Social Affairs

Culture and Economy: what accounts for the success of Japanese Companies


‘What lies at the core of any economic action or system is a shared cultural understanding which provides stability and meanings to people’s actions’

Taye Negussie (PhD)

Up until the 1980s, the dominant intellectual view in the development discourse was that culture and economy were two distinct and autonomous entities having little in common. Subsequently, certain economic management models and strategies were viewed as universal formulae readily applicable across cultures and societies. One such presumably universal economic model was the ‘economic growth approach’ which was tried in many of the then Third World Countries of Asia, Africa and Latin America, but succeeded only in a handful of countries.   

Nevertheless, the failure of the ‘economic growth approach’ and many more similar models fortunately inspired countless academicians and policy makers to immerse themselves in deep soul-searching efforts in order to come up with some reasonably workable ideas.

Out of these efforts was the idea that economy and culture were two unrelated and independent variables, which was proven erroneous. In the mean time, the revival of economic sociology in the 1980s had reaffirmed the idea that, indeed, culture and economy are two highly intertwined, hand in glove entities.

Furthermore, economic sociology has revealed that what lies at the core of any economic action or system is a shared cultural understanding which provides stability and meanings to people’s actions. Moreover, the cultural framework helps governments and people to make sense of the existing economic situations, set reasonable goals and devise the most appropriate economic strategies and programs.

Along with this, the miraculous pace of economic growth in Japan especially after WW II and the subsequent follow up of its close neighbours in East Asia, known as the Asian Tiger Economies (Singapore, South Korea, Taiwan,) in the 1980s in its footstep, and soon after the unravelling of the phenomenal economic growth across East Asia –Malaysia, Thailand, Indonesia, China, and Vietnam, among others -had further reaffirmed the theory of ‘culture-economy nexus’ making it the most credible and well-received intellectual argument.

It is against this background that this piece (which offers some insights on the Japanese wisdom of model adoption) attempts to explore how the ‘culture-economy nexus’ transpires by taking the case of ‘Corporate Culture’ in Japanese companies as one of the major force contributing to their phenomenal success.

It is widely believed that the Japanese companies’ Corporate Culture (kigyo bunka) – the predominant values, ideas and attitudes shaping the consciousness, actions and management of Japanese companies, their staff and employees – has largely been influenced by the cultural processes and legacies of pre-modern Japan.

The two notable indigenous social institutions which by and large influenced the Japanese corporate consciousness are:  the supreme ideal of serving the nation and thus the society espoused by merchants as well as bureaucrats that could be traced to the ideal of the Tokugawa Shogunate bureaucracies (1600-1868); and the Confucianist conception of the social order (many parts working together for the common good); its acceptance of hierarchy and emphasis on social identity were the cultural legacies easily adapted as an ideology for modern organizations.

The Japanese corporate cultures tend to share some common values and norms concerning such essential matters as profits, dividends, contractual obligations, and company personnel practices that differ from the conceptions of their western counterparts. These unique features of Japanese corporations reflect the values and characteristics of the larger Japan’s social and economic systems. The following common company practices could be taken as the unique features which constitute the Japanese corporate culture.

Corporate ideology: Each Japanese company generally possesses its own unique ideology often expressed in the company’s song, in essays by company elders, question-answer competition session which mainly contain the company’s primary goals and values, in annual celebrations and public events. The company’s ideology is the mechanism by which the spirit of the company as a big family with shared common interests, comradeship, and long-term social relationships is nurtured.  The key values in the company’s ideology are social harmony, cooperation and hard work.

Corporate decision making: The ringi system, a process of decision making through the use of circular letter is another unique system that characterizes the Japanese company. Each planned measure of the company has to pass through intense informal negotiations among concerned employees or departments including external stakeholders. Subsequently, final decisions on the proposed measures are often unanimous. Although this system is somewhat relatively more time consuming, it is very much participatory carrying the voices of each and every employee and consequently leading to a prompt and smooth implementation of decisions.

Corporate recruitment: Until very recently, the general pattern of employment of workers and management staff, especially among large corporations, was a long-term or life-time phenomenon. This long-term employment system helped the employees to have a sense of security, and feeling of belongingness, and hence the resultant strong commitment to the company.

Reciprocal relationship (giri): In Japanese culture, giri is a social norm that obliges the observance of reciprocal relationships – to help those who have helped one; to do favors for those from one has received favors. The concept implies a moral force that compels members of society to engage in socially expected reciprocal activities. Accordingly, one of the most common ways of showing gratitude to a company’s best customer is entertainment (settai) which takes a form of invitation of a substantial meal at Japanese or Western restaurants, followed by one or more visits to Japanese-style hostess bars. This custom serves as a moral force that strengthens the cliental relationships among business partners.

Seniority System: Employee’s rank, salary and qualification within a firm (especially before the 1980’s) were based on the workers’ length of services in the company. The seniority system enabled companies to benefit from strong worker loyalty and stable working environment. However, since the 1980s, perhaps due mainly to rapidly changing technologies, and fierce international competition, the seniority system appears to be gradually replaced by an emphasis on talents and abilities.

Kaizen: As discussed in the cover story of this magazine, it is another element of the Japanese corporate culture which has humanized the workplace and at the same time enhanced the level of productivity in Japanese companies.

To conclude, in my view the most important lesson that we could grasp from the wisdom of Japanese corporate culture is that instead of adopting grossly align economic policy and management fads now and then, one must, first and foremost, look inward and identify those positive indigenous cultural assets and legacies (rather than discrediting entirely what is all one’s past), and then blend them with a prudently selected align economic model so as to succeed in the pursuit of a grand socio-economic development program.

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