8 - Banks and financial links

Summary

One of the most pronounced differences between British and Japanese customer—supplier relationships is the norm concerning the projected length of trading. Chapter 6 discussed how sectors requiring greater asset specificity — electronic assembly more than PCB manufacturing — tended to have longer-term trading norms than those with less transaction-specific investments. However, such inter-sectoral differences do not wipe out the British—Japanese gap. Within the PCB sector, for instance, some suppliers in Britain preferred long-term trading but faced fickle, uncommitted customers. In Japan, the most ACR supplier now specialising in small-batch production felt obligated to take on low margin orders from a long-standing customer. From the Japanese customer company's viewpoint, slight price fluctuations do not normally constitute a sufficient reason for breaking off a trading relationship; as we saw in the case of JJ Electric, a strong norm works towards giving out as smooth and continuous a level of order as possible to its core suppliers and subcontractors. What national institutions enable customer companies to make such commitment for long-term continuous trading? Both the bank-oriented financial system and the lifetime employment system in Japan appear to reinforce long-term trading in product markets (see Figure 1.1).

This chapter focuses on the financial system in Britain and Japan as a possible reason behind the difference between the British norm of short-term trading and the Japanese norm of long-term trading in customer—supplier relationships.