Understanding an Emergent Diversity of Corporate Governance and Organizational Architecture: An Essentiality-Based Analysis

Masahiko Aoki

No 07-019, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: This article proposes a simple framework for understanding diversity of linkages between corporate governance (CG) and organizational architecture (OA). It distinguishes discreet modes of their linkage by different combinatorial patterns between three basic assets: managers’ human assets (MHA), workers’ human assets (WHA), and non-human assets (NHA). Using the concept of essentiality of human assets proposed by Hart (1995) and distinguished from that of complementarities, we first propose a new characterization of four known modes of CG-OA linkage: three traditional (Anglo-American, German, and Japanese) and one relatively new (Silicon Valley) models. Then we present empirical evidence of emergent diversity of CG-OA linkages in Japan, which is somewhat at odds with the old Japanese model. We interpret its emergent dominant mode as the path-dependent evolution of a new pattern of essentiality between human assets, made viable by lessening of institutional-complementarity-constraints which surrounded the traditional Japanese model. We argue that this new mode interpreted in terms of essentiality may have broader applicability beyond Japanese context.

Keywords: Corporate governance; essentiality; human assets; institutional change; organizational architecture; path dependence (search for similar items in EconPapers)
JEL-codes: D02 D23 G34 J24 Z13 (search for similar items in EconPapers)
Date: 2007-10
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