The Dynamics of Interfirm Relationships
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The Dynamics of Interfirm Relationships

Markets and Organization in Japan

Yongdo Kim

The goal of this pathbreaking volume is to relativize the experience of Japanese industries in terms of both location and time, exploring its similarities and differences with other countries and its unique relationship with the “global standard” of company performance set by US firms. By examining the intertwining of the organizational and market principles in interfirm relationships, this book tries to overcome the weaknesses of existing studies by looking beyond organizational principles, overturning stereotypes, and covering a wide range of industries.
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Chapter 3: The market and organization in interfirm relationships in Japan’s IC industry

Yongdo Kim


In this chapter I analyze how market and organizational principles worked in interfirm relationships in Japan’s IC (Integrated Circuit) industry from the 1960s to the 1970s. The IC industry is a new industry that emerged after the war, and it has played a key role in Japanese economic growth; it has led the way technologically for many other manufacturing industries in Japan. For instance, since the first oil crisis, the development of Japan’s IC technology has been the basis for the “microelectronization” of Japan, known as factory automation (FA) and office automation (OA). Moreover, since the 1970s, Japan’s consumer electronic products, calculators and electronic watches came to occupy a dominant position in the world market by using IC chips. Indeed, IC was called “the rice for industries” in Japan because it was consumed by almost all the industries as an essential component. Therefore, as far as the development of Japanese industries is concerned, interfirm relationships between Japanese IC companies and domestic customers from the 1960s were extremely significant. There have been many studies on the early stage of Japan’s IC industry, especially on its demand structure. They have identified the close cooperation between Japanese IC suppliers and customers and emphasized, on the whole, only the positive effects of demand. Nevertheless, it is highly probable that the interfirm relationship in this industry was multi-faceted and complicated. It is difficult to say whether previous studies have analyzed that point.

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