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Open Access Publications from the University of California

Inside the Castle Gates: How Foreign Corporations Nagivate Japan's Policymaking Processes

  • Author(s): Kushida, Kenji Erik
  • Advisor(s): Vogel, Steven K
  • et al.

Multinational corporations (MNCs) are at the heart of today's global economy, but their effects on the politics of advanced industrialized countries have not been studied systematically. This dissertation analyzes the case of Japan, a country most likely to reveal foreign MNCs' influence. Japan developed for most of its history with an extremely low presence of foreign MNCs, but it experienced a dramatic influx from the mid-1990s, particularly in long-protected sectors at the core of its postwar development model of capitalism.

The dissertation explains an observed divergence in the political strategies of foreign MNCs in Japan--disruptive challenges to existing policymaking processes and norms of government-business interactions, versus insider strategies, in which MNCs worked within established organizations and prevailing modes of policymaking.

The core contention is that the corporate "clock speeds" of MNCs strongly shape their policy strategies. Clock speeds, the relative rate of change in aspects such as product introduction, product processes, and corporate organization, differs systematically across sectors. By analyzing policy cases within the banking and securities, insurance, telecommunications, and pharmaceuticals sectors, this study shows that MNCs with faster clock speeds tend to pursue disruptive strategies, while MNCs with slower clock speeds tend to pursue insider strategies.

This dissertation also shows how changes in Japan's model of capitalism enabled the influx of foreign MNCs and expanded MNCs' opportunities to exercise voice. Through an analysis at the national, sectoral, and firm levels over time, this study shows how Japan's post-bubble political dynamics created new possibilities for foreign entry and voice. The new opportunities to exercise voice were taken advantage of by fast clock speed MNCs, while slower clock speed firms benefited from existing policy processes. The dissertation finds that MNCs can simultaneously influence policy processes along two different time horizons for cause and effect. While disruptive strategies act as exogenous sources of change, delivering shocks to existing arrangements and processes, insider strategies can lead to incremental, but potentially transformative, change over time.

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