Comparative Responses to Globalization

Experiences of British and Japanese Enterprises

M. Umemura, R. Fujioka, M. Umemura, R. Fujioka

• Publisher: Palgrave Macmillan
• Year: 2012
• Print ISBN: 9781137263629
• eBook ISBN: 9781137263636
• Topic: Business
• Subtopic: Business General
• Index: Business

Explores how British and Japanese firms have responded to globalization from a long-term perspective. Incorporates studies from the 18th century and sheds light on the impact of the institutional setting, the influence of government and entrepreneurs, and the weight of historical contingency in conditioning firm responses to globalization.

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Introduction – Comparative Perspectives on Globalization: Historical Reflections on British and Japanese Enterprises

Maki Umemura

Japanese firms have been global leaders in manufacturing. For several decades, services have been among the leading exports of Britain. Amid the current economic downturn, policymakers and business leaders in both countries have been debating how best to respond to the pressures of globalization by rebalancing their economies – albeit in opposite directions.¹ While Japan has attempted to develop its services sector, Britain has focused on reinvigorating its manufacturing sector.² The study of these ‘opposites’ raises some questions. For example, is Japan simply following Britain’s path of deindustrialization? If we believe in the free market and Michael Porter’s argument of competitive advantage, we would assume that countries would do well to specialize, or become ‘unbalanced’. Yet both economies appear keen to achieve greater ‘balance’. Does history suggest that countries prefer ‘balance’ over ‘imbalance’ amid globalization?

For the past few decades, we have observed globalization of a different magnitude from previous periods of history, bolstered by advances in information technology and government deregulation. As Manuel Castells has argued, in this ‘new economy’, competitiveness has become a product of knowledge generation and information processing.³ The organization of firms in many countries has changed dramatically. Companies now operate as networks of production, management, and distribution, and conduct business in different regions across different time zones. The 2008 credit crisis and the threat of contagion from the Euro crisis have underscored the degree to which economies are now interconnected. The issues that arise in the globalization literature – such as the rise of multinational companies or the changing nature of technological innovations – are phenomena that were observed during globalization in the past.

This book offers a collection of essays on business history that examine how British and Japanese firms have responded to the pressures of globalization at various points in time. Around the world, firms have responded to globalization in diverse ways, from expanding their operations, differentiating their products, normalizing risk, to adopting new knowledge. The chapter contributions are written by academics from diverse academic backgrounds who specialize in different industries. They have adopted varied methodological approaches and have used a rich range of published and archival resources in both Britain and Japan. The fruits of their research are not intended to offer a comprehensive or straightforward assessment of the reasons behind the success or failure of business amid globalization. We do, however, hope to shed light on the diversity of perspectives on the responses of British and Japanese enterprises to globalization.

The aim of this book is to offer a series of historical case studies of British and Japanese firms to enhance our understanding of firms’ responses to globalization in British and Japanese business history. In the process, we hope to shed light on the impact of the institutional setting, the influence of government and entrepreneurs, and the weight of historical contingency in conditioning firms’ responses. We also consider the extent to which the ‘varieties of capitalism’ and cultural distance concepts help us to understand how firms respond to globalization.

On globalization

Academics have defined ‘globalization’ in a number of ways. The economist Joseph Stiglitz has referred to globalization as ‘the closer integration of the countries and peoples … brought about by the enormous reduction of costs in transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and (to a lesser extent) people across borders’.⁴ The journalist Thomas Friedman has popularized this definition of globalization as the interweaving of markets, technology, information systems, and telecommunication networks in a way that is shrinking the world into a single market.⁵ The sociologist Anthony Giddens has defined globalization as ‘the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa’.⁶ We believe that the best working definition of globalization is one that refers to the increasing interconnectedness and interdependence of different regions in the world, recognizing a range of factors – from trade to information flows – as contributing to this process.⁷

Historians have vigorously debated the origins, causes, and consequences of globalization.⁸ One of the liveliest debates is about when globalization actually began. Some argue that globalization began well before the Christian era, while others associate it with the post-1945 period, when governments cooperated to open their markets.⁹ A few even restrict the term to the last 30 or so years.¹⁰ The most common view is that globalization began with the creation of the European empires in the age of discovery.¹¹ While there are a substantial number of works that examine the impact of globalization on firms, most such studies focus only on the recent phase of globalization, since the late 1970s.¹² The research presented in this collection places these developments in a historical perspective, as firms have been responding to globalization since at least the nineteenth century.¹³ We believe that taking a long-term perspective helps better account for how different institutional contexts shape divergent responses from firms.

Jeffry Frieden has convincingly argued that globalization has not been a linear process and that it has been reversed in certain periods of history. The years between 1914 and 1945, for example, have been regarded as an age of deglobalization.¹⁴ According to this perspective, the globalization of the post-1945 period is a reconstitution of the integrated global economic order that was undermined by the First World War.¹⁵ Whether in Britain or Japan, the animosity between nation-states in the interwar period prompted governments to erect protectionist barriers. In the post-1945 period, countries forged new collaborative efforts to foster the integration of markets. As the contributions in this volume suggest, Japanese and British firms played important roles in these developments.

In addition to timing, academics have also debated the causes of globalization. Some maintain that the reduction of transportation and communication costs is the key driver of global economic integration.¹⁶ The evolution of transportation technologies, from ships to automobiles and airplanes, as well as developments in communication technologies, from the telegraph, the telephone to the Internet, have altered previous conceptions of ‘distance’. However, focusing on technology explains neither why there have been periods of deglobalization nor why some countries have embraced globalization more than others at specific points in time. Globalization takes place partly as a result of politics and government policy.¹⁷

Perhaps one of the most important academic controversies involves the consequences of globalization. At the level of the individual firm, companies may respond to globalization by any number of means: from making production processes more efficient; innovating, standardizing, or expanding their product offerings; to expanding their business in overseas markets. More broadly, there have been major debates as to whether the pressures of globalization and deregulation are leading to the erosion of the differences between the economic systems of countries.¹⁸ Some have suggested that in the second half of the twentieth century the capitalist systems of industrialized countries came to resemble that of the United States, which is characterized by flexible labour markets and a managerial focus on maximizing returns to shareholders.¹⁹ The British system shares similar traits with the American model. Yet while the Japanese system has undergone considerable reforms since the burst of its bubble economy in the 1990s, it has yet to converge with the American model. Peter Hall, David Soskice, and Vivien Schmidt have stated that the differences in political and economic institutions lead firms to generate divergent responses and outcomes – and limits convergence.²⁰

Comparing Britain and Japan

Britain and Japan offer good historical case studies through which to examine how firms have responded to pressures of globalization for several reasons. The comparison of Britain and Japan is particularly useful when considering the ‘varieties of capitalism’ paradigm developed by Peter Hall and David Soskice.²¹ Scholars writing on the varieties of capitalism have often distinguished the liberal market economies (LMEs), such as Britain and the United States, from the more coordinated market economies (CMEs), such as Germany and Japan.²²

In LMEs such as Britain, firms coordinate their activities through the market mechanism, and conduct transactions through arm’s-length market exchanges and formal contracting. In this environment, the government tends to impose lower taxes and fewer regulations, and provide weaker social programmes. Scholars have argued that firms in LMEs tend to feature greater labour mobility and to emphasize returns to shareholders.²³ By comparison, firms in CMEs engage in more relational or incomplete contracting and network monitoring that is based on the exchange of private information within networks, and they also rely upon collaborative relationships. In this environment, firms tend to exhibit long-term relationships with their employees, other firms, and government. Critics have often argued that firms in LMEs tend to be focused on short-term goals whereas those in CMEs are focused on long-term goals.

Debates on the varieties of capitalism are acutely relevant to business performance in the global economy today. Following the financial crisis of 2008, public discussion in Britain has moved towards the need for its firms to embrace a longer-term perspective, and away from a previous emphasis on the shareholder and profit-centred model of capitalism. Conversely, however, public discussion in Japan has revolved around the need for its firms to adopt more flexible forms of organization and to shift towards a more market-oriented model that will allow firms to respond swiftly to changes in market conditions and strengthen knowledge-intensive industries.

Many scholars have highlighted the features of personal capitalism among British firms, compared to the collectivist form of capitalism among Japanese firms.²⁴ Firms in Japan, for example, have showed distinct features such as lifetime employment, keiretsu relationships, and multiple tiers of subcontractors. This book offers a forum for examining the extent to which firms in different institutional settings have responded to globalization over time. The studies presented also question the fluidity of these institutional settings th...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Figures and Tables
• Acknowledgements
• List of Contributors
• Notes on Conventions
• 1. Introduction – Comparative Perspectives on Globalization: Historical Reflections on British and Japanese Enterprises
• 2. An Empire of Goods? Groceries in Eighteenth-Century England
• 3. Globalization and Voluntary Consensus Standardization in the British Wire Industry, 1880
• 4. The City of London, British Ethnic and National Identities, and Investment Decisions in the Anglophone New World, 1860–1914
• 5. The Genesis of Modern Management of Technology: The Case of the Meiji Cotton Spinning Sector in Globalization, 1880s–1890s
• 6. Globalization and Family Business: The Renewal of Idemitsu Kosan, 1990s–2000s
• 7. Jute, Firm’s Survival, and British Industrial Policy: Government Action under Globalization
• 8. Emerging Market Strategies in Compact Vehicles: The Case of Japanese Automakers
• 9. The Pressures of Globalization in Retail: The Path of Japanese Department Stores, 1930s–1980s
• 10. Globalization and Change in the Japanese Pharmaceutical Industry, 1990–2010
• 11. The UK Pharmaceutical Industry: Challenges in an Era of Globalization
• Index