Market Characteristics, Intra-Firm Coordination, and the Choice of Human Resource Management Systems: Evidence from New Japanese Data

This paper explores theoretically and empirically potentially important yet often-neglected linkage between task coordination within the organization and the structure of organization and bundling of HRMPs (Human Resource Management Practices). In so doing, we also provide fresh insights on the interplay between the firm’s technological and output market characteristics and its choice of HRMP system. We begin with constructing a team-theoretic model and derive three task coordination modes: vertical control, horizontal coordination, and hybrid coordination. The model provides rich implications about complementarity involving task coordination modes, HRMPs, training and hiring, and management strategies, and illustrates how such complementarity is affected by the firm’s technological and output market conditions. Guided by the theoretical exploration, we analyze unique data from a new survey of Japanese firms which provide for the first time data on newer forms of HRMPs adopted by Japanese firms (such as cross-functional offline teams and self-managed online teams). One novel finding (which is consistent with the theory) is that the adoption of both self-managed online teams and cross-functional offline teams usually arises in firms with shop-floor committees while the introduction of cross-functional offline teams alone often takes place in firms with joint labor-management committees. We also confirm implications from our theory that firms in more competitive markets are more likely to adopt both types of teams while firms facing more erratic price movement tend not to adopt self-managed online teams (JEL: M5, L2, J53, D2) *This research was assisted by grants from the Nihon Keizai Kenkyu Shorei Zaidan and Nihon Sozo Kyoiku Kenkyu Jyo. An earlier version of the paper was presented at the Trans-Pacific Labor Seminar, UC-Santa Barbara, March 9-10, 2007. We benefited greatly from comments made by the conference participants. We are grateful to Kanichiro Suzuki and the Tokyo Institute of Technology for administering the Organization and Human Resources Survey of Japanese Firms. **Kato is W.S. Schupf Professor of Economics and Far Eastern Studies, Colgate University; Research Fellow, IZA Bonn; and Research Associate, Center on Japanese Economy and Business (Columbia Business School), Tokyo Center for Economic Research (University of Tokyo), and Center for Corporate Performance (Aarhus School of Business). The current version of the paper was completed while Kato was Velux Visiting Professor at ASB (Aarhus School of Business), and Kato is grateful for their hospitality. Hideo Owan is Professor, Graduate School of International Management, Aoyama Gakuin University; and Visiting Professor, Institute of Economic Research, Hitotsubashi University, Japan (email: [email protected]). Kato is the corresponding author: Email; [email protected]. Address: Department of Economics (Persson 222), Colgate University, 13 Oak Drive, Hamilton, NY13346, USA. Phone: 315-228-7562 Fax: 315-228-7033