Aggregate Concentration, Turnover, and Mobility among the Largest Manufacturing Firms in Japan

• Published date: 01 December 1987
• Author: Tomio Iguchi
• DOI: 10.1177/0003603X8703200404
• Date: 01 December 1987
• Subject Matter: Economic

The Antitrust Bulletin/Winter 1987

Aggregate concentration, turnover,

and mobility among the largest

manufacturing firms in Japan

BY TOMIO IGUCHI*

I.

Introduction

939

Economists

and

policy makers have long been interested in

aggregate concentration measures

of

economic power.

The

level

of

aggregate concentration is measured by

the

share

of

the

economic activity

that

is attributable to

the

largest firms. The

relevance

of

aggregate concentration is a subject

of

debate in

economic literature, especially in the area

of

industrial organiza-

tion.

The

controversy focuses on whether there is any meaning

attached to concentration measures

that

are

not

related to indi-

vidual markets.IPolitical

and

sociological concern over aggregate

concentration as the index for economic democracy was rising

throughout

this controversy. The economic importance

of

aggre-

Ryukoku University, Kyoto, Japan.

AUTHOR'S NOTE: Iam grateful to W. S. Comanor, A. Grabel, S.

Akutagawa, the editor

of

this journal, and anonymous referees,

for

helpful comments and suggestions.

Of

course, the remaining errors are

solely my own responsibility.

1See, e.g., D. Duke,

"Trends

in Aggregate Concentration," FTC

Working Paper no. 61 (June 1982), pp. 1-2.

© 1988by Federal Legal Publications. Inc.

940 The antitrust bulletin

gate concentration also became increasingly prominent with the

emergence of a conglomerate merger wave or enterprise diversifi-

cation. These factors obscured the traditional market boundaries

and dimmed the concept

of

market concentration. Aggregate

concentration has become requisite as a complementary concept

to measure the degree

of

competition in the market:

In Japan, where there are interlocking financial and manage-

rial ties among firms, aggregate concentration is a more impor-

tant measure

of

economic power than in other countries. The

close interfirm relationship, consisting of manufacturing and

financial firms and general trading companies, is called a "busi-

ness group" in Japan.' There are four Zaibatsu (literally, wealth

clique)

groups-Mitsui, Mitsubishi, Sumitomo, and Fuyo

groups-

and two non-Zaibatsu principal bank

groups-Sanwa

and

Daiichi-Kangyo groups. These are known as

"the

six major

business groups." Each group has its own presidents' club. The

member firms of the six major business groups number 182

companies as of March

1982.

These firms are tied together by

means of reciprocal shareholding, lender-borrower and buyer-

seller relationships, and reciprocal hiring of executives, etc.'

The findings

of

the Federal Trade Commission and Bureau of

the Census indicate that aggregate concentration has remained

almost unchanged in the United States manufacturing sector

2See, for studies of business groups in Japan, R. E. Caves and M.

Uekusa, Industrial Organization in Japan (The Brookings Institution,

1976), pp. 59-87; A. Goto, "Business Groups in a Market Economy,"

European Economic Review 19 (September

1982):

53-70; and

I.

Naka-

tani,

"The

Economic Role of Financial Corporate Grouping," in The

Economic Analysis

of

the JapaneseFirm, ed. M. Aoki (North-Holland,

1984), pp. 227-58.

3In 1981, 73 percent of the number of affiliates

of

the six major

business groups employed executives (directors and auditors) dispatched

from other affiliates

of

their own groups. In 1981, 20 percent

of

the to-

tal loans of the member firms of the six major business groups was com-

posed of loans from their groups' financial institutions. See Japanese

Fair Trade Commission, On the Situation

of

Business Groups (1983).