From Individual Skills to Organizational Capability in Japan

Mari Sako

Oxford Review of Economic Policy, 1999, vol. 15, issue 1, 114-26

Abstract: Two contrasting conceptualizations of skills lead one to attribute different roles to inter-firm networks. If skills are regarded as a public good, then inter-firm networks are like clubs that police the scope for firms to benefit from skills without paying for their acquisition. By contrast, if skills are regarded as a distinct and hard-to-imitate asset, then inter-firm networks provide an essential non-market mechanism for spreading it. The problem in the former conceptualization is market failure due to the ease of spill-over of knowledge, while the counterpart problem in the latter conceptualization is the difficulty of diffusing tacit knowledge by market mechanisms. This paper describes Toyota Motor Corporation's supplier development programmes in the wider industrial context of Japan. It concludes that of the two perspectives, the knowledge-as-a-distinctive-asset perspective is more appropriate in understanding the rationale behind the elaborate mechanisms for developing suppliers in the long term. Copyright 1999 by Oxford University Press.

Date: 1999
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