Manufacturer-supplier relationships in Japan and the concept of relation-specific skill

Abstract

This paper investigates manufacturer-supplier relationships in Japan based on field research on two major industries. I show first that various modes of relations exist and that longstanding relations are more densely distributed where customized parts are transacted. Then I show that this phenomenon is to be ascribed to ratings exercised by the purchasing firm on some skill accumulated by each supplier. I construct the concept of multidimensional relation-specific skill accumulated by each supplier through learning and technological investments, and relate this concept to Aoki's work on relational quasi-rent and Williamson's scheme to classify transactions.