Japanese Contracting Practices : Realities and Changes

This research looks at how contracting between Japanese manufacturers and suppliers has changed since the 1990s. The study analyzed semi-structured interviews with Japanese manufacturing experts in the: 1) electronics industry, a highly modularized industry, and 2) automobile industry, a moderately modularized industry. The study examines how the shift of product design from integral architecture toward modular architecture changed Japanese contracting practices by dividing them into deal structure and contractual provisions. In short, although deal structures have changed a lot, contractual provisions did not change as much. Most Japanese contracts continue to include future renegotiation clauses and do not specify who will have the right to make final decisions regarding predictable disputes, such as how to share the responsibility of product liabilities. Contrastingly, English-contracts with foreign companies tend to have more specific provisions and include an entire agreement clause. This paper proposes an alternative hypothesis to explain the stickiness of Japanese contractual provisions: cultural homogeneity and communitarian ethics decrease the specificity of contractual provisions. This research will address the change in Japanese deal structures since the 1990s and provide vital information on the nature of Japanese contractual provisions between manufacturers and suppliers