Japanese human resource management from the viewpoint of incentive theory

Abstract

This essay concerns the management of human resources in the stylized large Japanese firm. The emphasis is on issues of internal incentives, how the Japanese firm provides its employees with incentives to behave in harmony with goals of the firm. By drawing freely the insights from the growing literature on the economics of organizations (incentive theory), I attempt to explain economic rationale of some of the distinct features of Japanese management practices concerning pay and promotion systems.