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Downsizing and the deinstitutionalization of permanent employment in Japan

Christina L. Ahmadjian; Patricia Robinson

Title:
Downsizing and the deinstitutionalization of permanent employment in Japan
Author(s):
Ahmadjian, Christina L.
Robinson, Patricia
Date:
Type:
Working papers
Department:
Center on Japanese Economy and Business
Permanent URL:
Series:
Center on Japanese Economy and Business Working Papers
Part Number:
189
Publisher:
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Publisher Location:
New York
Abstract:
This study examines the process by which the Japanese permanent employment system was increasingly deinstitutionalized and replaced by downsizing among publicly listed companies in Japan between 1990 and 1997. We found that although economic pressure triggered downsizing, social and institutional pressures shaped the pace and process by which downsizing spread. The greater a firm's legitimacy and visibility, and the more it depended on organizations and institutions that supported the institution of permanent employment, the more hesitant it was to abandon that practice, even when it had much to lose financially. Specifically, large, old, and high-reputation firms were resistant to downsizing at first, as were firms with high levels of human capital, as reflected by high wages. In contrast, firms with high levels of foreign ownership were more likely to downsize. We found that these social and institutional pressures, however, diminished as downsizing spread across the population. We argue that this is due to a "safety in numbers" effect. As downsizing became more prominent, the actions of any single firm were less likely to be noticed and criticized.
Subject(s):
Economics, Commerce-Business
Item views:
215
Metadata:
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