Multiskilling, Delegation, and Continuous Process Improvement: A Comparative Analysis of U.S.-Japanese Work Organizations

This paper focuses on the following U.S.-Japanese differences in work organizations and labor market practices: in Japanese firms, (i) real decision-making authority is delegated more to lower hierarchical levels, (ii) employees are multiple-skilled, (iii) human capital accumulation is more firm-specific, (iv) labor turnover rate is lower, and (v) continuous process improvement is more prevalent. I present a model that addresses interconnections among three key features of work organizations (multiskilling, delegation, and continuous process improvement), and analyses ways in which they are related to labor market practices. It analyses strategic interactions among firms concerning their choices of the nature of work organizations, and shows that strategic complementarity due to labor market externality can yield the multiplicity of equilibria, which provides a systematic explanation for the U.S.-Japanese differences.