The role of firm organization in the adjustment of a declining industry in Japan: The case of aluminum

Abstract

Existing literature on Japanese industrial adjustment has focused largely on the role of government policy and adjustment assistance. A neglected issue is the role played by firms and their corporate organization. A case study of the aluminum smelting industry provides insights into how adjustment takes place at the level of the firm in Japan and highlights the important role played by the bank-centered corporate groupings. An important finding is that, notwithstanding a series of government-implemented assistance measures, structural adjustment losses were absorbed mainly by the firms in the industry in tandem with group-related partners. While providing some support for the risk-sharing hypothesis regarding group formation, the paper clarifies the extent and nature of the risk-sharing mechanisms. J. Japan Int. Econ., 5(1), March 1991, pp. 14–40. Department of Economics, Faculty of Economics and Commerce, Australian National University, Canberra, ACT 2601, Australia.