Division of Research Graduate School of Business Administration September 1986 AMERICAN ORGANIZATIONAL THEORY IN JAPAN: WESTERN CONCEPTS, JAPANESE SPIRIT Working Paper #476 Schon Beechler University of Michigan Vladimir Pucik University of Michigan Kiyohiko Ito* University of Michigan FOR DISCUSSION PURPOSES ONLY None of this material is to be quoted or reproduced without the expressed permission of the Division of Research. *The authors would like to gratefully acknowledge the helpful comments of Robert Cole and Mitsuyo Hanada.

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INTRODUCTION In the last five years, the poor economic performance of Western industrialized nations, contrasted with Japan's advances in international trade, has led to a keen interest in Japanese management techniques by practitioners and academics alike. Frequently, perhaps to accommodate the latent xenophobic tendencies of consumers of this latest managerial fad, American authors have not failed to point out that some of the management practices attributed to the Japanese actually originated in the United States. The assumption among many Americans is that, at least in the battle of intellects, we are still "number one" and the Japanese merely copy and adapt our ideas. However, others have pointed out that the Japanese transformation of imported ideas concerning management contributes a new quality to theories of organizations and cannot be dismissed as mere imitation (Cole, 1985; Hall and Leidecker, 1981). While the impact of Japanese "intellectual borrowing" from the West, and from the U.S. in particular, may be subject to different interpretations,>there is no doubt that a significant transfer of ideas has taken place. Less well known is the manner in which American organizational theories (AOT) were disseminated in Japan. This paper therefore reviews the flows of ideas about management and organizations between the United States and Japan, focusing on the differences in the diffusion patterns over time and across different classes of adopters. The transfer of management concepts across cultures and the related diffusion processes do not occur in a vacuum. We recognize that relatively stable factors, such as the cultural distance between countries (Hofstede, 1984), play an important role in determining the effectiveness of "idea exports" across national boundaries. However, we also propose that more dynamic factors, such as the change in relative economic power and position of actors in the

exchange, exert a powerful influence on the speed, scope, and direction of the diffusion process. We will attempt to show how the characteristics of the diffusion process of American organizational theories in Japan have changed with transformations of the relative socioeconomic conditions in the two countries, with changes of economic priorities on micro and macro levels, as well as with changes in interests and needs of the AOT adopters. DIFFUSION STAGES We divide the exchange of ideas on management and organizational practices between Japan and the United States into five stages (Table 1). Each stage is TABLE 1 DIFFUSION OF AMERICAN ORGANIZATIONAL THEORIES IN JAPAN STAGE ADOPTERS ACADEMICS MANAGERS STAGE 1:NEW THEOLOGY (1945-) VALUE SYSTEM PROFESSIONALISM STAGE 2:EMPIRICAL GUIDE (1965 —) STAGE 3:CULTURALIST ROLLBACK (1970 —) STAGE 4:NEW DIRECTIONS (1975 —) RESEARCH APPLICATION METHOLOLOGICAL REJECTION ANALYTICAL TOOL PRAGMATIC ADAPTATION REEXAMINATION OF THE PAST PRAGMATIC UNIVERSALISM STAGE 5:INTEGRATION (1981 —) COLLABORATIVE EFFORTS REVERSE IMPORTS 2

characterized by the emergence of a distinct approach to American organizational theory and management by two key classes of adoptors; academics and practicing managers. During stage 1, which began in the early postwar years and lasted until the mid-1960s, American organizational theory (AOT) and management practices were accepted as new theology in nearly unconditional terms by both Japanese academic and management communities. In stage 2, which began in the mid-1960s, pioneers in the academic profession pushed to supplement the armchair theorizing, then dominant in Japanese social sciences, with empirical analyses based on conceptual models developed in the West. At the same time, many practitioners continued to look to the United States for answers to specific organizational problems, but now with a more critical attitude. The emergence of Japan as a new economic superpower in the early 1970s (stage 3) was accompanied by a revival of "Japan is unique" theories that implicitly, and often explicitly, rejected the validity of empirical research based on Western analytical. Beginning in the mid-1970s, however, the resistance to uni-dimensional positions of culturalism led to stage 4, characterized by pragmatic approaches to the transfer of management techniques both to and from Japan, and by an increased use of rigorous research methodologies. Finally, stage 5 of the diffusion process began to emerge in the early 1980s with the export of managerial techniques from Japan supplemented by an increase in collaborative ventures between American and Japanese researchers drawing on an integrated methodological framework. While the beginning of each new diffusion stage can be identified with relative precision, the transition between stages was gradual. Paradigms that dominated an earlier diffusion stage often continued to exist concurrently as new paradigms developed. It is also important to recognize that a number of 3

scholars associated with the process of AOT diffusion in Japan shifted their paradigmatic positions over time. In such cases, the classification of their individual contribution into one of the diffusion stages characterizes their thinking at the time. We should also note here that the references cited in each stage are meant to be representative, not exhaustive. STAGE 1: NEW THEOLOGY At the end of World War II, the Japanese embarked on a path of reindustrialization by seeking out the best business minds of the Western world. Not only in organizational science, but in all the social sciences, Western, and especially American, concepts and values were perceived for several years after the war as a "new revelation" that should replace the discredited Japanese creeds of the recent past. In the area of management, Western concepts were also intended to serve as a counterweight to the diffusion of Marxist ideas which were ideologically unacceptable to most managers, as- well as to the American occupational authorities, who played an active intermediary role in the diffusion process. Since foreign travel was nearly impossible under the controlled economy during the early postwar years, American management principles were first disseminated in postwar Japan through training programs sponsored by the occupation authorities (Takamiya, 1983). At the same time, this effort was also supported by the strong legacy of the "scientific management" boom during the 1920s. A number of executives put in charge of the reconstruction of Japanese industry received their early training based on Western manuals and techniques. The background in "scientific management" among many managers and executives made it easier to assimilate the newly arrived concepts of management, particularly in the area of quality control. 4

The first QC seminars in Japan were conducted by a representative from the Allied General Headquarters in 1949 and were followed by seminars given by W. Edwards Deming in 1950 and J.M. Juran in 1954. The QC technology introduced by Deming and Juran, though eventually substantially modified by the Japanese, played a large role in modernizing Japanese management. American management control systems were also imported on a mass scale. For example, Ono Toyoaki, an executive with a major company and later a management scholar, translated the "Management Guide" of Standard Oil and introduced it to a large number of Japanese firms (Ono, 1972). Western management ideas also entered Japan in tandem with technological assistance from American firms to their Japanese partners. The most influential Western management theorist of this period was Peter Drucker. All of his major works were immediately translated into Japanese and widely read by managers. Drucker himself was a frequent visitor and seminar speaker. The Japan Productivity Center, which was established in 1955, invited many other American management experts to visit Japan. Numerous missions to the United States were sponsored by the Center, furthering management transfer and significantly enhancing the professionalism in Japanese management (Takamiya, 1983). The diffusion of AOT among academics was less direct than among practitioners. Until about 1960, Japanese organizational theory was dominated by two competing Marxist interpretations of the development of Japanese capitalism (Shimada, 1983). The prevailing view was that Japanese capitalism was semifeudal and immature. From this perspective, all of the conspicuous labor practices such as the emergence of enterprise unions, life-time commitment within a closed enterprise community, and the length-of-service reward system were seen as evidence that Japanese capitalism was backward. Western management 5

practices were seen as "progressive," but not necessarily desirable in the long run. Among the non-Marxist groups, the history of managerial sciences after the Second World War can be characterized as a process of "naive" inclination to American views (Ishikawa, 1982; p.ll). Interest in the realities of Japanese management was low, an attitude reflecting traditions of Japanese academism that has long been absorbed with adopting Western theories without taking into consideration their applicability to local conditions. STAGE 2: EMPIRICAL GUIDE A new trend, again spearheaded primarily by practitioners, began to emerge in the early-1960s. AOT ideas, especially those concerning leadership, management style, management information systems and organizational design, continued to be assimilated directly, but with important modifications that reflected local conditions. For example, Sony launched a drive to convert its "mechanistic" organization into an "organic" one, based on ideas drawn from the work of Rensis Likert, and from managerial concepts developed by the company's founders (Kobayashi, 1970). During this period a number of firms began to experiment with Western job enlargement and job enrichment techniques that, coupled with quality control techniques introduced earlier, led to the nowfamous "quality control circles". Organizational innovations such as the introduction of Management Information Systems (MIS) were also rapidly disseminated among Japanese firms. Nippon Telegraph and Telephone used the examples of AT&T and Westinghouse as models for introduction of their own Organization Development and Management Information Systems (Takahashi, 1970; Nakayama, 1973). The impact of AOT on Japanese organizational theory also shifted. A small minority of those in academia began to use AOT concepts to enhance the 6

methodological quality and empirical foundations of organizational research in Japan. However, their work was often better known abroad than at home, mainly through their personal links to foreign scholars. Several studies were products of early cooperative research efforts among American and Japanese scholars. For example, Whitehill and Takezawa (1968) used research methods in social psychology in their questionnaire survey of workers' perceptions and attitudes in a comparative analysis of the United States and Japan. Among scholars promoting empirically-driven methodologies of social analysis, a key role was played by Koike Kazuo who investigated Japanese internal labor markets and their impact on career development of various groups of employees (e.g. Koike, 1978). However, it gradually became evident that his analytical approach clashed with some emerging trends in Japanese social sciences that questioned the applicability of Western methodology to the analysis of Japanese organizations, and he and his colleagues came under increasing attack. Turning back to AOT, some organizational theorists began to trace the origins of popular management practices back to social relations in Japan's largely agrarian preindustrial society. Others invoked the research efforts of such Western scholars as Benedict (1946) and Abegglen (1958) to legitimize their views. Abegglen's book, describing the results of his field survey of a small number of large Japanese plants, was especially useful in this regard because, in explaining Japanese industrial relations, it emphasized the role of anthropological and cultural legacies. A number of Abegglen's propositions were in short-time rebutted, for example by Taira (1970) who pointed out that Japan's development was by no means unique and embedded in its culture, but could be explained fully by neoclassical economic theory. Nevertheless, as we point out below, changes in the economic environment were seen as giving additional

support to the culturalist positions, and the arguments of Abegglen's critics did not make much headway outside of a small group of scholars. A significant number of studies which were relatively atheoretical in nature were also conducted during this time. Researchers such as Tsuda, Shirai, Sumiya, Nakayama, Funahashi, Okochi, Minami, and others gathered a large amount of information on topics ranging from the structure of the labor market and personnel administration to decision making and technological change. They analyzed the structure and operation of various institutions inductively, providing data which contributed greatly to general knowledge in the field. These descriptive studies also provided much of the fuel for later debates concerning the applicability of AOT to Japanese management. STAGE 3: CULTURALIST ROLLBACK As research on Japan blossomed, criticism of existing organization theories based on concepts imported from the West continued to increase. This development was partially a function of theoretical weaknesses embedded in the mechanistic transfer of ideas across cultural boundaries. However, the key factor fueling the revisionist thinking was the change in the economic and social status of Japan from a devastated, war-torn country to a major international competitor. As Japan's economic successes spurred increased confidence in indigenous management policies, a number of Japanese scholars began to promote the view that Japanese management and organizational practices promoted, rather than hindered, Japan's economic growth. Japanese business leaders also became increasingly convinced that their management practices were valuable assets rather than deterrents to the international competitiveness of their firms. Theories focusing on supposedly "unique" features of Japanese society emerged in all areas of social sciences. Given the dominance of organizations in contemporary Japanese social life, the nihonjinron boom could not bypass the 8

field of organizational science. While specific constructs were often newly minted, many were, by and large, derivatives from nationalist management theories that grew until Japan's World War II defeat (e.g. Fujihara, 1936). As a result, organization theory in Japan during the 1970s came to be dominated by methodological culturism that emphasized the organizational impact of "unique" characteristics of the Japanese, such as "groupism" or "dependence". The culturalist approach was reinforced by the apparent failure of AOT to prevent the decline of American economic competitiveness. From a very pragmatic viewpoint, the Japanese asked, "if it does not work over there, why use it here?" A new consensus began to form, asserting that Japanese organizations have: not only unique, but also superior qualities. This pattern of alternating wholesale adoption of Western ideas with their nearly complete rejection has a longer history in Japan. The holistic view of Japanese society as a unique entity, resurrected during the culturalist rollback by Japanese organizational theorists, can be traced back to the idea of wakon kansai (Chinese learning with Japanese spirit) in the eighteenth century (Mouer and Sugimoto, 1983; pp. 277 -78). As commented by Hazama (1971), the assumption was that the behavioral characteristics of the group and the individual were incomprehensible to people outside Japan who were socialized under a system of well-developed individualism. "Uniqueness" was the basic paradigm, leaving nothing else to prove, and thus no empirical research was deemed necessary. Iwata (1977, 1978), for example, asserted that psychological traits are peculiar to each society and determine the particular pattern of management. Thus, he insisted that AOT does not have universal validity and that uniqueness of the Japanese management system cannot be revealed through comparative quantitative analysis. 9

Tsuda (1976, 1977), while adopting a number of the culturalist propositions, criticized this psychological approach to the Japanese style of management and proposed to explain its formation and existence from the way of life in Japanese society as a whole. Similarly, Kumon (1981) argued for the need for both a culturalist approach and an environmental (qualitative) approach. Because of the particular psychology of the Japanese, Kumon maintained that it is not possible to formulate a general theory, either by the deductive or the inductive method. STAGE 4: NEW DIRECTIONS Since the late 1970s, however, it became quite obvious that the dominance of the culturalist paradigm in Japanese organizational theory was weakening. This does not imply a renewed worship of AOT, but a more balanced integration of Western and Japanese concepts. The slowing down of the rapid economic growth after the oil crisis of 1973 led many to reexamine the validity of claims concerning Japan's superiority in management. Urabe (1978) presented one of the earliest critiques of theories of the Japanese style of management, criticizing both American and Japanese scholars who "tend to ascribe characteristics of Japanese-style management to Japan's traditional culture and society or to Japanese psychological traits without paying due attention to the technological and economic factors that precondition Japanese-style management. Consequently, their observations often turn out to be one-sided or lead to simple-minded generalities" (pp. 33-34). Ishikawa (1982) also concluded that the methodological nationalism of the culturalists has led to an oversimplification of the native peculiarities in Japan. To address these criticisms, Japanese theorists began to formulate more sophisticated theories and methodologies. For example, Okamoto (1981) presented an evaluation of the development of Japanese business through an analysis of 10

empirical observations on management in postwar Japan. Paralleling recent developments in Western organizational theory, he focused on managerial strategy and the economic environment. The rise of "traditional" Japanese management practices such as lifetime employment are seen as rational responses to various environmental contingencies facing Japanese firms. Emphasis on empirical research conducted by a small group of academics until the late 1970s, received a boost from a new generation of researchers who, because of their mainly Western training, are quite comfortable with analytical tools popular in contemporary AOT. The ability to engage in rigorous empirical research provides this generation with an opportunity to outflank the culturebound traditionalists. The unprovable conjectures of the culturalist paradigm have been rejected as a meaningful foundation for building an integrated theory. New generation researchers such as Hanada (1980) and Kido (1980) analyzed the organizational commitment of Japanese employees. Wakabayashi (1979) examined managerial career development in a department store chain by utilizing Graen's theoretical framework. Kono (1982) performed a large-scale quantitative analysis on the product diversification strategies of Japanese companies from 1962 to 1978. Using path analysis Shinohara (1980) characterized the corporate strategy creation process in Japan, and Uchino (1981) analyzed interorganizational relations by focusing on interlocking directorates. International collaborative research, such as Mannari and Marsh's (1980) replication of studies by Woodward, Blau, and the Aston group, while still infrequent, was part of the trend toward empirically-validated theory building. During this same period, practitioners continued to examine AOT and related managerial practices in order to apply them, with necessary modifications, to their own organizations. A clear example of the assimilation of AOT ideas in Japanese business can be found in organizational change at Toshiba (Taku, 1981). 11

Faced with tumbling business conditions after the first oil crisis in the early 1970s, Toshiba analyzed the organization of General Electric, which utilized the Strategic Business Unit (SBU) and Product Portfolio Management (PPM) concepts, and adopted them with modification for its organization in 1976. Similar changes have occured in other large Japanese firms. For example, Hitachi, which introduced a full product division structure in the 1960s, decentralized profit center responsibilities after studying the experiences of American firms (Okamoto, 1982). In the late 1970s, following trends emerging among Western multinational corporations, Matsushita Electric abolished the separation of domestic product departments and their international division and created global product divisions (Ono, 1979). STAGE 5: INTEGRATION Internationalization of business in both the United States and Japan has presented a new testing ground for organizational theory. Substantial crossnational research in various countries has added to the body of knowledge, providing researchers with a wealth of comparative data. A more informed and sophisticated approach has emerged which focuses not only on the differences or the similarities in social relations in organizations of various countries, but realizes that the truth lies somewhere in between the previous extreme approaches (Yamada, 1981). As the internationalization of the Japanese economy continued to progress, the push for integration of Japanese management concepts with AOT was abetted by calls from practioners for universal frameworks to help export Japanese practices to Japanese affiliates abroad. They knew from experience that a number of "unique" Japanese practices were transferable; what they needed was a more thorough way of organizing how to go about it. A number of Japanese theorists responded by examining management practices in overseas Japanese firms 12

in order to determine which aspects of Japanese management were transferable to foreign countries. Such studies have been conducted by, among others, Ishida (1981), Kobayashi (1982), Hanada (1981, 1982), Takamiya (1981) and Yoshihara (1983). In more general terms, Kono (1985) emphasized the fit between the corporation and the environment in discussing whether Japanese management philosophy can be exported. He argued that some characteristics of Japanese management had their origins in Japanese tradition but that others were the result of rational judgement and adjustment to environmental circumstances. An increased interest in Japanese organizations by American researchers, coupled with an increased appreciation for empirical research, led to a number of collaborative research efforts. Most of these collaborative works focus on comparative research. Among them, the work of Lincoln, Hanada and Olson (1981) examined the commitment of employees in Japanese-owned firms in California. Howard, Shudo and Umeshima (1983) examined the motivation and values among Japanese and American managers and Naoi and Schooler (1985) compared occupational conditions of workers in both countries. Some collaborative studies, however, have focused only on Japanese organizations, but have used concepts derived from AOT (e.g. Nonaka and Johansson, 1985). A growing number of Japanese scholars have not only integrated AOT in their studies, but have also modified and expanded theories developed in Japan and the West to arrive at a more general, less ethnocentric, culture-bound explanation of various aspects of organizational behavior. For example, Misumi (1985), in his recent book, presents research on the Performance-Maintenance (PM) Theory of Leadership. The concepts of PM leadership theory are derived from ideas about basic group processes postulated as field theory in the social sciences in the United States, but PM leadership theory is distinguished from other leadership 13

research outside Japan by its incorporation of Japan's cultural and historical context (Misumi and Peterson, 1985; p.203). Kagono, et. al (1981) gathered data on a large number of American and Japanese companies, focusing on strategic adaptation to the environment. The point of departure for their study was environmental adaptation theory, and the authors see it as an expansion of the classic works of Burns and Stalker, Woodward, Lawrence and Lorsch, and Galbraith. They have expanded on theories developed in a Western context, attempting to devise an analytical framework of increased comparative applicability and validity. As more and more organizations internationalize and are exposed to different management practices, the exchange and application of multi-cultural management concepts and values will increase, at least in some areas. In addition, the increase of Japanese investment in the United States, coupled with transfers of technology and management practices that reverses the trend experienced in Japan two and three decades ago, brings with it an increased awareness of Japanese organizational concepts. An increasing number of these concepts have begun to appear in American periodicals in articles authored by Japanese, a trend which is expected to continue. The number of Americans who are able to cross the language barrier and obtain direct access to current Japanese theoretical developments is also increasing. CONCLUSION In our analysis of diffusion patterns of American organizational theories in Japan, we have attempted to show that factors other than cultural distance may influence the process of diffusion of organizational theories across national boundaries. In particular, we focused on the relative economic power of the sender and recipient countries (U.S. and Japan). We also illustrated how theoreticians in academia and practicing managers differed in their approaches 14

to the process of diffusion. The resulting picture is one of great dynamism as the appeal of AOT in Japan greatly oscillated over time. Throughout the postwar period, the transferability of American concepts of management to Japan was clearly associated with the fundamentals of the economic relationship between Japan and the U.S. When the U.S. dominated, acceptance of American "hardware" technology was accompanied by broad and rapid diffusion of American management "software". However, when the relative economic power began to change, so did the scope and intensity of the diffusion process. Ultimately, the future roles of sender and recipient may be reversed in accord with the changed economic fortunes of the two countries. At the same time, the diffusion of AOT in Japan has been influenced by differences between the frequent methodological extremism of the theoreticians and the pragmatism of the practitioners, with the latter serving as transfer agents or gatekeepers, as well as moderators of swings in the diffusion process. In particular, the gatekeeping role played by Japanese managers deserves attention. On numerous occasions, the capacity of Japanese organizations to scan culturally alien environments, to discover and to experiment with potentially useful ideas and to rapidly internalize those ideas that have passed the test, was substantially larger than the capacity of their Western counterparts to learn within their own cultural milieu. The recent trend toward cross-pollination of organizational theories and management practices in the two countries also has important implications for American researchers. "Transplant" organizations provide challenging opportunities for testing the cross-cultural applicability of existing organizational theories taken for granted within a uni-cultural environment. This active approach not only enhances opportunities for information sharing, the exchange of ideas, and collaborative efforts between scholars in Japan and 15

in the United States, but also supports the the long-overdue internationalization of American social sciences. Japanese experience shows that "looking out", while not without its pitfalls, is nevertheless eminently worthwhile. 16

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