Institutions, Industrial Upgrading, and Economic Performance in Japan

Institutions, Industrial Upgrading, and Economic Performance in Japan

The ‘Flying Geese’ Paradigm of Catch-up Growth

New Horizons in International Business series

Terutomo Ozawa

Terutomo Ozawa examines Japan’s once celebrated post-war economic success from a new perspective. He applies a ‘flying geese’ model of industrial upgrading in a country that is still catching-up, to explore the rise, fall and rebound of Japanese industry with its evolving institutions and policies.

Chapter 9: Out of an Institutional Quagmire? International Business to the Rescue

Terutomo Ozawa

Subjects: asian studies, asian business, asian economics, business and management, asia business, international business, economics and finance, asian economics, international business, international economics

Extract

9.1. MATRICES OF INSTITUTIONS, OUTER VS. INNER When we talk about institutions and international business, it is important to keep in mind that there are two layers of institutional setting: one is an ‘outer’ (supra-national) set of global institutions and the other is an ‘inner’ (nationspecific) set of domestic institutions in each individual country. Both sets evolve as their surrounding politico-economic conditions alter over time. The outer set is currently arranged under the Pax Americana, which sends forth the forces of globalization. In this age of hegemon-led globalization, therefore, the outer set is dominant over the inner set, forcing accommodation and compliance of the latter with the norms of the former. Yet, some inner institutions retain their own logic of survival, resisting changes. Most of the time, international business activities react and adapt to – and even arbitrage between – these different institutional surroundings, but they themselves serve as agents of institutional homogenization throughout the world. As stressed by Douglass North (1990, 1999), the overall economic performance of a given economic unit is largely determined (enhanced or retarded) by its institutional regime. Such a regime can also be called ‘an institutional matrix that defines the incentive structure of society’ against the backdrop of ‘the belief system’ that connects ‘reality’ to the institutions (North, 1999: 9, emphasis added). In addition, the belief system is a product of local mores and traditions in the individual countries. North was thus talking about the role of an institutional matrix in a given individual country – that is,...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information