Japanese shipping cartel documents, this study demonstrates two main factors about the characteristics of Japanese shipping firms in transition and their market strategies. Firstly, geographical factors played a strong role. The economic environment of the partner country limits interfirm networks. Secondly, relationships with supporting industries were another key factor. This paper finds that changes in the strategies of supporting industries have a significant impact on the reoraganization of the division of labor within an industry. This study contributes to the understaning of a dynamic aspect of interfirm networks, whereas many studies of interfirm networks have emphasized the importance of stability.