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Co-operative capitalism in Japan

Dr George OlcottJapan’s recovery from the widespread death and destruction wrought by the earthquake and tsunami in March is defying predictions

Japan is recovering remarkably quickly from the disaster in March 2011 following an earthquake and tsunami that killed thousands, destroyed towns and villages and wrecked a nuclear power plant.

Nearly six months on, the country’s industrial production has actually risen when many predicted that the disruption to all-important supply chains would last at least until the end of the year if not longer.

Cambridge Judge Business School Fellow Dr George Olcott attributes the speed and success of recovery to the unusual brand of ‘co-operative capitalism’ that underpins the close and resilient Japanese business system.

He says co-operative capitalism revolves around the supply chain, industrial groupings and a vertical hierarchy that exists between the assemblers, the manufacturers and their related suppliers supported by cross-shareholdings.

“The idea that companies can take a much broader and longer term holistic view of who their customers are, who their suppliers are and who their competitors are, means that in the situation they had in March and April they were instinctively willing to co-operate, even with competitors, in order to get a very disastrous situation resolved by pouring in huge resources to help third parties.”

Dr Olcott feels that the lessons learned from Japan’s recovery in the last six months have what he calls ‘strong applicability’. However, there are areas of co-operative capitalism that are very difficult for Western firms to copy.

“The instinctive reaction to reconsider competitors as friends is not so easy for a Western company to emulate. However, in constructing business continuity plans, I feel that it is wise to rethink who your competitors are and rethink their role and potentially look to placing competitors in your business plans for the future where they could come on board in the event of problems. Then, I think there is tremendous potential for situations of this kind where tragedy and disaster strikes so suddenly – it could happen anywhere.”

Dr Olcott is also professor at the University of Tokyo’s Research Centre for Advanced Science and Technology.