The Keiretsu Fable - Where does the Truth Lie?

The success of the Japanese automobile industry has mystified Western scholars for many decades. In the early post-war years, the industry did not receive any blessings from the Bank of Japan. Even MITI was a little pessimistic about the industry’s future. The inclusion of the automobile components industry as part of MITI’s “pick-the-winner” industrial policy appeared almost as an afterthought. Yet against all odds the industry flourished to become one of Japan’s best known success stories. Western scholars and business strategists alike are naturally keen to deconstruct this mystery, while Japanese scholars were no less enthusiastic in documenting and offering an explanation. Many explored the keiretsu structure (networking or supplier relationship) as a possible source of the industry’s competitive advantage. Something has gone amiss however, in this parallel effort, and gaps and misperceptions developed. This paper explores some of the myths surrounding this industry. In the process, it revaluates MITI’s policy and raised another research question of whether some of Toyota’s domestic competitors might have misinterpreted the nature of Toyota’s keiretsu.