ABSTRACT
Honda Motor Company cofounder Takeo Fujisawa once observed that U.S. and Japanese management are 95 percent the same but differ in all important respects. 1 He was suggesting that while managers in both countries may appear to engage in similar activities and carry similar titles, the way they actually conduct business can be substantially different. Perhaps nowhere is this difference more pronounced than with respect to how organizations are put together. Both the United States and Japan have numerous large diversified corporations. In the West they are called conglomerates; in Japan they are called keiretsu. A principal difference between them, however, is that while both conglomerates and keiretsu consist of clusters of affiliated companies engaged in divergent businesses, in the West various member companies are typically run independently while in Japan they are not. That is, large Japanese companies typically consist of clusters of “sister companies” that actively help one another in both good times and bad. This help can take many forms, including mutual purchasing agreements, cross holdings of stock, loans from one company to another, exchange of management talent, and so forth. When a sister company is in trouble, other companies in the keiretsu step forward to offer assistance. However, there is a downside to this mutual assistance arrangement: when a sister company is either unwilling or incapable of turning itself around, the prosperity of the entire group can be threatened.
