Introduction

Keiretsu ties showcase the Japanese penchant for meshing market and social relations in a “thick and complex skein,” as Caves and Uekusa (1976:59) put it, casting in high relief the Japanese economy's network embeddedness. Companies adjust terms of trade in accordance with their obligations and commitments to one another, factoring into price and contracting decisions nonmarket considerations such as fairness norms or the partner's well-being. Prices, wages, and rates of return are thus set, not so much according to what the market will bear, but rather to what seems just and proper given the identities of the actors and the needs of the community as a whole. Thus, transactions channeled through keiretsu networks distort the operation of market mechanisms, yielding patterns of resource allocation and return that appear deeply suboptimal through a conventional economic lens.