Failures of Intermediate Forms: A Study of the Suzuki Zaibatsu

Abstract

This paper examines the technical and institutional factors leading to the 'fail ure' of a zaibatsu — a pre-World War II Japanese form of conglomerate organ ization that combined market and hierarchical elements. It suggests that coor dination and legitimacy problems can be particular threats to the survival of some intermediate organizational forms. Drawing on historical and archival materials, the paper chronicles the collapse of the Suzuki zaibatsu, a business empire with sales that at one point equalled 10 percent of Japan's GNP. Suzuki's coordination problems and resource misallocations were the outcome of three factors: (a) the lack of mechanisms to coordinate relations between operating units and the holding company, (b) the failure of the 'owners', in this case a merchant family, to correct managerial inadequacies and, (c) the parallel failure of the group's 'organ bank' to discipline managers. Suzuki's legitimacy problems included a shortage of support from political parties, the bureaucracy and the media. This jeopardized Suzuki's ability to compete with other zaibatsu for public resources and gain institutional support that might have allowed survival. The implications of the case study for future research on the 'failure' of intermediate organizational forms are discussed.