This book challenges Masahiko Aoki’s influential J-firm theory, which explains the behavior of Japanese firms in terms of game theory. Demonstrating the theory’s methodological and empirical shortcomings, the authors, a group of Japanese economists, offer an alternative theoretical framework for understanding Japanese business culture and present a series of empirical studies of Japanese companies that focus on skill formation, information sharing, subcontracting, and the role of labour unions.

Why are Japanese companies the best in the world? What is the driving force behind their strength? These questions summ up fully in a few short words the dominant perception of Japanese companies during the bubble period in the late 1980s. Against the backdrop of an improving Japanese economy, the 1980s was also a period in which various theories were espoused which sought to explain why Japanese companies were so competitive and how they were able to achieve such high efficiency. Formulated by Aoki Masahiko, Koike Kazuo and Asanuma Banri, these theories emphasised that Japanese companies were strong because they possessed crucial resources that contributed to their competitiveness, namely the skills of Japanese workers. Japanese companies had a tradition of long-term employment and production workers accumulated skills specific to a particular company that could not be used in other workplaces. They also argued that subcontracting in the keiretsu system was a relationship of coexistence and co-prosperity in which the parent company and the subsidiary shared the risks. It was emphasised that a long-term risk-sharing business relationship contributed to the international competitiveness of Japanese companies.

This study critiques comprehensively the widely-shared theories concerning Japanese companies. While the book reconstructs theories of Japanese companies and the Japanese economy, it is merely a first – albeit necessary – step. The authors go beyond critiquing these theories by offering an alternative view of the Japanese economy and Japanese-style management.