KEIRETSU NETWORKS IN THE JAPANESE ECONOMY - A DYAD ANALYSIS OF INTERCORPORATE TIES

We analyze the organization of keiretsu networks in the Japanese economy using data on the top 50 financial firms and 200 industrial corporations. Control relations between pairs of firms are modeled as a function of bilateral exchange relations and other firm- and dyad-level covariates in accordance with resource dependence and transaction cost theory. Firms with financial and commercial connections develop quasi-administrative ties through cross-shareholding and director transfers. Keiretsu networks have two sides. (1) horizontal relationships of mutual support and defense among large established firms as indicated by reciprocity of control and exchange, homophily among "big-six" affiliates, and symmetry in the effects of purchase/supply transactions on control; (2) vertical structures of asymmetric exchange and control between financial firms and industrial firms, large firms and small firms, and "big-six" firms versus independent companies.