Outsourcing has become an important strategy for many firms. Yet, firms need to compete with their competitors who also outsource and may share the same suppliers. This article explores how a firm could outperform others in managing the division of labor with a supplier in product development. Drawing on the empirical data collected from the Japanese auto industry, this paper shows that an automaker needs capabilities to coordinate various activities both externally with a supplier and internally within its own organization, in order to gain better component development performance. Overall, the results imply that outsourcing does not work effectively without extensive internal effort. Copyright © 2001 John Wiley & Sons, Ltd.

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Bridging inter‐ and intra‐firm boundaries: management of supplier involvement in automobile product development

This article presents the results of a questionnaire survey sent to a sample of automobile manufacturers in the United States and Japan (including Japanese-managed plants in the United States) during the spring of 1990. The data support observations that Japanese and U.S. practices tend to differ in key areas and Japanese suppliers perform better in dimensions such as quality (defects) and prices (meeting targets, reducing prices over time); and that Japanese-managed auto plants established in the United States have, in general, adopted Japanese practices and receive extremely high levels of quality from Japanese as well as U.S. suppliers. These findings provide evidence that Japanese practices and performance levels are transferable outside Japan and suggest that considerable improvements are possible for U.S. suppliers supplying U.S. auto plants. In addition, the survey indicates that U.S. firms have adopted at least some practices traditionally associated with Japanese firms, apparently reflecting some convergence toward Japanese practices and higher performance levels in supplier management.

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Supplier relations and management: A survey of Japanese, Japanese‐transplant, and U.S. auto plants

The purchasing strategies of the dominant U.S. automakers form a topic neglected by both economists and business historians. The following article examines the automakers' changing relations with their suppliers throughout the twentieth century. Using the exit/voice paradigm, it establishes a framework that can account for both current and past strategies, even when they seem to contradict the logic of economic theory.

Strategy and Irreversibility in Supplier Relations: The Case of the U.S. Automobile Industry

U.S. industry is changing. More work is being subcontracted; longer-tern relationships are being developed with fewer suppliers; suppliers are being given more design responsibilities; and there is more monitoring of suppliers' quality. These changes, moving U.S. business practices closer to Japanese business practices, recognize the indubitable success of Japanese methods of organizing production. This article examines the structure of incentives offered to supplier firms in Japan and compares them with U.S. practices.

Managing Suppliers: Incentive Systems in Japanese and U.S. Industry

Negotiations between buyers and suppliers that require sharing cost details to identify profitable relationship specific investments often fail and result in hold‐ups. Based on inequity aversion, strategic uncertainty, and risk dominance criteria, we expect negotiators to be more reluctant to share fine information than coarse, less detailed information, which suggests that fine information systems can exacerbate hold‐ups. When negotiators share fine information they achieve more efficient bargaining agreements. However, we find that strategic concerns about inequitable outcomes (fear of opportunistic behavior) lead fewer negotiating pairs to share fine information (where inequitable outcomes can be larger) than coarse information (where inequitable outcomes are smaller). Our results demonstrate that information fineness leads negotiators to trade‐off potential utility losses due to fairness considerations and potential monetary gains. Fewer (more) negotiators chose to share fine (coarse) information and ...

Does ABC Information Exacerbate Hold‐Up Problems in Buyer‐Supplier Negotiations?

In view of the importance of stable, long-term economic and political relationships between Japan and the U.S., automotive issues have to be dealt with in ways consistent with the joint prosperity of both countries. With these considerations in mind, the Joint U.S.-Japan Automotive Study project identified 4 forces that will determine the future course of the industry in both countries: (1) consumers demands vis-a-vis automobiles; (2) flexible manufacturing systems (FMS); (3) rapidly evolving technology and (4) the internalization of the automotive industry. The dilemma facing the industrialized nations is the problem of making short-term adjustments to the macro political and economic problems without succumbing to a deteriorating cycle of long-term restrictions, stagnation and decline. With the objective of resolving this dilemma and furthering the adjustments to new competitive forces, the study narrowed the problems to the following areas: (1) macroeconomic policy; (2) exchange rate; (3) market access; (4) technological progress; (5) manufacturing cost differences; (6) manufacturer-supplier relations; (7) human resource management; and (8) public policy.

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Taizo Yakushiji

Papers

The American and Japanese auto industries in transition : report of the Joint U.S.-Japan Automotive Study