Honesty, Diligence, and Skill: Risk Sharing and Specialization in the Kiryu Silk Weaving Cluster, Japan

Masaki Nakabayashi

No f166, ISS Discussion Paper Series (series F) from Institute of Social Science, The University of Tokyo

Abstract: Many economies have seen growth in industrial clusters during their industrialization, and the relational contracts between manufacturers and subcontractors are often the organizational basis of clusters. We predict that, if manufacturers form relational contracts with subcontractors and if manufacturers closely collude when trading with subcontractors, then premium subcontractors suffer more from market volatility than ordinary subcontractors and hence it is optimal for manufacturers to shield premium subcontractors against the risk. We then study Kiryu, a kimono weaving cluster that expanded from the late nineteenth century with the development of new synthetic dyeing techniques. We show that premium subcontracting weavers were allowed long-term relational contracts and specialization, which shielded already honest weavers against market volatility and induced them to be diligent and to acquire skills.

Keywords: industrial clusters; relational contracts; putting-out system; risk sharing; textile industry; Japan (search for similar items in EconPapers)
JEL-codes: L14 O12 O14 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2013-12-23, Revised 2016-07-13
New Economics Papers: this item is included in nep-cse and nep-his
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Journal Article: Honesty, Diligence and Skill: Risk Sharing and Specialization in the Kiryu Silk Weaving Cluster, Japan (2017)
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