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Asia and Europe in the
New Global System
Intercultural Cooperation and
Competition Scenarios

Edited by
Sung-Jo Park and Sierk Horn
Asia and Europe in the New Global System
This page intentionally left blank
Asia and Europe in the
New Global System
Intercultural Cooperation and
Competition Scenarios

Edited by
Sung-Jo Park
Freie Universität Berlin

and

Sierk Horn
Freie Universität Berlin
Selection and editorial matter © Sung-Jo Park and Sierk Horn 2003
Individual chapters © contributors 2003
Foreword © Yoshiaki Takahashi 2003
All rights reserved. No reproduction, copy or transmission of this
publication may be made without written permission.
No paragraph of this publication may be reproduced, copied or transmitted
save with written permission or in accordance with the provisions of the
Copyright, Design and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright licensing Agency, 90
Tottenham Court Road, London W1T 4LP.
Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
The authors have asserted their rights to be identified
as the authors of this work in accordance with the Copyright,
Designs and Patents Act 1988.
First published 2003 by
PALGRAVE MACMILLAN
Houndmills, Basingstoke, Hampshire RG21 6XS and
175 Fifth Avenue, New York, N.Y. 10010
Companies and representatives throughout the world
PALGRAVE MACMILLAN is the global academic Imprint of the Palgrave
Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd.
Macmillan® is a registered trademark in the United States, United Kingdom
and other countries. Palgrave is a registered trademark in the European
Union and other countries.
ISBN 1–4039–0496–0
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources.
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Euro-Asia–Management Studies Association. Conference (18th: 2001: Free
University Berlin)
Asia and Europe in the new global system: intercultural cooperation and
competition scenarios/edited by Sung-Jo Park and Sierk Horn.
p. cm.
“Selected papers presented at the 18th Annual Conferences of the Euro–
Asian Management Studies Association (EAMSA) in November 2001” – Pref.
Includes bibliographical references and index.
ISBN 1-4039-0496-0
1. Asia – Foreign economic relations – Europe – Congresses. 2. Europe –
Foreign economic relations – Asia – Congresses. 3. Industrial management –
Asia – Congresses. 4 Industrial management – Europe – Congresses.
5. Intercultural communication – Asia – Congresses. 6. Intercultural
communication – Europe – Congresses. 7. International trade – Congresses.
8. Competition, International – Congresses. I. Park, Sung-Jo. II. Horn, Sierk.
III. Title.
HF1583.Z4 E8518 2001
337.504—dc21 2002192657

10 9 8 7 6 5 4 3 2 1
12 11 10 09 08 07 06 05 04 03
Printed and bound in Great Britain by
Antony Rowe Ltd, Chippenham and Eastbourne
Contents

List of Figures vii

List of Tables ix

Foreword by Yoshiaki Takahashi xii

Notes on the Contributors xiv

List of Abbreviations xx

Introduction: Interculturality as a New Global

Competitiveness Factor xxii

1 Japanese Hybrid Factories in Germany: Survival

in a Different Environment 1
Testuo Abo

2 Two Faces of Corporate Governance in Britain:

Symbiotic Diffusion of Human Resource
Management/Japanization and European Works Council 26
Hasegawa Harukiyo

3 The Effect of Amakudari on Bank Performance in the

Post-Bubble Period 51
Kenji Suzuki

4 The Transformation of Corporate Governance Systems in

Japan and Germany: The End of Rhenian Capitalism? 66
Ulrich Jürgens

5 The International Organization of Technology Acquisition

Activities: A Comparative Study of Japanese and German
High-Tech Business Units 74
Martin Hemmert

6 International Trade in Services: A World Trade Organization

and Asia-Pacific Economic Cooperation Perspective 94
Sayeeda Bano

7 Students’ Perceptions of Choice Criteria in the Selection

of Tertiary Institutions: A Regional Comparison 136
Zahiruddin Ghazali and Mohamad Hanapi Mohamad

v
vi Contents

8 Revisit the Impact of the Single European Market

Programme on the Reorganization of Japanese
Subsidiaries in the Region: Case Studies of Canon,
YKK and Mitsui OSK Lines 148
Romdej Phisalaphong

9 Japanese Businesses in China: Performance, Control,

Trust and their Relations in Japanese–Chinese Joint Ventures 172
Tadamasa Imaguchi and Xinjian Li

10 The Impact of European Union and Middle East

Partnership: Agreements on Developing the Level of
Environmentalism in Jordan 185
Dieter Beschorner and Thoraiya Younes

11 The Development of Global Education in Malaysia:

Strategies for Internationalization 208
Mohamad Hanapi Mohamad and Zahiruddin Ghazali

12 The Determinants of Share Market Response to Employee

Share Option Plans Announcements and Implementations:
A Review of the Malaysian Bourse 225
Zahiruddin Ghazali, Norlida Abdul Manab, Rusmawati Ismail,
Nurwati Ashikkin Ahmad Zaluki, Habibah Tolos and Munauwar
Mustaffa

13 Technology Transfer in Asia 242

Akira Kuroda

14 Limitations and Potentials of Intercultural Communication

in Unethical Business Conventions: A Theoretical Scrutiny of
Intercultural Communication, Business Ethics, Habermasian
Discourse Ethics and Foucaultian Aesthetics 262
Nobuyuki Chikudate

15 Networking Bricks and Clicks: Convenience Stores and

the Organization of E-Commerce in Japan 283
Hendrik Meyer-Ohle

16 Online Marketing: Displaced Dichotomies 303

Fred Robins

Index 319
List of Figures

1.1 Hybrid evaluation of 23 items in Europe 9

1.2 Hybrids of six groups in Europe 9
1.3 Four perspectives of hybrids in Europe 17
3.1 Average capital/asset ratio and average current
profit/asset ratio, 1990–99 54
3.2 The number of amakudari executives in total and
the number of banks with at least one amakudari
executive, 1992–99 55
5.1 International distribution of R&D sites of the
business units surveyed 81
5.2 International distribution of R&D business unit
expenditures by region 82
5.3 Internationalization of the technological sources
of the questionnaire respondents 84
5.4 Percentage of questionnaire respondents who receive
technological information exclusively from domestic
sources by country and industry 85
5.5 Average technology accquisition performance
assessments by questionnaire respondents by country 86
6.1 World trade in goods and services over time, 1970–99 106
6.2 Trade in goods and services by country, 1999 114
6.3 International trade in services in relation to total trade
and GDP by country, 1998 115
6.4 Trade in services as a proportion of total trade
by country, 1999 116
8.1 Canon organization in Europe 154
8.2 YKK organization in Europe, and Middle
and East Africa (EMEA) 160
8.3 Mitsui OSK Lines organization for liner business
in Europe 165
12.1 Risk-adjusted CAR around ESOP announcement on
KLSE, 1989–97 231
12.2 Risk-adjusted CAR around ESOP implementation on
KLSE, 1989–97 233

vii
viii List of Figures

A12.1 Daily risk-adjusted abnormal returns on ESOP

announcements of the KLSE listed firms, 1989–97 238
A12.2 Daily risk-adjusted abnormal returns on ESOP
implementations of the KLSE listed firms, 1989–97 239
16.1 Four dichotomies of classical marketing thinking 304
16.2 Four dichotomies of electronic marketing practice 312
List of Tables

1.1 Japanese transplants in Germany as of September 1998 3

1.2 Hybrid evaluations of 23 items in Europe 8
1.3 Hybrid evaluations of six groups in Europe 8
1.4 Four-perspective evaluations of hybrids in Europe 16
2.1 Typical corporate governance: types, actors, objective,
methods and relations 29
2.2 Personnel management, HRM and Japanese
management 33
3.1 Listed regional and second-tier regional banks
that failed in the 1990s and the number of amakudari
executives employed in 1990 52
3.2 Total assets, loans and deposits of 82 regional
banks, 1992–99 54
3.3 The effect of amakudari on the capital/asset ratio of
Japanese regional banks 59
3.4 The effect of the amakudari employment in presidential
and non-presidential positions on the capital/asset ratio
of Japanese regional banks 61
3.5 The effect of the number of amakudari executives on the
capital/asset ratio of Japanese regional banks 61
3.6 The effect of amakudari on the capital/asset ratio of
Japanese regional banks (time-related dummy variables) 62
3.7 The effect of the employment and the number of BoJ
amakudari executives on the capital/asset ratio of
Japanese regional banks 63
A3.1 Summary statistics of the data set:
continuous variables 64
A3.2 Summary statistics of the data set:
dummy variables 65
5.1 Structural indicators of firms and business units
by country and industry, 1998 78
5.2 Correlation between internationalization of
technological sources and technology acquisition
performance assessments of questionnaire respondents 88
6.1 World trade in goods and services over time, 1970–99 104
6.2 International trade in goods and services by country, 1999 107

ix
x List of Tables

6.3 Categories of trade in services by country, 1999 108

6.4 Categories of trade as a proportion of total trade and
trade in services by country, 1999 110
6.5 International trade by regions/areas, 1999 111
6.6 Categories of trade in services by country, 1999 112
6.7 Categories of trade in services as a proportion of total
trade and trade in services by trade areas, 1999 113
6.8 International trade in services in relation to total
trade by country, 1998 118
6.9 Categories of trade in services as a proportion of
total services, 1999 122
6.10 Categories of trade in services as a proportion of
total services, 1992 123
6.11 Categories of trade in services as a proportion of
total services, 1984 124
7.1 Summary of factor importance 139
7.2 Comparison of importance 139
7.3 Summary of means 140
7.4 Comparison of means 141
9.1 Trends of Japanese FDI 173
9.2 Performance evaluation by Japanese expatriates in China 175
9.3 Performance evaluation by managers in the
manufacturing industry in Japan 176
9.4 Joint-venture performances evaluated by
managers in Japan 178
9.5 Mutual trust between Japanese firms and Chinese partners 179
9.6 The mean value of control by parent firms 180
9.7 Correlation analyses on control, trust and general
performance 182
10.1 Major facts about Jordan 196
10.2 Study sample characteristics 199
11.1 Public and private universities offering
degree programmes 210
11.2 Post-secondary enrolment 210
11.3 Model summary 217
12.1 Selected ESOP announcements and ESOP
implementation events 230
12.2 Test of significance on CAR over different cumulating
periods (n ⫽ 59) 231
12.3 Test of significance on CAR over different cumulating
periods (n ⫽ 77) 232
 List of Tables xi

12.4 Results of ESOP annnouncement model regressions

for beta, and firm size for long window (n ⫽ 59) 233
12.5 Results of ESOP implementation model regression
for beta, firm size, firm’s assets, and turnover for
long window (n ⫽ 77) 234
A12.1 Risk-adjusted average abnormal returns on ESOP
announcements of the KLSE listed firms, 1989–97 236
A12.2 Risk-adjusted average abnormal returns on ESOP
implementations of the KLSE listed firms, 1989–97 237
13.1 Which side takes responsibility for management of
the following? 243
13.2 Which side has the real authority, the parent company
or local management? Or is a transfer to local
management planned? 244
13.3 Worker expatriate ratio (a/b, c/d) (Japanese and
Western firms) 246
13.4 Training loss 248
13.5 Learning levels of technologies at local firms 254
A13.1 Profile of the surveyed firms (23 Japanese subsidiaries) 256
A13.2 Profile of the surveyed firms (13 Western subsidiaries) 257
A13.3 Profile of the surveyed firms (20 Thai firms) 258
A13.4 The production processes and products of surveyed
firms (56 firms) 259
15.1 Leading convenience store companies 286
15.2 Concerns of Japanese consumers about e-commerce 287
15.3 Organization of e-commerce 297
Foreword

This volume collects selected papers presented at the 18th Annual

Conference of the Euro–Asian Management Studies Association
(EAMSA) in November 2001. The main theme of this conference was
‘Asia and Europe in the New Global System: Intercultural Cooperation
and Competition Scenarios’. EAMSA was founded in November 1984
and its first conference was organized by the East Asian Institute of the
Free University of Berlin and the Science Centre of Berlin. Thirty partic-
ipants came from all over Europe and Asia for that occasion, the first in
a series of annual conferences each attracting participating audiences of
around 70 people. A popular feature has been the publication of
selected papers from these events, either as a special issue of an inter-
national journal or as a monograph.
When we look back over the past 18 years, we can see how our prin-
cipal concerns have developed. During the first four to five years our
discussions were centred on internationalization, the globalization of
Japanese business and the transferability of Japanese management.
Themes then shifted to a comparison of European and Japanese
management, and competition and cooperation between them. In the
1990s, discussions predominantly focused on Asian business, on newly-
industrializing economies (NIEs) and on ASEAN, the growth of the
Asian economy, and business operations of Japanese and European
companies in East Asia. Our most recent area of attention, as shown in
the conference theme from which these papers are derived, has been the
analysis of various issues of business and management emerging in both
European and Asian companies, in response to the new environments
of globalization.
Our current theme is simultaneously one of our most challenging and
most important and calls for further investigation into competition and
cooperation, not only between European and Asian companies but also
among East Asian companies such as Chinese, Japanese, Korean,
Taiwanese and ASEAN businesses with the participation of China in the
World Trade Organization (WTO) at the end of 2001 and the adoption
of the Euro as a common currency over much of Europe in January 2002.
I firmly believe that this publication, under the editorship of Sung-Jo
Park and Sierk Horn of the Freie Universität Berlin, will mark a signif-
icant contribution to the above area of study. On behalf of EAMSA,

xii
 Foreword xiii

I would like to thank Daimler-Chrysler AG, Schering AG, Palgrave

Macmillan, OAK-TFH, WZB, the Embassy of Japan, Kobe Graduate
School of Adult Education and the Commerz Bank for their financial
support for the 18th annual conference of EAMSA. Last but not least,
I am grateful to Katrin Quandt and Barbara Fense for enabling the
conference to be realized.

YOSHIAKI TAKAHASHI
Chairman of Euro–Asian Management Studies Association
Professor of Chuo University
Notes on the Contributors

Tetsuo Abo is Professor Emeritus at the Faculty of Economics of Teikyo

University. His fields of study are multinational enterprises, and interna-
tional economic relationships in the Japanese, American and European
economies. He has been Guest Professor at the University of Rennes in
2001, Visiting Professor at the University of California, Berkeley, in 1994
and Guest Professor at the Free University of Berlin in 1984 and 1997. His
recent main publications in English are Hybrid Factory: The Japanese
Production System in the United States (New York, Oxford University Press,
1994); ‘Electronics Assembly Industry’, in H. Itagaki (ed.), The Japanese
Production System: Hybrid Factories in East Asia (Macmillan, 1997); ‘Changes
in Japanese Automobile and Electronics Transplants in the USA’, in
H. Hasegawa and G. D. Hook (eds), Japanese Business Management (London:
Routledge, 1998); ‘Hybridization of the Japanese Production System in
North America, Newly Industrializing Economies, South-East Asia, and
Europe: Contrasted Configurations’, in R. Boyer, E. Charron, U. Jürgens
and S. Tolliday (eds), Between Imitation and Innovation: The Transfer and
Hybridization of Productive Models in the International Automobile Industry
(New York: Oxford University Press, 1998); and ‘Spontaneous Integration
in Japan and East Asia: Development, Crisis, and Beyond’, in G. L. Clark,
M. P. Feldman and M. S. Gertler (eds), The Oxford Handbook of Economic
Geography (New York: Oxford University Press, 2000).

Sayeeda Bano is a Senior Lecturer in Economics at the University of

Waikato, Hamilton, New Zealand. She received her BA (Hons) and MA
in Economics from Patna University and her MPhil from Jawaharlal
Nehru University in New Delhi, India. After being awarded a Canadian
Commonwealth Scholarship she completed an MA at the University of
Alberta, Edmonton. She then received a PhD from Simon Fraser
University in Canada. She has lectured at the University of Dar-Es-
Salaam and the Centre for Foreign Relations in Tanzania and was an
economist at the New Zealand Institute of Economic Research (NZIER)
prior to taking up her appointment at Waikato in 1987. She was
a visiting Professor at the University of Ottawa during 1991/92. She was
a visiting scholar at Jawaharlal Nehru University in 1999. Her main
teaching areas are international trade, international finance, interna-
tional economy, and the Asian-Pacific economies. Her professional

xiv
 Notes on the Contributors xv

research interests are: inter-industry and intra-industry international

trade; international trade in services; balance of payments; the role of the
World Trade Organization and the Asia-Pacific Economic Cooperation
group in fostering world trade and development; intra-industry interna-
tional trade between New Zealand, Australia, the Organization for
Economic Co-operation and Development (OECD) and Asian nations;
economic reforms in India and New Zealand; the development of region-
alism and economic integration; links between Special Drawing Rights
(SDRs) and development finance; and the role and status of women in
Islam. Her publications include The Extent and Determinants of Intra-
Industry International Trade: The Canadian Experience (Gower, 1991); book
reviews; articles in international journals; six book chapters; seven mono-
graphs and working papers; 28 articles in edited volumes and numerous
international conference papers and seminar papers.

Dieter Beschorner is Deputy Head of the Department of Business

Planning at the University of Ulm in Germany. He studied Electronic
Engineering and Industrial Engineering and Economics, gaining a PhD
in 1976 from the Technical University of Munich. He lectured on
Economics at the Universities of Bamberg, Speyer, Vienna and Freiberg
(Sachsen) from 1979 to 1992. Since 1992 at the University of Ulm,
Faculty of Mathematics and Economics. Deputy Dean and Member of
the Commission for Restructuring Faculty of Economics at the
Technical University Bergakademie Freiberg/Sachsen (1991/92).
Memberships in the Euro–Asian Management Studies Association and the
Vereinigung für ökologische Wirtschaftsforschung. Research activities in
the fields of Economics and Ecology, International Management,
Controlling and Ecological Management Systems and Auditing.

Nobuyuki Chikudate is Associate Professor of Organization Theory in

Department of Management Studies, Graduate School of Social
Sciences, Hiroshima University. He received his doctorate from
University at Buffalo, State University of New York, and completed post-
doctoral trainings at the Johns Hopkins University. His specialities
include organizational culture, business ethics, comparative manage-
ment and intercultural communication. His major articles have appeared
in the Journal of Applied Behavioral Science, the Journal of Business Ethics,
Journal of Management Studies, and the Management International Review.

Zahiruddin Ghazali is Lecturer at the School of Finance and Banking,

University of Utara, Malaysia. He teaches corporate finance and capital
xvi Notes on the Contributors

markets. His research areas cover capital markets, corporate capital

structure and real estate. He is the author of ‘Do shareholders benefit
from acquisition?’, in Bankers Journal, March 2000. Chapter 12 was
written with the help of his colleagues at the University of Utara.

Hasegawa Harukiyo is Senior Lecturer in the School of East Asian

Studies and the Director of the Centre for Japanese Studies, University of
Sheffield. His research interests are in Asian business and management.
His publications include An International Comparison of Business and
Management (Tokyo: Chuo Keizaisha, 1993) (in Japanese, co-author);
Steel Industry in Japan: A Comparison with Britain (London: Routledge,
1996); Japanese Business and Management: Restructuring for Low Growth
and Globalization (London: Routledge, 1998) (co-editor); The Political
Economy of Japanese Globalization (London: Rouledge, 2001) (co-editor).
He is also general editor of a new international journal, Asian Business
and Management (Palgrave Macmillan, 2002).

Martin Hemmert gained his qualification for full lecturership in business

administration from the University of Essen in June 2001 where he lec-
tures on business administration. From 1998 to 2001 he was DFG Research
Fellow at the Institute of Production and Information Management,
University of Essen, Germany, and from 1993 to 1998 he was Research
Associate at the German Institute for Japanese Studies in Tokyo. In 1993
he recieved his doctoral degree in business administration from the
University of Cologne, where he also completed his studies of Business
Administration (MBA 1989). From 1990 to 1993 he was Research Fellow
of the Institute of Business Research at Hitotsubashi University, Tokyo.

Tadamasa Imaguchi is Professor of the Faculty of Business and

Commerce at Keio University, Japan. His fields of research focus on
management and organization. From April 1985 to March 1997 he
worked at the Department of Business Administration of Kyoto Sangyo
University, Japan and from August 1991 to August 1992 he was a visit-
ing scholar of the Faculty of Commerce and Business Administration at
University of British Columbia, Canada.

Ulrich Jürgens studied economics and political science at the Freie

Universität Berlin from 1965 to 1969. He was Assistant Professor of
Political Science at the same university between 1969 and 1977. In 1977
he became a research fellow at the Social Science Research Centre, Berlin
 Notes on the Contributors xvii

(WZB) and in 1989 he became Adjunct Professor at the Institute for

Political Science of the Freie Universität Berlin. From 1989 to 1999 he
was deputy director of the research unit Regulation of Work at the WZB
and since January 2000 he has been the head of this research unit. At
the WZB he conducts international comparative research in the fields of
industrial politics, work organization, and organizational development
with a focus on the automotive industry.

Akira Kuroda is Professor at the Toyohashi Sozo College in the Aichi

prefecture in Japan. He is also Visiting Professor at the Teikyo University
of Science and Technology in Japan. His subjects are financial manage-
ment, small industry, foreign investment and technology transfer. From
1984 to 1988 he worked for the Department of Industrial Promotion,
Thailand. Between 1965 and 1967 he worked for the Small Medium
Enterprises Agency in Japan. From 1963 to 1993 he worked for the
Shoko Chukin Bank. He studied at the University of Tokyo from 1957
to 1963, and was with the University of London from 1993 to 1997.

Xinjian Li became a doctoral student in the Department of Business and

Commerce of Keio University, Japan, in April 1998. From April 1997 to
March 1998 he was Visiting Researcher at the Department of Business
Administration at Keio University. From September 1996 to April 1997 he
served as Associate Professor at the College of Business Administration of
China University of Mining and Technology, and from August 1990 to
August 1996 he was a lecturer at the same institution. His current research
topics centre around international joint ventures, business administra-
tion in China, corporate strategy and business organization.

Hendrik Meyer-Ohle majored in Japanese studies and business

administration at the Philipps University, Marburg, where he also
received his PhD with a dissertation on dynamics in Japanese retailing.
From 1995 till 1999 he worked for the German Institute for Japanese
Studies in Tokyo. Since January 2000 he has been Assistant Professor in
the Department of Japanese Studies at the National University of
Singapore. He has published on the distribution and service sector
in Japan as well as on international marketing strategies of Japanese
companies in Asia.

Mohamad Hanapi Mohamad is Associate Professor at the School of

Management, University of Utara, Malaysia. He teaches international
xviii Notes on the Contributors

business, corporate strategy, corporate finance, international marketing,

and multinational firm and business management. His research areas
cover corporate performance, international business, industrial organi-
zation and corporate finance. He is also editor and reviewer of the Asian
Academy of Management and Malaysian Management Review. He is adviser
to the MARA Professional College, Institute of Technology, Darulnaim,
and to the National Accreditation Board.

Romdej Phisalaphong is a PhD student at the Tinbergen Institute,

Erasmus University Rotterdam, the Netherlands. The title of his doctoral
dissertation is ‘The Impact of European Economic Integration on
Inward Foreign Direct Investment from Japan’. From 1997 to 1999 he
studied at the Graduate School of Economics, The Universty of Tokyo,
Japan, where he gained a Master’s degree in economics. From 1997 to
1998 he took part in the special programme, ‘Globalization and
Regionalism’, at Sophia University. From 1993 to 1997 he studied at the
University of Tokyo, where he gained a Bachelor of Economics degree at
the Faculty of Economics. From 1992 to the present he has received a
Royal Thai Government Scholarship.

Fred Robins holds a BA and MA in economics and an MSc and PhD in

marketing. He teaches and researches at The Graduate School of
Management, University of Adelaide. He is also a member of The
University of South Australia’s Marketing Science Centre. Prior to his aca-
demic career he had public sector experience in Europe and Asia and, later,
private sector experience in public relations and as a marketing manager.
He has lived and worked in a range of European and East Asian countries
and has been a frequent visitor to the major cities of the Asian region for
many years. He is a regular contributor to MBA programmes in Australia
and overseas. He researches the activities of international business in the
Association of South East Asian Nations markets and publishes articles on
Asian business in international academic journals. He has also written on
the contrast between Asian and Australian trade and industry policies and,
more recently, produced an MBA course in e-marketing. This year he has
presented papers on ‘Contemporary Business Development in East Asia’ at
the Tenth World Business Congress in Zagreb and ‘Online Security and
Privacy’ at the International Conference on Global Business in Bratislava.
He has also written a chapter for a new book on Asian post-crisis manage-
ment, co-edited by Frank-Jurgen Richter, and published by Palgrave
Macmillan.
 Notes on the Contributors xix

Kenji Suzuki has been Assistant Professor at the European Institute of

Japanese Studies, Stockholm School of Economics, since 1999. He
received his doctoral degree in political economy from the University of
Warwick, UK in 1999. From 1995 to 1996 he studied at the London
School of Economics (MSc). In 1992 he graduated from University of
Tokyo. His main publications are ‘Policy Network of Competition
Policy: Comparative Political Economy of Britain and Japan’ (originally
a PhD thesis, which will be published by Routledge in 2002) and
‘Companies’ Use of Web Information in English: An Analysis for
International Investors’, Journal of Asian Business, 16 (4) (Winter 2000).

Thoraya Younes is a PhD student at the University of Ulm, Germany.

She received the Master of Business Administration (in English) from
Yarmouk University, Irbid, Jordan in 2000. From 1987 to 1991 she stud-
ied at Yarmouk University, Irbid, Jordan, where she received a Bachelor
of Business Administration. From 1993 to 2000 she worked for the
Jordanian Government of Education, teaching commercial transac-
tions, economics, office management and public relations in high
schools. From 1991 to 1993 she also worked in the Department of
Statistics of the Jordanian Ministry of Planning.
List of Abbreviations

A-A application-adaptation
AEEU Amalgamated Engineering and Electrical Union
APEC Asia-Pacific Economic Cooperation
ASEAN Association of Southeast Asian Nations
BoJ Bank of Japan
BU business unit
CAR cumulative abnormal returns
CEO Chief Executive Officer
CGF Corporate Governance Forum of Japan
CRM customer relationship management
DVD digital video disk
ECIT European Confederation of Independent Trade Unions
ECOM Electronic Commerce Promotion Council of Japan
EMF European Metalworkers’ Federation
ESOP employee share option plans
ETUC European Trade Union Confederation
EVA economic value added
EWC European Works Council
FDI foreign direct investment
FICs Forum Island Countries
GATS General Agreement of Trade and Services
GATT General Agreements on Trade and Tariffs
GMM generalized method of moments
HQ headquarters
HRM human resource management
ILO International Labour Organization
IMF International Monetary Fund
ISCT integrative social contracts theory
IT information technology
JETRO Japan External Trade Organization
JMNESG Japanese Multinational Enterprise Study Group
JV joint venture
KLSE Kuala Lumpur Stock Exchange
MD Managing Director
ME Middle East
METI Ministry of Economy Trade and Industry

xx
 List of Abbreviations xxi

MNCs multinational corporations

MoF Ministry of Finance
NGOs non-governmental organizations
NICs newly industrialized countries
NIEs newly industrializing economies
NSOs National Sales Organizations
NYSE New York Stock Exchange
OECD Organisation for Economic Co-operation and Development
PC personal computer
PFL Pacific Forum Line
R&D research and development
ROE return on equity
SCANS Securities Clearing Automated Network Services
SEA Southeast Asia
SIMM Single Index Market Model
TSE Tokyo Stock Exchange
UNCED United Nations Conference on Environment and
Development
UNICE Federation of European Employers
VER voluntary export restraint
VTRs video tape recorders
WTO World Trade Organization
Introduction: Interculturality
as a New Global Competitiveness
Factor

This book is an anthology of the contributions presented at the annual

conference of the Euro–Asian Management Studies Association
(EAMSA) at the beginning of November 2001 in Berlin. The studies
embrace not only topics such as foreign trade (inter-regional, intra-
regional), foreign direct investment, technology transfer, and the com-
parison of management systems, but also intercultural communication
and marketing, corporate governance, e-business and, last but not least,
the economic development of countries in East Asia, with particular
reference to China.
Since their foundation in 1984, EAMSA meetings have followed the
tradition of choosing a specific conference subject oriented towards the
most current and timely issues. At the beginning of the 1980s, experts
concerned with economic and technology cooperation between Asia
and Europe came together. They focused on the analysis of the superi-
ority of the Japanese management system and the comparative advan-
tage of its economy vis-à-vis the West, as well as on the question of how
corporate strategies in the West should cope with the so-called Japanese
challenge. For this reason, EAMSA was first called the ‘Euro–Japanese
Management Studies Association’.
Some years later, experts and EAMSA members were forced to realize
that the analytic scope could not remain confined to Japan alone. Since
NIEs ASEAN member countries and China had, in the meantime, begun
to show excellent economic performance, the entire region of East and
Southeast Asia had to be taken into consideration. The volume of intra-
regional trade and foreign direct investment increased enormously,
while trends towards an intra-regional division of labour began to
emerge.
These regional economies gradually posed a real challenge for the
Western-dominated world economy, even though they were still far from
cementing an EC or North America Free Trade Agreement integration.
Thus, handling the economies in the region in toto led to re-naming the
Association the ‘Euro–Asian Management Studies Association’.

xxii
 Introduction xxiii

The headline of the 2001 Annual Conference was ‘Asia and Europe in
the New Global System – Intercultural Cooperation and Competition
Scenarios’. The Organizing Committee identified the implications and
consequences of intercultural management, communication and marketing
as the most significant issue among the current relevant topics.
The end of the Cold War in 1989 was perceived as a new challenge for
tackling inter-systemic problems. The integration of the former socialist
economic systems into a capitalistic world economy – that is, the chal-
lenge of transformation – deserved the highest priority.
Transformation difficulties were scarcely addressed when massive
globalization had to be faced. Uncertainty overwhelmed individual
countries in their effort to seek the best solutions of how to continue
with liberalization, de-regulation, privatization, innovation, and so on.
The events of 11 September 2001, however, signalled an entirely new
dimension for re-thinking notions and strategies inherent in the ongo-
ing globalization, especially problems of intercultural confrontation
and cooperation. The issue of interculturality suddenly became the focal
point of academic and political debates. Was this the antithesis of
Francis Fukuyama’s thesis, ‘absoluteness of Western liberalism’? Some
people already saw Samuel Huntington’s Clash of Civilizations con-
firmed. Others concluded that the building of a new peaceful world
order required the coexistence of cultures as a precondition. In short, the
current escalation of global conflict reminds us of the necessity and
urgency of sincere debate on new perceptions of the cultural dimen-
sions of globalization.
The most imminent question is how culture, in the context of Euro–
Asian cooperation and competition, should be perceived. In the past,
Japan, Korea, China and Taiwan were believed to lack the ability to
develop capitalism, as has been argued by philosophers and social scien-
tists such as Gottfried Herder, Karl Marx, Friedrich Engels and Max Weber,
among others. However, these countries are the only areas that have suc-
cessfully learned from Western capitalism and have been able to compete
with Western capitalist economies. Thus, experts began to take a great
interest in exploring the reasons for the region’s economic success.
Confucianism was now widely perceived as the key dimension for this
regional miracle, and debates on the monocausal or functional correlation
between Confucianism and economic performance have not ceased.
Ironically, Confucianism – which is believed to positively determine
the high economic performance in East Asia – has lately been consid-
ered a significant breeding-ground for the development of the crony
capitalism which probably contributed to the recent financial and
xxiv Introduction

economic crisis in the region. A balanced answer to the question of the

extent to which Confucianism affects economic development, posi-
tively or negatively, still calls for intense research.
Back to the concept of culture in a broader sense: not only reglions,
ideologies, morals and ethics, but also norms, values and attitudes in
daily life are gaining increasing importance in the process of globaliza-
tion. The common question of how individual countries are being
affected by globalization implies the formation of a standardized and
uniform global economy and society. However, in doing so, differences
between economic and management systems, as well as societies, will
tend to be ignored. Reality indicates that efforts by individual countries
to maintain and develop their cultural identity should be taken into
consideration when working out successful strategies for ‘global play-
ers’. In other words, integrating local culture and mentality into global
strategies seems to be the key to success. ‘Think global, act local’ comes
to mind again. In this sense, the studies included in this book follow the
above-mentioned framework.

Corporate governance: shareholder value versus

stakeholder value
This topic has, in fact, provoked serious debates among experts. Chapters
2 and 4 focus particularly on the comparison or, in other words, on the
inter-play of Western (European) and East Asian ( Japanese) management
principles and styles. Chapter 3 is evidence of the extent to which per-
sonal and information networks have significant repercussions on the
decision-making process in the banking sector of Japan.

Intercultural management, communication and marketing

In this field, Chapters 1 and 14 deal with the applicability of Japanese
management concepts and ethic principles compared with those of the
West. The authors depict its limitations, which stem from socio-cultural
and other local constraints.

Human resources development and industrial relations

With regard to global education and share option possibilities,
Chapters 11 and 12 provide an in-depth analysis of the case of Malaysia.
Chapter 2 indicates the difficulty of using the Japanese concept of
human resources development and worker participation in the UK.
 Introduction xxv

E-business
E-business has recently gained increasing importance. Chapters 15 and
16 are largely based on empirical evidence which shows the variety of
emerging structures, their specific patterns in e-business, and the scope
of online marketing.

Technology transfer and technology dependence

Chapters 5 and 13 present a profound empirical study on the practice
of technology transfer and the reality of technology dependence. The
former contribution is based on quantative data analysis, as well as on
the author’s personal experience in the Asian region. The author sheds
light on the practical impediments in the transfer of know-how and
technology which can be attributed to corporate strategies and cultural
variables. Chapter 5 is a large-scale quantitative analysis on the corpo-
rate technology access strategies of German and Japanese companies.

Trade, investment and the Chinese market

Chapter 8 contains an in-depth comparative analysis of Japanese firms
and the degree to which the formation of the single European market
determines corporate decisions as regards future investment strategies.
Chapter 10 shows the impact of the Single European Market on the
Middle East Region ( Jordan), especially in the field of environmental
problems. Chapter 9 provides a special study on the cooperation
between Japanese and Chinese firms. The authors present an extremely
fruitful differentation of cooperation practices. Last but not least,
Chapter 6 discusses new trends in the trade services of selected Asian
nations, South Pacific Forum Island economies, and OECD countries.

***

In summarizing all of the contributions, it can be emphasized once

again that the ‘intercultural communication, management and market-
ing’ factor (interculturality) is believed to play a crucial role in enhancing
global competitiveness. This means that the expertise necessary for
efficient Euro–Asian transaction and cooperation must be based on
profound intercultural insights, experiences and strategies.

Freie Universität Berlin SUNG-JO PARK

SIERK HORN
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1
Japanese Hybrid Factories in
Germany: Survival in a Different
Environment
Tetsuo Abo

1 Introduction
It is commonly assumed that managerial conditions in Germany are not
favourable to Japanese manufacturing firms. It is notable, however, that
some Japanese transplants not only manage to survive but even achieve
solid results through the partial application of Japanese management
and production techniques, and the adaptation to (or adoption of)
particular location-specific management advantages in Germany.
This chapter will address the following points:

1 How do Japanese transplants in Germany manage to cope with rigid

social regulations and customs, such as the Tarif system based
on AZUBI (to be described later), which are implemented through
negotiations with labour unions and work councils (Betriebsrat)?
2 How do Japanese-style flexible production systems and ‘mechatron-
ics’ (mechanical and electronics) technologies manage to coexist
with German-style rigid work organization and mechanical
engineering technology?
3 What are the advantages to Japanese manufacturers of having their
production bases in Germany in terms of markets and logistics?
What are the advantages of being in Germany in terms of supplying
functionally advanced and high quality products to the German
market, or in terms of parts procurement from suppliers and OEM
(Original Equipment Manufacturer) contracts with local manufacturers
in eastern European countries?

1
2 Japanese Hybrid Factories in Germany

4 What is the significance of recent changes in German society, such

as the revision of the AZUBI system; the arrival of part-timers as a
new addition to the workforce, with the cooperation of manpower
agencies; and the emerging frontier in former East Germany?

The Japanese Multinational Enterprise Study Group (JMNESG), of

which I am a member, carried out large-scale field research in Europe in
1997 and 1998 as part of its comparative hybrid factory investigation
project in major regions such as North America and East Asia. The group
conducted plant visits in Germany during the research on continental
Europe in 1998.

2 Outline of the surveyed companies

The present study surveyed the plants of eleven Japanese (see Table 1.1)
and three German companies. Since it was difficult to obtain sufficient
data from German plants to permit a detailed comparison with their
Japanese counterparts, it was not possible to include such analyses in
the application-adaptation evaluation. Instead, I will refer to the char-
acteristics of individual plants and companies as necessary. Table 1.1
shows the overall characteristics of Japanese plants located in Germany.
Of these eleven Japanese plants, five manufacture electronics compo-
nents, three manufacture automotive parts, and three are electronics
assembly plants. The majority of these plants are therefore parts-related;
there are no Japanese auto-assembly plants in Germany. This distribu-
tion of plants by industry type itself reveals much about the character-
istics of Japanese plants in Germany.
First, while the cost of labour in Germany is high, there is also a
sophisticated level of skills and technology in the areas of precision
manufacturing and assembly that are suitable for the production of
higher value-added and advanced functional materials. Second, the
domestic market for automobiles and other types of manufacture pro-
vides steady demand from customers with sophisticated expectations.
Numerous parts manufacturers cater to this demand and are also in a
position to supply the products to the greater European market, and
especially to the EU. In the auto-related industries, typical examples
include APa, which is a manufacturer of springs, and APb, a joint ven-
ture between the Japanese company APJ and a German company APG,
which produces oil seals, and APc, which manufactures air bags. These
companies predominantly supply German auto manufacturers, and
Japanese manufacturers to a much lesser extent. Electronics component
Table 1.1 Japanese transplants in Germany as of September 1998

Company APa APb APc EPa EPb EPc EPd EPe EAa EAb EAc

Industry Auto parts Auto parts Auto parts Electro parts Electro parts Electro parts Electro parts Electro parts Electro Electro Electro
assembly assembly assembly
Start of 1971 1976 1996 1988 1984
operation
Mode of New/ Joint New/ New/ New/ New/ New/ Joint venture/ New/ New/ Joint venture/
entry wholly- venture wholly- wholly- wholly- wholly- wholly- wholly-owned wholly- wholly- wholly-owned
owned owned owned owned owned owned owned owned
Capital DM24 DM15 DM295 DM26.29 DM69 DM8 million
million million million million million
Ownership 100% 40% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Number of 174 62 240 225 192 650 450 280 661 430 153
employees (part 100)
Japanese 10 1 6 2 7 19 11 5 13 4 5
% Japanese 5.7% 1.6% 2.5% 0.9% 3.6% 2.9% 2.4% 1.8% 2.0% 0.9% 3.3%
Products Ball bearing: Auto pump Air bag, and Magnet IC 16 DRAM DRAM tuner, Large high PC: HDD spindle
48.7 million seal related: head VCR: (memory, (wafer), switch grade 1 million motor, R&D
200 million 11.4 million asic) module copier: 60 k
Volume/ Fabrication Electronics mechanical: Cylinder DRAM, etc., wafer: 120 k DM185 RF toner (notebook mass
capacity unit: 2.1 VCR 8,240 kp million Modulator filling: type) production:
million 1,120 k 170 k
[1998] Auto total Switch, etc: IGBT assembly: power supply ink (desk-top tester
tensioner 500 million 246 million module, 2.4 million etc.: DM163 filling: type)
EN-FAX million 3,980 k
Export ratio 32% 15–20% 5% a little 14% (1997) 83%
Destination France 18%, Brazil, USA USA Continental UK 18%, All Europe USA, Japan,
UK 14% Australia, Europe France 16% UK, France,
UK, France Thailand

HDD ⫽ hard disk drive

IGBT ⫽ insulated gate bipolar transistor
PC ⫽ personal computer
R&D ⫽ research and development
RF ⫽ radio frequency
VCR ⫽ video cassette recorder

3
4 Japanese Hybrid Factories in Germany

manufacturers exhibit basically the same tendencies. However, since

German electronics product assemblers are not as competitive and do
not provide the same degree of demand as the German auto manufac-
turers, component manufacturers tend to focus on the overall European
market, which also relies on Japanese electronics manufacturers.
Managing these semiconductor and other manufacturing plants is not
an easy task.
Third, in the field of product assembly, it is difficult for simple vol-
ume production plants to exist in Germany for longer than they have
done in Japan. The only types of plant that have survived are those pro-
ducing EAa’s large advanced photocopiers, EAb’s notebook personal
computers (PCs) with their concentration on miniature, precision
technology, or the small motors developed and designed by EAc. Small
wonder that even Japanese manufacturers hesitate to get involved in
local auto assembly, which includes world-class high- and medium-
quality automobile manufacturers.
Some companies established plants in Europe at a surprisingly early
date. Companies such as APa, APb and EAa began operations in the mid-
1970s as part of the overall move towards local overseas production on
the part of the Japanese manufacturing industry, and parallelling the
first group of Japanese companies to explore such activities in Asia.
Likewise, in 1980, EPc became the first Japanese company in its field to
begin operations in Europe at around the same time that it ventured into
the USA, where trade friction had become a major issue. These early ven-
tures are notable in comparison with the numerous cases of Japanese
direct investment in the UK, which was to become the powerhouse of
the European electronics industry, beginning in the mid-1980s.
The reason behind these early ventures into Germany was probably
the companies’ appraisal of the importance of Germany to the rest of
Europe, in terms of supply and demand. Particularly from the supply
aspect, companies such as APb, EAa, and later EAc took note of the high
levels of skills and technology in Germany’s machinery industry. For
this reason, they had the desire to develop advanced functions and new
products through joint ventures or other forms of cooperative effort
with local industry rather than simply introduce Japanese technology.
In this regard, most of the Japanese who were dispatched to these plants
were unanimous in their high praise for the manner in which mechan-
ical engineering know-how had been adapted to the work place, as well
as for the high level of traditional trade skills. This does not mean, how-
ever, that it led directly to an aggressive expansion of local production
operations. The following characteristics explain this.
 Tetsuo Abo 5

Japanese manufacturing plants in Germany were limited to small or

medium-scale operations. As Table 1.1 shows, the largest plant
employed about 600 workers, with the majority well below that num-
ber. This compares unfavourably with France, Holland, and some coun-
tries in southern Europe, where several plants employed more than
1,000 workers, not to mention the plants in England, most of which
employed more than 1,000 workers while six had more than 2,000
workers. In other words, it seems that Japanese companies ventured
into Germany with great expectations at an early date, and when things
failed to work out as anticipated, further progress was stifled. Many of
the local Japanese managers admitted as much and, with the wisdom of
hindsight, suggested that they might have been better off not coming
in the first place. Needless to say, the major reason for this opinion was
the various costs associated with labour. As will be discussed later, the
high level of wages and salaries was not the only problem; other labour-
related difficulties included regulations such as working hours and
restrictions relating to the labour unions and the system for employee
representation. Moreover, another aspect of this problem was that the
advanced mechanical technology and worker skills typical of the
German industrial environment could not easily adapt to electronics-
related or IT-related technology, or to the Japanese system of multi-
skilled workers and flexible work organization. A number of companies
such as EAa and EAc started out as partners in a joint venture, but ulti-
mately opted to go it alone for this very reason.
In comparison with the historical developments described above,
recent Japanese foreign direct investment (FDI) has dealt more posi-
tively with the new situation in Germany. Table 1.1 shows APb as one
example, but there are other new, large-scale plants that are not subjects
of the present study. These include the EPe plant for the manufacture
and development of cathode-ray tubes (established 1995 with 1,300
employees at Esslingen), a Komatsu plant for the manufacture of large
hydraulic shovels (1996; 650 employees; Dusseldorf), and a giant
Siemens-Matsushita joint venture producing electronics components
(1999; 10,000 employees; Munich; see Toyokeizai 2000).
Behind these recent developments lies an aggressive strategy for inter-
nationalization on the part of German industry as it confronts new
aspects of EU integration, and a trend, particularly among increasingly
globally competitive Japanese parts manufacturers, to select Germany as
the location for their production centres. One reason for a growing
preference for continental Europe over the UK on the part of Japanese
corporations is the delay in bringing sterling into the European
6 Japanese Hybrid Factories in Germany

monetary union, which distances the UK from the rest of Europe. Even in
Germany, traditional labour practices and customs are crumbling under
the impact of trends and events such as Japanization, the integration of
East and West Germany, the advent of major global- or European-scale
competition, and market capitalism. This is particularly evident among
the new type of companies and plants that foreign companies and for-
mer West German companies are establishing in former East Germany.
Representative among these is the General Motors (GM) plant that we
visited in Eisenach, as well as the APc plant. Another development likely
to have important consequences for future investment, although it was
not very notable among the plants that we visited for the present study,
is the widening range of jobs for which companies employ part-time
workers. In other words, the rigid social and system frameworks within
which management had to operate in the past are becoming more flex-
ible, and in many respects this works to the advantage of local produc-
tion by Japanese companies.

3 Hybrid evaluation
3.1 Analytical framework: application-adaptation (hybrid) model
The application-adaptation (A-A) model, which was developed by the
JMNESG, seeks to determine the extent to which the Japanese-style
production system, summarized in terms of 23 elements and six groups
(see Table 1.2–3), has been successfully introduced and applied at for-
eign subsidiaries of Japanese enterprises (Abo 1994, chs 1 and 2; Itagaki
1997, ch. 1). The A-A model emphasizes those aspects of the production
system that are vital to achieving high product quality and efficient
production over a wide range of operations. The focus is on employees’
strong sense of identity with the company, and on the flexibility that
derives from genbashugi (work site-orientation) operations. The model
was completed around the latter half of the 1980s, just before the
beginning of the bubble economy in Japan. Although there have been
some changes in the Japanese system since the crash of the bubble,
nevertheless we continue to believe that the model is appropriate and
useful as a prototype with which other models at home and abroad can
be contrasted. The focal point of the A-A model is the human factor,
which underlies and reinforces the Japanese systems. Not only is this
closely related to the historical and cultural background of Japanese
society, but it is also largely based on in-house education and training.
Therefore, our hypothesis is that when Japanese firms ‘apply’ their tech-
nological advantages to foreign countries, they will face problems in
 Tetsuo Abo 7

‘adapting’ to the local managerial environment. This is a ‘dilemma

model’ in the sense that it exposes the difficulties inherent in the A-A
aspects of the system. However, various types of application and adap-
tation generate different ‘hybrid patterns’ of Japanese elements and
local elements at the subsidiary plants, largely depending on socio-
cultural backgrounds, which are greatly influenced by the historical and
geographical contexts of each respective society. We use a five-point
scale (‘hybrid ratio’) to determine where to position the overseas plants
of Japanese firms relative to the Japanese and the local models. A score
of 5 indicates the highest possible degree of application (and conse-
quently, the lowest level of adaptation: e.g., a Japanese plant operating
in Japan). Conversely, a score of 1 represents the highest degree of adap-
tation (and would reflect conditions at a non-Japanese plant operating
in its domestic environment).

3.2 Overall industry average

The overall industry analysis of application and adaptation, according
to Table 1.2, produces a high average score for application. Although no
Japanese auto-assembly plants are represented in this group, the average
application score of 3.2 is close to that of plants in the UK (3.3) and
higher than plants in other countries such as France (3.0) and Italy
(2.8). The problem, however, concerns the composition of elements
revealed in the hybrid evaluation.

3.3 Six-group, 23-item evaluation

The six-group evaluation, shown in Table 1.3, shows a conspicuously
high application score for group III, procurement (3.5, ⫹0.5)1 as well as
for group VI, parent–subsidiary relations (3.4, ⫹0.5). This is not only
high for other countries in Europe, but also relative to major countries
or areas in other parts of the world. On the other hand, the score for
group I, work organization and administration, which represents the
human-method core of the Japanese production system, is not particu-
larly high (3.1, ⫹0.1), while group V, labour relations, receives the low-
est score (3.0, ⫺0.3). Group II, production control, receives the second
highest score, following the UK. However, as in most other cases,
regional discrepancies in this group are minimal. A detailed discussion
of these points, as well as each of the 23 items in the groups, coupled
with Figures 1.1 and 1.2, follows.
First, as mentioned earlier, the high degree of application for parts
procurement is largely related to the fact that many of the larger
Japanese companies in Germany are parts manufacturers. The companies
8 Japanese Hybrid Factories in Germany

Table 1.2 Hybrid evaluations of 23 items in Europe

UK Germany France/ Italy/Spain/ Hungary

Benelux Portugal

1 Job classification 4.4 3.1 3.5 2.9 3.3

2 Job rotation 3.3 2.8 2.8 3.0 2.5
3 Training 3.5 3.2 3.0 3.1 3.0
4 Wage 2.8 2.7 2.9 2.6 3.0
5 Promotion 3.4 3.2 2.8 3.2 3.0
6 Supervisor 3.4 3.4 3.0 2.9 2.8
7 Equipment 3.9 3.9 3.2 2.6 4.8
8 Maintenance 3.0 2.7 2.7 3.1 2.5
9 Quality control 3.6 3.5 3.0 3.1 2.5
10 Operation 3.6 3.4 3.2 3.2 3.0
management
11 Local content 1.9 3.6 2.8 2.0 2.0
12 Suppliers 2.7 3.8 2.8 2.1 2.8
13 Methods 2.9 3.0 2.6 3.0 2.3
14 Small group 2.7 2.6 2.7 2.3 2.0
15 Information 3.6 2.8 3.2 2.7 2.3
16 Unity 3.7 3.0 2.8 2.6 2.5
17 Employment policy 3.3 3.1 3.1 3.4 2.5
18 Employment security 3.4 3.0 3.6 3.2 2.5
19 Union 4.2 3.2 3.9 3.1 4.3
20 Grievance 3.0 2.8 3.3 3.0 3.3
21 JPN ratio 2.4 3.0 2.6 2.4 2.3
22 Power delegation 3.0 3.6 2.9 2.7 4.0
23 Local manager 3.0 3.5 2.9 2.8 3.5

Table 1.3 Hybrid evaluations of six groups in Europe

UK Germany France/ Italy/Spain/ Hungary

Benelux Portugal

GI Work organization/ 3.4 3.1 3.0 2.9 2.9

administration
GII Production control 3.5 3.4 3.0 3.0 3.2
GIII Parts procurement 2.5 3.5 2.7 2.4 2.3
GIV Team sense 3.3 2.8 2.9 2.5 2.3
GV Labour relations 3.5 3.0 3.5 3.2 3.1
GVI Parent/subsidiary 2.8 3.4 2.8 2.6 3.3

themselves have little choice but to procure many of their own parts
and materials from Japan or other Asian sources, for two reasons: first of
all, the parts makers have to meet stringent quality and function stan-
dards from product assemblers competing on the German, European or
 9

1. Job classification
23. Local manager 5.0 2. Job rotation
22. Power delegation 3. Training
21. JPN ratio 4.0 4. Wage
GVI Parent/subsidiary 5. Promotion
20. Grievance 3.0 6. Supervisor
19. Union 2.0 GII Production
control
18. Employment security 1.0 7. Equipment

17. Employment policy 8. Maintenance

GV Labor relations 9. Quality control
16. Unity 10. Operation management
15. Information GIII Parts procurement
14. Small group 11. Local content
GIV Team sense 12. Suppliers
13. Methods
UK
Germany
France/Benelux
Italy/Spain/Portugal
Hungary

Figure 1.1 Hybrid evaluation of 23 items in Europe

GI Work
organization/administration
n
5

GVI Parent/subsidiary 3 GII Production control

GV Labour relations GIII parts procurement

UK
GIV Team sense Germany
France/Benelux
Italy/Spain/
Portugal
Hungary

Figure 1.2 Hybrids of six groups in Europe

10 Japanese Hybrid Factories in Germany

global markets. Second, these assemblers expect the parts makers, par-
ticularly when they are Japanese or other foreign companies, to help
them meet ‘Euro-one’ and other EU local content regulations. In other
words, the parts makers cushion the product assemblers from local con-
tent requirements by providing the logistics to raise quality and lower
costs through the procurement of high quality and functionally
advanced parts and materials from Japan, or low-priced components
from other sources in Asia.
Second, next to parts procurement, parent–subsidiary relations have
the second highest application rating among Japanese plants in
Germany, and in all of Europe for that matter, coupled with Hungary.
Indeed, the only case of a higher application rating for this item any-
where in the world was a 3.6 point evaluation recorded for Japanese
plants in the USA ten years ago. Even there, an interim survey carried
out in 1993 revealed a marked shift towards adaptation (Abo 1998b)
while yet another survey completed in 2000 confirmed this trend. It is
likely that in 1998, the plants in Germany represented the highest
degree of application of parent–subsidiary relations among all overseas
Japanese plants anywhere in the world. Notable among the items in this
group is item 21, ratio of Japanese expatriates, with an application score
of 3.0 (⫹0.4). Judging from the manufacture of products that involve a
high degree of technical difficulty, or the large number of small and
medium-sized operations (which facilitate a high ratio of Japanese expa-
triates) problems would arise in the overall plant management without
a comparatively large number of Japanese employees.
This is certainly not because of any lack of supervisory or manage-
ment skills on the part of German managers. In fact, we were greatly
impressed by the enthusiastic, skilled managers in a number of plants
who have made a sincere effort to introduce and apply the various
methods practised at the parent plants in Japan. At EAa, a group of five
German engineers who visited the parent plant in Japan to prepare for
the introduction of a new process of manufacturing ink cartridges
demonstrated their craftsmanship and system engineering skills and
techniques in various ways. For example, they formed ‘novice teams’
with other inexperienced Japanese employees and succeeded in starting
up the process without any help. They also designed ‘computer inspec-
tion method’ systems for problem identification during parts inspection
in the copier assembly process, and they also invented devices for waste
disposal within the plant. At EPb, highly motivated German managers
who had made numerous training trips to Japan guided the creation
of a score sheet to record workers’ multiskill competencies, along with
 Tetsuo Abo 11

a detailed job chart. At EPa, German engineers improved Japanese

equipment used in the assembly of tact switches, thereby achieving a
higher operating rate than the parent plant in Japan. The Japanese
parent company of EAc formed a 50 per cent joint-venture subsidiary
with a German company that had expertise in the manufacture of spin-
dle motors for personal computers. However, since the German partner
lacked managerial skills, EAc turned it into a 100 per cent owned
subsidiary and strengthened management by increasing the number of
Japanese expatriate employees (3.3 per cent plus two trainees). In the
case of an EAb plant for the assembly of personal computers, the qual-
ity control formation rate reached 30 per cent despite the complete
absence of a bonus system. In addition, enthusiastic, self-initiated kaizen
activities include a system for collecting suggestions from employees.
As these many interesting cases show, German workers who demon-
strate leadership on the shop floor and voluntarily utilize their technical
expertise and competent job skills also contribute to a fairly high level of
kaizen activities as well as creative job performance. However, for a num-
ber of reasons, it is a little problematic to entrust the overall manage-
ment of the plant to these employees. First, extreme cases such as EAc
demonstrate that German workers have a slightly narrow perspective
when it comes to plant operation. It is unfair to expect them to broaden
their views of plant management, or to expect them to coordinate those
operations with those of other plants outside Germany, not to mention
those in Japan. Second, and somewhat related to differences in manage-
ment styles, while Germans tend towards a perfectionism that will only
be satisfied with expert, comprehensive solutions, Japanese managers,
despite their interest in system development or process changes, will act
in moderation, always giving due consideration to cost factors. In this
respect, ultimately there is no choice but to leave such decisions up to
Japanese managers. Finally, in most cases, the German domestic market
is of greatest importance to German plants. Consequently, as long as it
is a profit centre, it will be necessary to have Japanese managers in
charge who, as the representatives of Japanese headquarters, are con-
cerned with market strategies such as sales and purchases.
Third, the reason that certain human-related item-groups such as work
organization and administration, or labour relations, do not exhibit such
a high degree of application is that there are such pronounced differences
between Germany and Japan in terms of the various customs and systems
governing jobs or labour. When a Japanese company attempts to intro-
duce the methods employed at its parent plant, it often encounters
a spate of restrictions on its implementation. This German system
12 Japanese Hybrid Factories in Germany

framework is not as diametrically opposed to Japan’s as was the case in the

USA. Although there is a strong emphasis on specialization in Germany
with regard to job methods, as mentioned above, this is quite limited and
not nearly as exhaustive as the detailed job descriptions in the USA.
Likewise, neither is the wage system so tightly linked to job classifications.
The German system also utilizes a type of team approach, and in some
aspects it also supports the long-term employment that cultivates teams.
In the background, however, there is strong evidence of horizontal
divisions in the organizations which are rooted in a traditional social
hierarchy. Such rules and practices take precedence over the organiza-
tion system that is imposed from within a particular corporation and
which centres on the functions of the labour union. These characteris-
tics do not coexist well with the vertical structures of the Japanese pro-
duction system. This refers in particular to the employee representative
council (Betriebsrat) that exists in the organization completely separate
from the labour union. In fact, the council is closely related to the
labour union, and its position and functions are rather delicately
defined. An understanding of this point requires a brief explanation of
its relationship to wage classes, known as ‘Tarif wages’.
The Tarif is the German version of a European qualifications system
for specifying the relationship between traditional jobs and the wage
classes (or salaries) earned by workers doing those jobs (cf. Jürgens
1998b; Nihon Rodo Kenkyu Kikou 1998; Sudwestmetall 1995). It is
based on an agreement between management and the labour union
that conforms to the business organization law, and according to which
ten agreement areas throughout the country determine wage levels
(in the case of white-collar workers, ‘salaries’) across as few as 8 or as
many as 12 (in most cases 10) wage classes (Lohngruppe). The qualifying
conditions for each class are determined by agreement between the
labour unions and the employer associations in each area, and simply
expressed in a standard document. In the case of Sudwestmetall
(November 1995, owned by EAc), there are 10 wage classes: class 1 refers
to simple jobs that require no prior knowledge or training; those up to
class 4 reflect respectively more experience and some specific knowl-
edge; classes 5 or 6 require two months’ or more training; class 7 and
above require the completion of special training or the equivalent level
of skill. This special training and education is a particular system for the
training of tradesmen (Facharbeiter) through a combination of voca-
tional school (AZUBI: Auszubildende) training and in-house appren-
ticeship. Originally, Facharbeiter training was a fusion of the traditional
in-house worker training system and a special German-style, external
 Tetsuo Abo 13

training system. Today, however, it has become standard training for

about two-thirds of all male labourers and is no longer considered a par-
ticularly special qualification. The wage levels that correspond to these
wage classes in 1995 were approximately DM2,501 for class 1, DM2,934
for class 7, and DM3,894 for class 10 (monthly). Moreover, maintenance
workers are those selected from the class 7 to 10 group who also fulfil
other conditions such as a ten-year experience at the plant. Line leaders
(Linie Leiter) seem to be selected from the 9 or 10 wage class.
Otherwise, the highest qualification for a plant worker is that of
Meister (a standard classification since the Second World War, and dis-
tinguished from a similar term for ‘craftsmen’ in the handicrafts indus-
try) which requires about 2 years of special training and education after
the Tarif, culminating in a diploma (Diplom) on graduation. The salaries
for a Meister would be about DM5,500–6,500 a month (in case of
plant EAC). The Meister qualification used to be a prerequisite for
becoming a foreman in the traditional job-rank sense. Recently, how-
ever, it has not been unusual to become foreman without this quali-
fication, and indeed, at the Japanese transplants, it is common for
a foreman not to have this qualification. Even in German companies,
apparently, if there were plans to develop flexible plant or organization
management operations to cope with changes in the internal or exter-
nal environment, the present qualification system leaves little room for
compromise and is thus difficult to utilize.
On considering how Japanese companies have dealt with this system
for qualifications, we see that among the eleven plants surveyed, four
have not established a labour union, although all except one plant
located in former East Germany have an employee representative
council. Also, while it is required that any work place with five or more
employees has an employee representative council, were it not for the
request from the employees there would not be any need for this coun-
cil. The determination of wages and salaries in the majority of cases
clearly conforms to Tarif wages and, in fact, each of the eleven plants,
including the one that does not have an employee representative coun-
cil, determines wages and salaries in accordance with this system. In any
case, the discrepancy between this situation and the Japanese system is
nowhere near as great as that between the American job-centred and
Japanese person-centred wage systems.
In other words, the focus of attention shifts to dealing with job func-
tions per se. In the case of standard jobs, wage classes are determined
with reference to an example contained in the labour agreement.
However, in the absence of such an example, a committee made up of
14 Japanese Hybrid Factories in Germany

representatives from the company and the employee representative

council decides on the wage class. As described above, this Tarif wage
system is basically a job wage, and management does not have the right
to shift an employee to a different job unilaterally without regard to the
type of job that matches his particular job qualifications. However, in
comparison with US-type job wages, there is a greater degree of toler-
ance and flexibility. That is to say, first, a specific wage class specified
through Tarif wages may be applicable to a number of different job
types. Therefore, since job shifts within a particular wage class have no
effect on wages, it is possible to transfer workers between different jobs
within their respective wage classes. Second, since each wage class only
specifies a certain minimum wage rate, it is possible to encourage work-
ers to accept job rotation by offering them incentives such as perform-
ance bonuses based on worker assessments. However, it is probably
impossible to exceed the level specified as the minimum for the next
highest wage class. Third, even though these wage class practices may
reflect certain social regulation frameworks and thus take precedence
over the organization imposed by a corporation, they are ultimately
determined by the wage class committee and thus do, in fact, reflect
internal company conditions. But again, this depends largely on the
position of the employee representative council. In cases where the
labour union exerts considerable influence over the council, these
things do not always work out as planned.
Under such conditions, many of the Japanese transplants choose not
to press the matter. Instead, they tend to leave work organization and
its operation in the hands of their German managers. This may account
for the unusually sketchy responses from many Japanese managers
when asked to provide detailed answers on matters concerning work
organization. But in other cases (e.g., both EPb and EAb plants of the
same company Y, and the EPa plant) companies have actively utilized
performance bonuses based on the introduction of the straightforward
worker assessments mentioned above. There are other cases such as APa,
where, in order to train and develop mechanical maintenance techni-
cians, the company succeeded in negotiating with the employee repre-
sentative council for a pay increase equivalent to an entire wage class.
In short, to a certain degree it is possible to conduct blue-collar worker
assessments in Germany and to stretch the limitations of the wage-class
system in order to develop broader, more diverse job skills, and thereby
pursue a more flexible process management. Indeed, it is fairly standard
among German firms that an average 13–16 per cent of the contractual
wages are subject to some kind of worker assessment. However, this does
 Tetsuo Abo 15

require the readiness to spend time and trouble observing conventions

and practices such as, in particular, patient negotiation with the labour
union or the employee representative council. In the majority of cases,
these Japanese firms did not resolve to undertake the type of cost-
intensive, all-out mass production manufacturing operations that would
warrant such a commitment of effort. As mentioned previously, they
have assumed the form of operations that allows them to utilize German
technology and production skills in order to manufacture functionally
advanced components and higher value-added products, mainly for the
German market, and on a scale that is appropriate for this demand.
Consequently, they basically allow plant management to pursue a
‘Japanese style’ that is understood and accepted by German managers.
Fourth, at the level of the 23-item analysis, group I, items 5 (promo-
tion) and 6 (first-line supervisors) for the Japanese plants in Germany
receive about as high a score as Japanese plants in Britain (Table 1.2,
Figure 1.1). In fact, due to the somewhat flexible internal promotion
system to the first-line supervisor (Linie Leiter) and foreman classes, the
process ensures the development of plant managers who are broadly
skilled in operational as well as managerial aspects. In contrast, however,
all items in group V (labour relations) receive a lower score. This is partly
on account of the presence of Germany’s strongest labour union, IG
Metall, which represents workers in the metal-working industries, such
as electrical machinery or automobile manufacturing. In spite of the fact
that the union has become fairly flexible, the employee representative
councils require extra, painstaking negotiations for any attempt to mod-
ify existing regulations or practices. It must be said that the strength of
these systematic constraints in Germany greatly restricts the ability to
develop the type of accommodative labour relations seen in Japan.
Fifth, the high average item scores for group II (production control)
reflect the high scores for items 7 (production equipment), 9 (quality
control), and 10 (process control). In fact, with the exception of item 8
(maintenance), these item scores for Japanese plants in Germany are the
highest in continental Europe. Japanese production equipment is indis-
pensable because, as mentioned above, it is difficult to bring in Japanese
elements through human-related items and, moreover, because of the
need to supply functionally advanced, high-quality products to the
German market. In the case of quality and process control, German
managers implement Japanese production methods competently and
effectively, although not exactly in the Japanese style. However, the
reason that maintenance receives a lower score is that, as mentioned
earlier, the process of skills training has only been partly introduced
16 Japanese Hybrid Factories in Germany

and implemented on an in-house basis; fundamentally, it conforms to

systems and institutions external to the company. For example, it is not
easy for these companies to carry out training for firm-specific, multiple
job skills, and it is especially problematic to find methods of rewarding
this training.

3.4 Four-perspective evaluation

Let us now reconsider the results of the six-group, 23-item hybrid analy-
sis by using the ‘four-perspective evaluation’ which looks at the sub-
stantive content of technology transfer. According to this evaluation,
‘method’ refers to the transfer of intangible elements such as the tech-
nique and know-how that are necessary to build the organization and
carry out personnel administration. This requires transplanting a con-
siderable number of Japanese skills and technologies to the local soil.
‘Result’, on the other hand, concerns the transfer of the visible elements
of ‘ready-made’ hardware such as machines, parts, and even Japanese
personnel. After repatriation, it is possible that these elements will have
left no trace whatsoever on local soil.
As expected, Table 1.4 and Figure 1.3 confirm the overall high appli-
cation scores obtained from the hybrid analysis. Moreover, there is a
conspicuously high application score for ‘material result’, as measured
along the horizontal axis of this figure.
The results are not surprising, in the light of the high application
scores for all group III procurement items (and, in the case of the
auto and electronics parts manufacturers, particularly local content and
suppliers) as well as equipment. There are two ways to consider this.
On the one hand, it shows that it is not easy for Japanese transplants
in Germany to transfer and successfully implement the Japanese
system and technology in their all-important parts manufacturing
plants. Therefore, to compensate, they must bring in ‘ready-made’
Japanese parts, materials and equipment. On the other hand,
this reflects the particular importance that set makers attach to the

Table 1.4 Four-perspective evaluations of hybrids in Europe

UK Germany France/ Italy/Spain/ Hungary

Benelux Portugal

Method: human 3.4 3.0 3.0 2.9 2.7

Result: human 2.7 3.3 2.8 2.6 2.9
Method: material 3.2 3.1 2.8 3.1 2.4
Result: material 2.8 3.8 2.9 2.2 3.2
 Tetsuo Abo 17

Method human
5.0

4.0

3.0

2.0

Result material 1.0 Result human

UK
Germany
France/Benelux
Italy/Spain/
Portugal
Method material Hungary

Figure 1.3 Four perspectives of hybrids in Europe

production and supply of functionally advanced, high quality products

in Germany.
This is also evident in the high application scores for ‘human result’
in Japanese transplants in Europe. That is to say, not only is there a high
ratio of Japanese expatriates, but the position of local managers
(item 23) is also quite low. In other words, there is little commitment
to developing the authority of German managers, and compared
with their counterparts in the UK, far less than we would expect (see
Table 1.2, Figure 1.2). As mentioned earlier, we encountered quite a few
Germans at the rank of shop floor manager, but their presence seemed
far less noticeable above that level. Outwardly, a certain degree of
localization does seem to be taking place, as shown by three companies
at which Germans are positioned at levels from plant manager to
president, and two companies where Germans occupy other upper
management posts, such as vice-president. However, there is a strong
sense that these are only nominal appointments and, moreover, at all of
the other companies, Japanese personnel dominate the positions of
authority almost exclusively.
In the case of medium-scale parts manufacturing plants, such a wide
variety of know-how on the part of local managers is not considered
necessary for the creation and development of opportunities in the
18 Japanese Hybrid Factories in Germany

local market. Rather, priority is given to effective local application of

products and technologies already held by the parent plant.
In contrast, the material-method aspect group is among the highest
application scoring groups in Europe, despite the existence of some
striking differences between the German and Japanese systems, such as
education and training (which, as pointed out above, partly accounted
for the low application in maintenance). One reason for this high over-
all score is that, as exemplified by the electrical product assembly plants,
although these companies followed the outward form of the German
system and practices, in substance they applied Japanese production
control. In other words, the companies followed German-style gen-
bashugi, such as having specialists carry out the maintenance or quality
control job functions. In practice, however, these specialists took it
upon themselves to acquire Japanese methods such as ‘creating quality
in the process’, and as a result of their interaction and communication
with quality and process engineers, were able to achieve a wide range of
kaizen effects. This is a case of what we have called ‘revised application’.

4 Performance evaluation
How does the business performance of these plants compare with their
hybrid evaluations? When the field research was conducted in the
autumn of 1998, with the exception of some of the semiconductor
plants, most plants were operating in the black. The scale of their prof-
its, however, was not particularly large. Many of these operations had
also succeeded in erasing their cumulative losses. Overall, despite the
high cost of labour, and although their performances were not particu-
larly impressive, these Japanese transplants did manage to survive in
Europe and, more significantly, in those countries whose markets were
especially important.
On the other hand, not many of these transplants are entirely satisfied
with their situations, particularly those that had set their sights on the
German market in the 1970s, that were impressed with the country’s
high levels of skills and technology, and that took the lead in local
investment strategies there. We heard of several who reconsidered their
strategies in the light of later circumstances, or believed that England
might have perhaps offered a more suitable environment after all.
While this is no doubt their honest opinion, other companies feel
differently. Although few in number, companies such as APa represent
a new wave of investment that took place in the early 1990s. The value
of locating a plant in Germany may gradually change as the integration
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