AS MENTIONED in the Introduction the purpose of this book is to examine organisational change at Japanese firms taken over by foreign firms. The aim of this chapter is to establish an understanding of the Japanese employment system, to examine its institutional underpinnings and to determine in what way the practices that constitute the system are distinctive. From this we can build a model of a Japanese firm from which we might speculate how practices might diverge if the firm were to be taken over by an organisation embedded in a different institutional framework. We will also examine the pressures that the Japanese system has been under in recent years and the extent to which the institutions that make up the Japanese form of capitalism may have been undermined.

This chapter is divided into two sections. In the first section I give a broad overview of Japanese organisations, presenting it in an institutional framework, focusing on the development of the communitarian firm in the decades following the end of World War II. In the second section, I describe recent developments which have affected the Japanese organisational model, again offering an institutional lens to view the process of change that appears to have taken place during the last decade and a half.

Japan, varieties of capitalism and institutional Distinctiveness

Interest in the idea that there are varieties of capitalism grew with the rising economic profile of Japan and Germany in the post-war era. As early as the 1950s, writers such as Abegglen (1958) and Levine (1958) identified organisational processes and structures that differed markedly from those that characterised American companies.