Network analysis of Japanese global business using quasi-exhaustive micro-data for Japanese overseas subsidiaries

Abstract

Network analysis techniques remain rarely used for understanding international management strategies. Our paper highlights their value as research tool in this field of social science using a large set of micro-data (20,000) to investigate the presence of networks of subsidiaries overseas. The research question is the following: to what extent did/do global Japanese business networks mirror organizational models existing in Japan? In particular, we would like to assess how much the links building such business networks are shaped by the structure of big-size industrial conglomerates of firms headquartered in Japan, also described as HK. The major part of the academic community in the fields of management and industrial organization considers that formal links can be identified among firms belonging to HK. Miwa and Ramseyer (Miwa and Ramseyer 2002; Ramseyer 2006) challenge this claim and argue that the evidence supporting the existence of HK is weak. So far, quantitative empirical investigation has been conducted exclusively using data for firms incorporated in Japan. Our study tests the Miwa-Ramseyer hypothesis (MRH) at the global level using information on the network of Japanese subsidiaries overseas. The results obtained lead us to reject the MRH for the global dataset, as well as for subsets restricted to the two main regions/countries of destination of Japanese foreign investment. The results are robust to the weighting of the links, with different specifications, and are observed in most industrial sectors. The global Japanese network became increasingly complex during the late 20th century as a consequence of increase in the number of Japanese subsidiaries overseas but the key features of the structure remained rather stable. We draw implications of these findings for academic research in international business and for professionals involved in corporate strategy.