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Hitachi Research Institute

Interview

Interviews with experts and opinion leaders from our research network

Learning from the history of the Edo Period: Japanese-style management supported by “people”
- Returning to the starting point to find ways for Japanese companies to endure and evolve -

As conditions in the world become increasingly unstable and the business environment changes dramatically, it is no small feat for a company to continue to survive for a century or more. At a time like now, it is perhaps worthwhile to cast our sights back to the Edo Period during which Japanese management took shape and give careful consideration to the form that Japanese companies today should strive for and the path that they should follow. We spoke with Dr. Tsunehiko Yui, one of Japan’s foremost economic historians, to discuss how Japanese companies should develop and respond in an era when it is becoming increasingly difficult to take the helm of management, and what is necessary to aim for new development that values history and culture at the same time.

Dr. Tsunehiko Yui

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Completed studies at the Graduate School of Economics, the University of Tokyo and was awarded a PhD in Economics. In addition to serving as Managing Director of the Board of Directors and Head of the Library at Mitsui Bunko, serves as Professor Emeritus at Meiji University, and Honorary President of the Japan Business History Institute.

Author (including coauthor) and editor: Nihon no Keiei Hatten (Development of Japanese Business) (Toyo Keizai Shimpo-sha), Yasuda Zenjiro (Minerva Shobo), Toyoda Kiichiro Den (The Life of Kiichiro Toyoda) (The University of Nagoya Press), Tohi Mondo: Keiei no Michi to Kokoro (Tohi Dialogue: The Road and Spirit of Business) (Nikkei Business Bunko), etc.

The Edo Period is the starting point of Japanese management

Shirai: Dr. Yui, you have widely researched the history of corporate management from the Edo Period up until the present. Upon reading your work Japanese Management in Historical Perspective, Its Evolution and Ordeals (2015, PHP), I was very surprised to find that “business management” in the Edo Period has currency today. Today I would like to start by asking you about the background of the formation of Japanese management in the Edo Period, where management is said to have its roots in the principles that “companies are people,” and “business is people.”

Yui: The notions that “companies are people” and “business is people” resonate with humanism and are outstanding expressions, don’t you think? Professor R. Locke, an American who specialized in the history of economics, was visiting Japan about 20 years ago and happened to see a sign in a certain department store on which was written the words “gratitude and dedication.” He did not understand Japanese and asked me to explain who these words were addressed to and by whom. My rendition of the words was a direct translation and I explained that they were addressed to clients, customers and employees. Upon hearing this, he looked at me in amazement. When I asked him what kind of similar mottos would be used in the United States, he told me, “Profit and money only.” Now it was my turn to feel bewildered. According to Professor Locke, there was no motto other than “profit” that existed in any business school the world over. Even as internationalization progresses, in Japan the situation remains the exact opposite. I found this quite interesting. Looking back at history, we see that both Great Britain and Japan were on the threshold of market economies in the mid-18th century. Nevertheless, there were significant differences between the market economy of Great Britain and that of Japan. Overseas trade was flourishing in Great Britain while Japan’s entire market was domestic and self-sufficient. In Great Britain, on the other hand, trade revolved around exports and, as such, the consumer was not visible and there was little emphasis on “people.” Even with progress of a free economy and towns overflowing with unemployed, these phenomena were perceived as the workings of the “invisible hand.” In other words, it was the will of God. As mechanization progressed, the enclosure movement gained momentum in Great Britain, resulting in a constant migration of people from farming villages into cities. In Japan, on the other hand, the system of alternate attendance, which required feudal lords to go to Edo and reside there to serve the shogun in alternate years, was becoming established and the city of Edo developed and prospered significantly. Furthermore, from the mid-17th century, Japan’s policy of seclusion also became fully established. It was under this system of seclusion that the self-sufficient economy of Japan, a country poor in natural resources, took shape. There was no landfill technology at that time, so there was no means of expanding the country’s land. By the 18th century, approximately 25 million people in a land lacking in resources had to live self-sufficiently, so efficient use of “people” was imperative. Education of people was also valued since ancient times. Just as the words “companies are people” and “business is people” connote, “people” have been a structural attribute of Japanese management since the Edo Period. This is something that can also be understood by both Chinese and Koreans, so perhaps it is an Eastern concept.

Shirai: It is said that Japanese companies have fewer innovations than their U.S. counterparts but in the Edo Period, Mitsui Echigoya (now the Nihombashi Mitsukoshi Main Store) grew significantly after abolishing its credit sales and introducing new cash trading.

Yui: In the West in the 18th century, innovation sprang from manufacturing and industry, which later became known as the Industrial Revolution. In Japan, advances during the Edo Period occurred in infrastructure such as logistics which involved transportation, shipping and communications. Up until then, the transport of goods from distant regions was a dangerous proposition that involved putting one’s life at risk. Consequently, apart from a small number of people of the upper classes, people had no concept of sending away for things from distant places. In Japan, where everyday “commerce” and a “merchant” class had not yet come into being, the arrival of a peaceful era and the formation of distribution infrastructure made it possible to order goods anywhere in the country and send them anywhere nationwide, which drove the development of major cities. The population of Edo in the 18th century was approximately 1.2 million, which is quite an astounding number, considering that all of these people were consumers. Recognizing the opportunity that lay at his door, Takatoshi Mitsui of Mitsui Echigoya introduced new mass-retail business with “fixed low prices if you pay cash,” and achieved remarkable success. Sales of items such as clothing up until then were negotiated between the shopkeeper, who took their goods to the customer and negotiated the price; payment for the purchase was then made once every six months under a “credit transaction” arrangement. Mitsui Echigoya, made it possible for anyone to purchase at its store through the introduction of fixed cash price sales. While fabric for kimono (woven silk) was quite expensive, fixed prices enabled the buyer to make purchases with peace of mind. Moreover, exchange was possible if a product had any defects. Fabrics which were sold in single bolt units could also be purchased in units of measurement, and Mitsui Echigoya introduced an on-the-spot service where a kimono of one’s choice could be completed within a day. This was innovation in distribution. As economist Schumpeter stated in one of his books, innovation is accompanied by great friction from surrounding businesses. Echigoya did in fact incur the ill feelings of traditional kimono stores, and consequently suffered for a period. However, Saikaku Ihara, a famous writer at the time, introduced this new form of commerce in Edo in one of his works, stating, “For a long time, we bought on credit yet now we pay with cash,” and Echigoya became widely known among people in general. Likewise, as Schumpeter described, Echigoya earned enormous profits. Subsequently, powerful rivals such as Shirakiya, Hoteiya, Daikokuya and Matsuzakaya appeared one after another and once lucrative profits leveled out. Nevertheless, Echigoya maintained its top status in Edo's clothing business, and even today Chuo Dori where the Nihombashi Mitsukoshi Main Store is located remains a major downtown street of Tokyo that is dotted with large stores.

The Strength of Japanese Innovation

Shirai: As the business of a company grows to an enormous scale, generating new ideas and innovations becomes difficult. In that context, what kind of approach is necessary for creating new things and ideas? Is it correct to assume that the DNA of innovation is steadily being passed on in Japanese companies today?

Yui: From a long-term viewpoint, the market economy in Japan, which developed from the latter half of the 17th century, began to stagnate at the end of the 18th century, roughly one century later. This was, as I noted earlier, when the population of about 25 million reached a level where people were somehow able to make a living and further economic development was not possible. About this time, inventions and discoveries were being made in the West one after the other, and the Industrial Revolution served to further promote development. In Japan, on the other hand, even though the country had arrived at an era when it was necessary to take some kind of measures - either to introduce achievements of the Industrial Revolution from the West or to make significant innovations - Japan’s self-sufficient economy, which had been completed under the country’s closed door policy, allowed little opportunity for spawning innovation. Nevertheless, even amid stagnation changes began to take place little by little, and refined ingenuity and meticulous service became important. For example, for a kimono priced at the same one ryou (an old coin), quality steadily began to improve, thanks to the originality and ingenuity of business owners, as well as the division of labor. Take textile, for example. Since textile involves numerous manufacturing processes, advances in the division of labor were actively promoted which lead to various small innovations.

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Consequently, textile production achieved unique development. The phrase mottainai (what a waste!) was commonly used in the self-sufficient economy of the Edo Period. Originally a religious term, the phrase evolved to mean “avoid waste,” which is the meaning it has retained until today. There is no English expression that equates with mottainai. There is a term “incremental innovation,” and I believe this term applies to development in Japan. On one occasion when I checked this view of mine directly with Dr. Alfred Chandler, an American professor of business history, he concurred with my view, saying that incremental innovation was a characteristic of Japanese innovation and, when continued, yielded the same results as innovation in the true sense. From the viewpoint of incremental innovation, the concept of providing refined or meticulous services in business during the Edo period can be seen as corresponding to this. Unlike in the West, in Japan there are many seemingly insignificant attributes of a product that are considered to be important, such as the fine quality of a fabric or a fabric that “breathes,” and this holds true even today. A long time ago, I heard that when a certain department store ordered in garments of a famous Western brand and offered them for sale, the customers complained that the goods were defective. While it may be considered quite normal for clothing products to have slight differences in color, or to have slight fraying or imperfections around the edges, Japanese consumers are quite particular about the feel, comfort, and physical appearance of products, and stores cannot sell items that do not live up to the consumers’ standards. In the end, this particular department store supposedly commissioned a toprate textile company to rework the garments and afterwards returned them to the racks for sale. This initiative can perhaps be considered a form of incremental innovation. There are many companies in Japan that achieved success in a similar manner through incremental innovation.

How corporate governance is perceived

Shirai: Baigan Ishida, a philosopher of the Edo period, advocated morality in commerce in his teachings Sekimon Shingaku (popularized blend of Buddhist, Shinto and Confucian ethical teachings) in much the same way as the American statesmen Benjamin Franklin did in the latter half of the 18th century, when he advised, “the way to wealth is also the way to virtue.” I believe corporate governance is also concerned with core values in today’s business management. The morality of the merchant is a topic that has been much discussed since the Edo Period, and I wonder how it has been carried over into modern companies.

Yui: Professor Chandler referred to corporate governance simply in terms of “the stakeholders,” saying that everything ultimately came down to returns to shareholders. However, the meaning of stakeholders in English is somewhat different from the meaning of stakeholders in Japan. Fujio Mitarai, Chairman and CEO of Canon Inc., served as the president of Canon U.S.A. Inc. in the past but returned to Japan after the death of his cousin, Hajime Mitarai, who had been the president of Canon Inc. in Japan, and took over after his cousin. When I asked him about the differences in management between the United States and Japan, he said that in the United States company shares sold quickly when dividends fell and, therefore, he was always completely preoccupied with profits and dividends for each quarter. He also said that the labor-management relationship was quite different from that in Japan. In the United States, the weekly wage and monthly pay are established for each geographical region, and the workforce is quickly assembled as needed. However, the situation in Japan is the opposite, and the weekly wage and monthly pay are not established, thereby necessitating methods and consideration of management of employees and their livelihood. Mr. Mitarai told me with a smile that as the manager of a Japanese company in the United States, he had to follow the rule, “When in Rome, do as the Romans do.” As the working hours of Japanese were considered too long, he instructed all of his staff to go home at 5 o’clock in the evening. When I was engaged in the compilation of Canon’s corporate history, I gathered materials at the company during the day, with the idea of working through the night after staff went home for the day to get the manuscript finished but I was also kicked out. Even the company president was not allowed to work overtime. Mr. Mitarai was a man with a very strong sensitivity regarding working hours at a time when they were not considered an issue as they are today. In the case of Toyota, the company did not set up offshore factories for a long time despite being an exporter, and the reason given for this was Toyota’s inability to get a clear picture of what a U.S. factory was like, mainly because it was unable to discern what kind of people the employees working in factories were. Management, in a sense, is just like a love relationship. In the end, everything comes down to the people. What reminded me of the history of Hitachi was the company split that took place in 1956, with Hitachi Metals, Ltd. and Hitachi Cable, Ltd. spun off. Although company splits have become quite commonplace today, at that time it was believed that separating businesses from the main earning entity would be difficult and that it would not be approved by shareholders at the general meeting. After this, the company division became firmly established during the period in which I was living in the United States, and I was asked various questions by Americans concerning the arrangement. I remember explaining to them that the company split in Japan not only strengthened the system of division of business but also enhanced the overall corporate structure, and that it was one of the strategies for achieving globalization through expansion of the company.

Fascinating Meiji business leaders born in the Tempo era (1830 - 1844)

Shirai: You have researched many talented business leaders such as Eiichi Shibusawa, Zenjiro Yasuda, Yataro Iwasaki, and Kihachiro Okura, who were born in the Tempo era and played an active role in the Meiji Period. What can you say about the characteristics of business leaders who spent their youth in the final days of the Tokugawa Shogunate and lived in an era that coincided with the modernization of Japan’s economy? Why do you think so many fascinating business people appeared during this era?

Yui: These people who played an active role in the same era as the Meiji Restoration had not been central figures under the shogunate system of rule, but they were close in age to people like Hirobumi Ito and Kaoru Inoue, and shared various common traits. This era, which can be described as a revolutionary period in Japanese-style management, was a very risky period with a completely unknown future. Business people who survived this era were very vigorous, active, and had strong personalities. In English, there is the descriptive word “idiosyncratic,” which refers to individuality and is not frequently used in Japanese. I believe these business people who led lives that common people could not imitate had idiosyncratic qualities. Their lives were so dramatic that they were quite suitable as subjects of novels and, indeed, the lives of people like Eiichi Shibusawa were featured in works a number of times. Many of these people faced life and death situations over and over again. For example, during the Meiji Restoration, Kihachiro Okura risked his life to purchase guns and began trading immediately after the restoration. He took numerous risks and ventured far to the West with little knowledge or information.

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Yataro Iwasaki actively recruited stalwart feudal retainers of the Tosa domain, who were not included in government dominated by the Satsuma and Choshu domains, and established the audacious Mitsubishi Shokai trading company. Although the government provided a certain amount of support, as the forerunners of their era, these men leapt into the great unknown of the world and took up challenges fraught with risks and dangers, and consequently, they were rewarded with massive profits. The people that subsequently took the place of these business people, who played an active role in the early years of the Meiji Period, were people who were born in the last days of the Tokugawa Shogunate and thereafter. These were people who had high aspirations and outstanding abilities as well as a sound academic background. Those who followed in the footsteps of people like Hikojiro Nakamigawa of the Mitsui zaibatsu (business conglomerate), the leader of modernization, were business entrepreneurs who created the first academic career-based society. While they were entrepreneurs of the Meiji Period, they were different from business people born during the Tempo Era. One notable characteristic of many of the business people born immediately before or after the Meiji Restoration is that they were entrepreneurs who had aspirations of success in their careers and had acquired academic qualifications in Japan and overseas.

Shirai: When we shift our focus from corporate leaders to the actual companies themselves, we find that not only zaibatsu groups like Mitsui and Sumitomo but also many companies among Japan’s large corporations today established their businesses during the Meiji Period. How do you view the enduring existence up to the present of companies that established their businesses during that period?

Yui: There are a number of points worthy of mention, but here I would like to point out changes in ideas about the continuation of a company as a single unit. The idea of business continuation existed from the Edo Period, and businesses like Mitsui Echigoya were known to have placed continuation of the family business above profit. Times changed and, as I mentioned earlier, the people born during the Tempo era, who played an active role during the period when many companies came into existence, did not necessarily view companies as entities that would exist forever. In the early years of Meiji, there was a view that the life cycle of a company was 10 or 20 years, and even company articles of incorporation at the time foresaw the company’s existence as being around 20 years. This was a capitalistic point of view like that which existed in the West. There was also another point of view, that is, that a business should make profits up to a certain level and should be disbanded once it ceased to be profitable, or that the company should be quickly folded after making profits, and the remaining assets should be distributed as returns to shareholders. However, around the time the Japanese-Russo War ended, there were no companies that stated in their articles of incorporation the number of years a company should exist. Like family businesses of the past, the understanding that a company should be maintained and continued, and that its continuation depended largely on the abilities of the manager began to spread. In the Taisho period, Kamekichi Takahashi, an economic analyst and economic history researcher, described entrepreneurs who sold off companies in his book Kabushiki gaisha bokokuron (Joint Stock Companies are Ruining the Country) (1930, Banrikaku Shobo), and scathingly criticized them. The general public did not have a good image of these business people, and the idea of giving priority to dividends simply because one owned the company, or selling off a company at will was considered the basest of acts and rocked the very foundations of Japan’s lofty principle of corporate governance based on the principle “a company is people.” For zaibatsu like Sumitomo and Mitsui, maintaining large organizations became difficult from the beginning of the Taisho and Showa periods, but they were able to continue to some extent with the support of the strength of public sentiment and their employees. The zaibatsu business combines restricted dividends and placed importance on employment. However, during the period of the so-called Showa Depression, which occurred from 1930 to 1931, the zaibatsu faced an uphill battle in maintaining employment. The heads of these business conglomerates including Mitsubishi’s Koyata Iwasaki came under pressure to cut back employment and were at a loss as to what to do.

Hitachi’s founder establishes domestic production

Shirai: Hitachi was established as a company in 1910. The founder, Namihei Odaira, worked at the Tokyo Electric Light Company (now the Tokyo Electric Power Company) prior to establishing the company. I believe he was a gifted engineer who designed a complete system of power generation equipment when a new power station was being established. Hitachi traces its beginnings as a company to the Hitachi Mine motor repair plant at the Kuhara Mining Station, which was located in the village of Hitachi (now the city of Hitachi) in Ibaraki Prefecture. Thereafter, from prewar industrialization to postwar reconstruction, Hitachi had a history of growing in tandem with the development of the Japanese economy. How do you see Hitachi, Ltd. in the history of business management in Japan?

Yui: Namihei Odaira, who founded Hitachi, graduated from the Department of Electrical Engineering in the School of Engineering at Tokyo Imperial University (now the Faculty of Engineering at the University of Tokyo). He was more of a high-spirited, ambitious student than a student with an excellent academic record. He was very passionate, possessed what we call a “Yamato spirit,” and is said to have firmly set his sights on developing domestic production after observing that all machinery in the electric power business consisted of products from either Great Britain or the United States. In fact, I believe he was the first person to establish technologies for Japan’s heavy industries. For his employees, Namihei Odaira singled out people with backgrounds in technology as human resources who would take on the important role of product development in the future. He was the first corporate manager to actively employ graduates from the Faculty of Electrical Engineering at Tokyo Imperial University. Until then, the majority of those graduates either went on to become scholars or find employment at government-owned corporations. As a general rule, companies did not make efforts to recruit such personnel. At that time, it was general practice to invite foreign engineers by paying them high wages, and there were some companies that sent their employees to Great Britain or the United States to study there for a certain period. However, companies like Toyobo, Mitsubishi Heavy Industries, and Mitsubishi Shipbuilding seemed to be the exceptions in employing graduates from the Faculty of Electrical Engineering. After graduating from the same faculty, Namihei Odaira established Hitachi, Ltd. in an era when founding companies was unusual, and the news that a small local company employed a large number of graduates from the Faculty of Electrical Engineering at Tokyo Imperial University became the talk of the town.
Zenjiro Yasuda, who established the Yasuda zaibatsu, launched a nail manufacturing business during the same period but failed because he was unable to secure capable engineers. It was customary for high-salaried engineers from overseas who came to Japan on work contracts to return to their home countries once their contract ended, regardless of what the situation was at the factory where they worked. Therefore, in addition to inviting foreigners to Japan, these companies sent talented Japanese to the United States to acquire skills. However, there was no way that technologies which were corporate secrets would easily be shared with these young engineers, and the initiative ended in failure. Against this backdrop, Hitachi undertook the task of domestic production, and was among the first companies to actively employ talented young graduates from the faculties of electrical engineering.

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Shirai: Hitachi’s first product was a five-horsepower induction motor. As you just mentioned, securing engineers was very important to manufacture domestic products. At the time of its establishment Hitachi was located in the village of Hitachi in Ibaraki Prefecture. To attract engineers from cities, I understand that the company arranged generous fringe benefits which included company housing, and exerted significant effort in securing employees.

Yui: I believe there were two reasons for employing graduates from the Faculty of Electric Engineering at Tokyo Imperial University. The first was their foreign language ability. At that time, the era of large corporations had already arrived in the West, and numerous papers and information journals were being published. Electrical engineering graduates had studied German as a second foreign language and had competence in reading English and German. Therefore, it was possible to send away for books and journals from overseas and introduce into the company knowledge of industries, culture, and the latest technologies from overseas.
For example, Takuma Dan of Mitsui Miike Coal Mining, while demonstrating his abilities as an engineer, was further deepening his study of technologies that he learned about at MIT in the United States through English and German books. When a serious water discharge problem occurred at the Miike coal mine, he obtained information from academic books and traveled all the way to Great Britain to bring back Davey pumps,* which were the most advanced pumps at the time but were not yet in use. As a result, he completely resolved the problem.
The second reason was wages. This was an era when engineers received higher pay than office workers. Faculty of electrical engineering graduates received higher wages than faculty of law graduates, and these engineers, who also had a sense of mission about achieving domestic production, were committed to their research and development and pushed steadily ahead with development, so there was no reason for them to leave their company. For example, after Toshiba obtained a license from its business partner GE to produce the MAZDA lamp, a world-class invention, Japanese engineers began producing the lamps at Toshiba’s Shibaura factory. They applied Japanese ingenuity to address the problem of the lamp light being too harsh, and succeeded in creating a light bulb for home with softer light thanks to the use of frosted glass. This light bulb became a major success.
I believe that Hitachi’s Namihei Odaira, as an engineer, had a strong determination to successfully produce British and American products in Japan without fail. It can be said that he was a trailblazer in a new generation of business managers who had technological competence. It was because of its emphasis on technology that Hitachi was able to achieve significant growth as a company. Ichiro Ishikawa, who later became the first chairman of Keidanren (The Federation of Economic Organizations), was a junior fellow student of Namihei Odaira from Tokyo Imperial University’s Faculty of Electrical Engineering, and he had a profound respect for Namihei Odaira as an industrialist who pioneered the electrical industry in Japan.

*
The Davey pump is a type of pump that drives force pumps at the bottom of mine pits while more expensive steam engines are installed outside of the mine.

Common traits of enduring companies

Shirai: Up until now, you have spoken about the history of business management in Japan. If we consider companies as individual entities with their various corporate cultures, what kind of traits do you believe enduring companies that continue to thrive and develop for long periods share?

Yui: First of all, there are no companies that simply endure for a century in a thriving state. The larger the company, the larger its ups and downs will be. In other countries, sales and acquisitions undertaken at the judgment of management when a company goes under are not uncommon. Many people who are considered outstanding business managers in Europe and the United States honed their acumen in business management through mergers and acquisitions. I guess President Trump would be included in these. Elbert Henry Gary, who developed U.S.

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Steel into a major global company at the beginning of the 20th century, is also an individual who achieved notable success through mergers and acquisitions. He had a different career history from general business managers, and although he was not an engineer, his skills in executing mergers and acquisitions were outstanding, so much so that he inadvertently promoted the image of an outstanding business manager as one who conducts M&A. Although M&A are not as widely practiced in Japan as in Western countries, when companies grow significantly in scale and become well-known, they somehow cannot escape from contracting the “big company” disease. In Japan, companies have a seniority-based system, and the more prestigious a company is, the less apt employees are to leave. Therefore, if companies continue with their customary practices in the same manner as in the past, they are doomed to weaken.

Shirai: I guess you mean that they will lose dynamism, is that right?

Yui: Exactly. This is particularly so for companies with superior financial status, where both management and employees tend to believe that their existing methods of running their business are adequate. They cannot avoid losing dynamism. There is the interesting example of Kirin Beer and Asahi Beer in the past. From the 1970s to 1980s, Kirin was a bluechip company that boasted the country’s top sales of beer. In terms of its financial affairs, it was debt-free and provided shareholders with high dividends. Asahi Beer, on the other hand, had considerable debt and poor business performance. At the beginning of the 1990s, however, their business circumstances reversed, and Asahi became the rising star while Kirin declined. From a solely financial perspective, Kirin had been considered an outstanding major company unequaled in excellence. Of course, the employees thought so as well. To rise to an executive position at Kirin, an employee had to be over the age of 50, while to take up the position of executive managing director, an employee had to be at least 60. When I met executive officers of the company in the past to compile their company history, they were in fact all elderly people. When a company becomes overconfident about its financial status, it loses any sense of impending crisis. Since Kirin had a history of success and was well-endowed with human and financial resources, it attempted a comeback by launching a new whiskey business but that ultimately failed. Canon is another example. After its founder passed away it fell upon hard times for a period of about 10 years until Ryuzaburo Kaku rebuilt the company. Corporate management moves in cycles. The handling of business when it is at a low point in the cycle is very important, and the circumstances where companies are forced to review conventional arrangements such as its seniority and employment systems may come up within 10 or 20 years. I believe companies should consider such times of “review” as stages in their development.

Compiling a corporate history

Shirai: Dr. Yui, you have been involved in compiling the corporate histories of numerous companies. As a final question, please tell us what aspects you focus on when you are compiling a corporate history.

Yui: A corporate history is a statement of validation, and it must be based on facts. For example, in Great Britain, I understand that when employees compile a corporate history, the company has an academic person check the manuscript to ensure integrity is maintained. In the United States, on the other hand, there is a theory that corporate histories written by a third party have more vitality. When employees write corporate histories, they tend to simply praise their companies to the skies. In Korea and China, there are volumes upon volumes of corporate chronicles but for the most part these are merely tales of praise and, needless to say, they are useless in research. I do not believe they are particularly useful for the future of a company either.
As a researcher of Japanese business history, when I compile a corporate history, I consciously position the leadership of the business entrepreneurs and the transition of the organization as the core of the work. It has also been my practice to incorporate factors such as growth issues and conditions of the surrounding environment, and to cover areas such as marketing, financing, and sales sequentially along with the central plot. In the United States, there are some corporate histories that focus solely on decision-making, but I believe the surrounding environment at the time decisions are made is also important. Recently we can see an increasing number of corporate histories that incorporate initiatives in environmental issues and social welfare.
Unfortunately, there is no particular pattern for a corporate history. In Japan, many corporate histories are written from the viewpoint of the business history but they seem to be divided into those aimed at highlighting corporate glory and fame, and those aimed at preserving records. In the West, where there is a long tradition of recording the lives of outstanding individuals, corporate histories to a great extent are written to pay tribute to certain people’s achievements. On the other hand, more than a few corporate histories are carefully planned by researchers in a step-by-step fashion. When I was studying in Great Britain, one British student pointed out that there were many corporate histories published in Japan and asked me whether there were differences in them as literary works. When I explained that many companies tended to publish their corporate histories at the time of some commemorative event in their history, the student seemed to understand. I think Japan’s view on corporate histories is accepted overseas.
There are many excellent corporate histories in the United States, but the majority are from the past and very few histories are being published at present. I do not know why; perhaps compiling histories today is a more difficult task. I believe the trend reflects the cycle of capitalism, which I touched upon earlier. When a company grows to a certain stage, priority is given to financial affairs, and corporate philosophy tends to fade into the background. If we look back at the past, the majority of companies have been like that.

Shirai: Ultimately, however, a company needs to return to its corporate philosophy and corporate culture.

Yui: That is correct. I have heard that at golf courses in the United States, the golfers are clearly divided into two groups: the business entrepreneur types that are focused on making money and the more cultural types. Even the clothing they wear is supposedly different, so these groups can be identified at a glance. It is dangerous when people start controlling everything with a financial focus. Financial capital tends to deteriorate into a vicious cycle of “profit for the sake of profit” rather than for the sake of industry, and loses connection with “employment.” When that happens, it is apt to become a “social evil.”

Shirai: After all, “the way to wealth is also the way to virtue.” While profit is important, no good comes of business without virtue.

Yui: In the past and in the present as well, I believe it is an unavoidable part of a market economy. As a company grows in scale, so too does its responsibility and the requirement for it to exercise morality. This is even more so in Japan where the idea that “a company is people” is highly valued. The people who head organizations in particular must have high morals. In Japan, employees who have been with a company from the beginning of their careers usually occupy the top positions of the company and therefore exert a strong influence. External checking functions conducted by third parties do not work very well compared to those in other countries, and therefore, people who occupy the top positions must have a higher consciousness and commitment to defending morals. I am sure that business leaders in Great Britain and in the United States also realize that they must have a strong moral compass. During the 1960s, discussion of the social responsibility theory of business came to the fore, and again at the beginning of the 1980s, it was discussed from an academic perspective. Furthermore, responsibility in the form of corporate governance has also been widely discussed in recent years.

Shirai: Thank you very much for joining today’s discussion. The experiences and knowledge you shared with us have been quite elucidating.

Editor's Postscript

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In this interview, Dr.Tsunehiko Yui, Japan’s foremost expert in Japanese business history, spoke about what companies today should learn from history at a time when the business environment is dramatically changing. I believe that the “incremental innovation,” which supported the success of Japanese companies, and the dynamism companies require to continue existing in the future have many elements which are relatable to the present. The history of a corporation collapsing even as it prospered due to the loss of its corporate culture and philosophy was quite thought-provoking. During the interview, we were also reminded that company managers need to engage in business with a constant awareness that “a company is its people.”