MMRCDISCUSSION PAPER SERIES

No. 268

Tendency toward Specificity in Transactions and Compliance to
Hierarchy: A Report on the Interviews with Japanese Automotive
Suppliers in March, 2009
Jianxi Luo
Engineering Systems Division
Massachusetts Institute of Technology
Heejin Kim
Manufacturing Management Research Center
University of Tokyo
July 2009

東京大学ものづくり経営研究センター
Manufacturing Management Research Center (MMRC)
Discussion papers are in draft form distributed for purposes of comment and discussion. Contact the author for
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Tendency toward Specificity in Transactions and Compliance to
Hierarchy: A Report on the Interviews with Japanese Automotive
Suppliers in March, 2009
Jianxi Luo
Engineering Systems Division
Massachusetts Institute of Technology
Email: luo@mit.edu
Heejin Kim
Manufacturing Management Research Center
University of Tokyo
We would like to express our sincere appreciation to the interviewees for theircollaboration

Abstract
This paper documents, summarizes and analyzes the results of interviews with two
typical Japanese automotive suppliers with different business focuses. The shared
responses from the interviews include: the emphasis on trust and collaboration for
product quality and cost instead of new product development for new customers, thepursuit for specificity in products and transactional relationships, perceptions on thematurity of the automotive industry, and the regular tier structure in automotive supply
networks. All these issues are intertwined and lead to the lock-in of the current
automotive industry landscape. The complex integration of many components and partsin an automobile drives the firms to pursue specificity in design and production process,which improves quality and cost in order to compete. Such pursuit of specificity forhigh-performance/high-quality integration has emphasized deep relationships and trust in
existing transactional relationships, but limited the innovation incentive and innovation
capability accumulation, and made the firms either unwilling or unable to diversify theirproducts and transactional relationships with new customers in new market niches. Over
years of evolution, automotive suppliers have become compliant to their positions in thesequential hierarchy of assembling from raw materials to components/parts, systems andthe entire vehicles. The interviews have provided qualitative insights that may
complement and support the related quantitative supply network analysis using archival
data, in order to further our understandings on industry architectures.

Background
This paper reports, summarizes and analyzes our interviews with theexecutives/managers of two Japanese automotive suppliers, in the first week of March,
2009, at the support of the Manufacturing Management Research Center of University ofTokyo. One of the suppliers is an automotive system supplier, and the other is a metalmaterial supplier.
The purpose for the interviews is to collect micro evidence at the firm level on how
individual firms make local decisions on the transactional links with other firms on both1

customer and supplier sides, e.g. product strategy and procurement strategy, which theninfluence the overall macro industry architecture. We managed to screen the factors,
including technological, economic and cultural ones, which the firms have or have notconsidered when making the decisions on creating and managing transactional links with
its corporate customers and suppliers.
The evidence collected from the interviews is expected to supplement the findings fromour previous analysis using historical archival data on the Japanese manufacturingindustries in 1993, industrial network model, as well as a hypothetical theory on how thenature of technology (e.g. energy processing technologies used in an automobile) may
influence the industry architectures 1 of a production sector (e.g. automotive production
sector). Particularly, preliminary analysis has shown that the Japanese automotive
production network in 1993 was highly hierarchical (compared to the electronics sector).
We hypothesize that it is the high-power nature of an automobile system that promotes
mutual specificity in automotive components, production assets, and transactional
relationships, which further give rise to hierarchical industry architecture (Luo, Whitney,
Baldwin and Magee, 2009).
In addition, we also intended to identify the managerial value of our research on industry
architectures for individual companies via systemic discussions, we tried to inspire theinterviewees (company executives) about how industry architectures and dynamics, aswell as the underlying forces and fundamental rules, would affect an individualcompany’s strategies and performances. In nature, firms in the middle of the value chains
can only observe its direct customers and suppliers, with ignorance of the big picture ofindustry architectures.
For these purposes, we managed the interview questions to fall in three major areas:
1) General questions on how the procurement and product strategies are made in thecompany. The discussions are related to how the company manages organizational
structure, procedure and people to make related decisions.
2) Questions about procurement strategies and suppliers. We asked about the portfolio ofpurchases (what to buy), and the pattern of purchasing linkages with their suppliers(whom to buy from). We also sought for their decision rules (e.g. technology, cost) on
their strategic choices about purchases and relationship with suppliers. Furthermore, wetended to confirm their perceptions about hierarchy in supply networks and specificity inthe relationships with suppliers.
3) Questions about product strategies and customers. We asked about the portfolio of
products (what to sell), and the pattern of sales linkages with their customers (whom tosell to). We also sought for their decision rules (e.g. technology, revenue) on theirstrategic choices about product/ innovation and relationships with customers.
Furthermore, we tended to confirm their perceptions about hierarchy in supply networks
and specificity in the relationships with customers.

1

Please see Jacobides, et al (2006) for the definition of industry architectures and its importance for bothacademic research and business practices.

2

In the later sections, we first document the interviews as detailed as possible, even morethan the need of our own research. Not all parts of the interview discussions fit closelywith the interview questions, but we still document them for possible interests of otherresearchers. Then, the most impressive observations, from which we draw the title of thispaper, are analyzed and summarized in the concluding section.

Company A
Jianxi Luo interviewed Mr. A, the executive officer of marketing and sales division of amajor Japan-based manufacturing company engaged in the manufacture and sale ofaluminum and aluminum alloys, copper and copper alloy products. The interview was
conducted on March 2, 2009, and was accompanied by Ying Li, master student from
Yokohama National University.
Company A’s products are used in cans, caps, foils, printing, heat exchangers,
automobiles, room air conditioners and aluminum materials for electrical equipment. The
company offers its products to domestic and foreign can manufacturers, automobile andparts manufacturers, companies of chemical and electricity industries. Figure 1 below
was drawn by Mr. A during the interview. The largest portion of production of thiscompany comes from aluminum materials for cans.

Can Stock

Transport machine&Transportation Foil Stock Lithographic Coilenvironment

Other

Figure 1. Product portfolio of company A (courtesy of Mr. A)

We tried to identify the company’s transactional relationships with other firms in theautomotive supply network in Japan. Mr. A provided some examples of the company’s
suppliers and customers. The company purchases raw aluminum mainly from foreigncommodity markets like LME (London Metal Exchange), originally from major refining
companies, including Alcoa and Rio Tinto Alcan. Company A processes the raw
aluminum into materials by rolling and shoving, and then sells aluminum sheets for auto
body to automotive manufacturers, radiator fin to cooling system suppliers, and forgedparts for automobile suspension to suspension suppliers. Company A seems to locate at
the bottom portion of the automotive supply chains, but it has a broad spectrum ofcustomers on multiple different tiers. Mr. A drew Figure 2 for us to demonstrate theposition of company A on the automotive value chain. The automakers, including Toyota,
Nissan and Honda, are its customers of aluminum materials.

3

car company

primary
subcontract

second tiersubcontractor

third tiersubcontractor

primary
subcontract

second tiersubcontractor

third tiersubcontractor

subcontract

second tiersubcontractor

third tiersubcontractor

second tiersubcontractor

third tiersubcontractor

third tiersubcontractor

Company A
Figure 2. Position of company A on the automotive supply chain (courtesy of Mr. A)

Mr. A agreed that there is clear tier structure in the automotive supply chains. He
observes the transaction patterns around company A are almost hierarchical, and there
are many transactions with automakers, who are at the top of the hierarchy. In particular,
Mr. A confirmed that the company clearly knows where each of its products is going to
be used at the end of the supply chain, and customizes specifically for each specific use.
They think having that kind of specificity is important for the quality of their products,
and strive to improve that specificity by working closely and collaboratively with thecustomers.
Mr. A perceives that the businesses of company A, including automotive, are all in asaturated stage. It is said that aluminum industry of Japan has stable technology base andindustry structure, as well as excess supply and competition. He emphasized that there isno “innovator’s dilemma” (Christenson, 1997) in such heavy industries as aluminum/raw
materials/chemical, because the possibility for disruptive technologies (Christenson,1997) to take place is limited. The R&D in company A is mainly to improve the QCD(Quality, Cost and Delivery) for their existing products, production processes andtransactional relationships with customers.
Being asked about where to invest given limited resources, his answer was that investing
in QCD and mutual trust/relationships with customers is essentially more important thaninvesting in radical innovation (Henderson and Clark, 1990), e.g. new products for new
demands from new customers in new market niches. If there is so-called “innovation” inthe company, it actually represents incremental innovations (Henderson and Clark, 1990)
that sustain and improve the company’s current business landscape. Investment that
expects radical innovations for new demands/new customers in new market niches will
become very likely a waste, simply because the industry is quite stable. We then further
asked about the company’s strategy in response to the development and possible
penetration of electrical vehicles in the future. He told us that his company is watching
the development of the electrical vehicle market, and preparing battery-related products.
It may become a big business in the future, but is still small at present.
Generally, Mr. A perceives “excess competition based on price” as their major risk for
future, and the main strategy to deal with this is strengthening the relationship and trustwith customers by continuously improving their QCD and providing solutions tocustomers’ problems. When asked about potential product portfolio change, he answered
that, due to this stagnant nature of the industry and the competitive advantage of low-cost4

low-quality competitors (e.g. competitors located in low cost countries, such as China),
their plan is to shift the product portfolio from commodity products to highly quality
products. He confirmed that they have little incentive to innovate new products for new
demands in new markets, but addressed the company’s focus of sustaining thecompetitiveness within current markets or industries by strengthening the trust andcollaborations with customers and suppliers.
In general, the impression from this interview was that, company A as a major player in
its segment values the improvements in QCD and trust with existing customers, morethan fundamental innovation and expansion to new products for new customers in newmarkets. That is to say, there is limited scope of the type of transactions and limited
incentives to create new type of transactional relationships in new market niches. They
know where their products are used and try to seize what their customers want, and thencustomize specifically for improving QCD by working closely with the existingcustomers. This strategic focus is set upon their understanding on the current industry as
a stagnant and stable one. Mr. A confirmed that the current automotive value chain ismaturely organized and well smoothed as a hierarchy.

Company B
Jianxi Luo and Heejin Kim interviewed Mr. B, the manager for global procurement
planning in the procurement department of a major Japanese tier-1 automotive system
supplier. The interview was conducted on March 4, 2009, and was accompanied by
Yanyan Jiang (acting as interpreter), master student from the University of Tokyo.
Company Structure
Company B is a major automobile component and part manufacturer, and supplies awide range of products, including power train control systems, electronic systems,
electric systems, thermal systems, ITS, etc, to the worlds’ major automakers.
We started the discussion with the company’s organization structure. Prior to the recentchange, persons in charge of purchasing are placed in the corporate center for raw
materials and facilities procurement, and in each business/production groups, including
power-train, electrical, electronic, ITS, and thermal system units, for specialized parts.
Meanwhile the supplier management function was placed together with strategy andplanning at the corporate center. After the recent change, now they have established an
independent purchasing center in parallel with other functional centers, including
corporate center, administration center, technological center, production promotion
center and sales group. The purchasing center has integrated the previously-distributedpurchasing operations in corporate center and separate business/production groups. Suchstructural changes are documented in the old and current organizational charts below, in
Figure 3.

5A) Previous organizational structure
Functional Center

Board Meeting

Corporate Center
Corporate Center
Corporate Center
Production Promotion C
Sales Group

ChairmanPresident
VP

Procurement department <85 persons>-- Planning section (planning, strategy)-- Quality/Engineering section (supplier audit)-- Material Purchasing section (CPS raw materials)-- Equipment purchasing section (CPS equipment)-- Facility purchasing section (CPS facility)• CPS prototype parts

Business Group

Purchasing member<278 persons>• Planning, Making strategy, Supplier management, CPS(Raw material etc)

Power-train group

Prototype purchasing department <8 persons>Electrical Group• Purchasing business group parts

Electronic GroupITS Group
Thermal System Group

Business group purchasing department <4 depart. 193 persons>-- Power-train purchasing department <63 persons>-- Electrical purchasing department <30 persons>-- Electronic purchasing department <49 persons>-- Thermal system purchasing department <51 persons>B) Current organizational structure
Functional Center

Board Meeting

Corporate Center
Corporate Center

Prototype purchasing department <8 persons>

Corporate Center
Production Promotion C
Purchasing Center
Sales Group

ChairmanPresident
VP
Business Group

Purchasing member<266 persons>• CPS prototype parts

Power-train group
Electrical GroupElectronic GroupITS Group
Thermal System Group• Planning, Making strategy, Supplier management, CPS(Raw material etc)
Purchasing department <147 persons>-- Planning section (planning, strategy)-- Supplier support section-- Manufactured procession parts center-- Material purchasing section (CPS raw materials)-- Equipment purchasing section (CPS equipment)-- Facility purchasing section (CPS facility)• Purchasing business group specialized parts-- Power-train purchasing department <36 persons>-- Electrical purchasing department <21 persons>-- Electronic purchasing department <34 persons>-- Thermal system purchasing department <28 persons>Figure 3. Organizational structures of company B before and after a recent organizational change (courtesyof Mr. A). Note: CPS is Central Purchasing System

However, Engineering Research & Development Center is still not involved inpurchasing decision making process. The Engineering Research & Development Center
is mainly responsible for long-run (10~20 years) product strategies, while purchasing
center for relatively short-term (4~5 years) procurement strategies. Thus, generally, theEngineering Research & Development Center has a different strategic viewpoint frompurchasing center. There is no organizational mechanism for purchasing managers andR&D managers to interact and influence the decisions of each other, while thepurchasing center persons do sit down together with those from the production/businessgroups to discuss and plan production and purchasing strategies together. However, Mr.
B commented that it would be desirable if the purchasing center could join the productdevelopment process and make active proposals from the initial stage of productengineering. Without that, the Engineering Research & Development Center tends tomake plans adapting the assumed parts supplied by the suppliers which the company has
already had transactional relationships, and thus some chances of cutting costs from rearchitecting products are lost.
Components and Suppliers
We asked if the company views the supply chain as a clean tier structure. Mr. B
confirmed it, and explained that the automotive supply chains have been smoothed andwell organized after decades of evolution in Japan. The company’s suppliers all know

6

their supplies are going to company B’s specific automotive products, and customize
specifically for the best of quality and cost. In particular, when asked about possible
cycles of purchasing transactions (for example of a cycle, company 1’s customer iscompany 2’s supplier, while company 2 is a supplier of company 1), he could not thinkof any formal/regular one. However, there are still some interesting situations.
Sometimes there are supplies in reverse way, that is, from company B (Tier-1) to its
Tier-2 or Tier-3 suppliers. This happens when a lower-tier supplier does not have certain
necessary parts for making its product for company B. In that case, company B
purchases that kinds of parts from another supplier and then “provides” to this supplier.
Another incentive underlying this phenomenon is that company B can purchase theneeded parts at a cheaper price than the supplier which actually needs the parts. Mr. B
called this “provision”, and does not view it as a formal market-based purchasetransaction.
Sometimes, company B also purchases products from its competitors (company on thesame tier), such as Bosch and Visteon. For example, when an automotive customer
requires specifically using a part of Bosch's parts, or Visteon is the only manufacturer of
certain parts, company B has no choice beyond buying from them. Thus, exactly
speaking, the products are not competing items with that of company B.
Concerning questions about global supply networks, Mr. B said strengthening global
supply networks is one of the primary concerns of their purchasing center these days.
Many foreign subsidiaries of company B still import parts from company B's suppliers inJapan, which accompany risks and high costs. Thus, purchasing center is busily working
to search for qualified local suppliers.
Mr. B perceives the bankruptcy of their suppliers as the major risk on the supply sideamid the current economic recession since 2008. If that happens, they have to consider
producing many components or parts in house if these are complex products, andsourcing from alternative viable suppliers if these are general or commodity parts. Costs
may increase in any case.
Products and Customers
On the product/customer side, Mr. B confirmed that the company knows well where its
products are specifically used in the automobiles made by different automakers. In
particular, company B even examines the usages of its commodity type of products at thecustomers. If a customer is not specific in purchases and uses of its certain products, thecompany will be concerned about the performance of that customer and may withdraw
from supplying products for it. Company B is very concerned about the quality andperformance of the system product after integrating the components and parts suppliedby it.
Mr. B told us that his company is worried about the risk that they cannot receive thepayments on time from the automakers due to the slump of automotive sales since 2008.
In spite of such risk from its automotive customer base, the company still insists its
concentration in the automotive industry. We asked him about potential changes in future
products portfolio and the possibility for company B to diversify its business beyond
automotive components (electronics, finance, medical, etc) and to evolve into a company

7

like General Electronics (GE). In response, Mr. B emphasized his company’s automotive
DNA, and does not think there is strong incentive inside the company to expand to othernon-automotive business. There are cultural and historical reasons.
Still about this business scope issue, he mentioned the difference in product portfolio
between his company and a company such as Bosch, which has 60% revenue fromautomobiles and 40% from other businesses such as agricultural machines and tools. He
also provided a historical story that his company actually tried some other nonautomotive business about 10 years ago. For example, around 1996, they developed andpatented the first batch of EL Crystal Panel, but failed to make a profit from that businessbecause of their limited distribution channels in the consumer electronics market. They
also invested almost ten billion yen for the television business. However, later the
television factory switched to the production of automobile parts.
Therefore, in the past decade, the company has chosen strategically to focus on theautomotive business, and believes that its DNA is automotive. The key for automotive
business is the collaborative relationship and trust with its customers -- Toyota and othermajor Japanese automakers in this mature and stable automotive market. If the company
is investing in certain innovation, it is the type of innovation that improves quality andperformance of their existing products and processes in the needs of or pulled by theautomakers.
He commented that the company hesitates to expand to consumer electronics industry
also because it has been rooted in the culture of the relatively slow-paced automotive
industry, and cannot get used to the dynamics of the consumer electronics market. Even
though company B recognizes the value to capture the end-user needs faster than its
automotive customers, it has been insensitive to the end-user's needs, largely due to its
value chain position as a Tier-1 supplier since its establishment. This historicallydeveloped characteristic of company B makes it difficult to diversify its business. In thecompany’s DNA, they are better off focusing on sustaining and improving relationships
with the automakers, rather than facing the dynamic demands of individual customers,
and fast-paced innovations of its competitors.
However, he also speculated a little that such strategy may change to some extent
because of the slump of automobile sales amid economic recession, and the potential
failure of the automakers. Because of the reduction of production for current products,
about 30 percent of the employees can be utilized in searching for new fields of business.
For last ten years, when automobile market has been in good condition, company B was
too busy to think about possible diversification or utilizing its advanced technologies inanother field of business. In that sense, this recession could be a good chance forcompany B. They might re-start the efforts of exploring new products for new customers
in new market niches.

Summary and Conclusions
The key points from the two interviews and documented above are summarized in Table
1.
Table 1: Categorized interview results

8CompanyType
Product Technologies
Purchases and Suppliers
Transaction
Patterns

Products and Customers

Purchase from higher-tier firm
Supply to lower-tier firm
Perceive Cycled Supplies?
Perceive Industry Tiers/Hierarchy?
Perceived Industry Status
Major Risks
Given limited resources, which one of the two toinvest?
(1) Trust/collaboration with customers andsuppliers for QCD improvements;(2) new products for new customers in newmarket niches
Attitude toward trust and relationships withcustomers and suppliers
Attitude toward innovation for new products to
new customers in new market niches
Future Product Strategy or Portfolio Change

A

B

Material supplier

Tier-1 system supplierElectrical + Electronics +Mechanical
Specific; suppliers are
required to design andproduce specificallySpecific; care where
products are used
No
No
No
Yes
Mature/Slow-paced
1) Cannot receive paymentsfrom customers on time2) Supplier bankruptcy

Material + ChemicalCommodity; buy from
commodity market, but
know original sources
Specific; care where
products are used
No
No
No
Yes
Mature/Slow-paced
Competition in price, cost,quality, service, etc

(1)

(1)

Most important

Most important

No needHesitation due to the failureof historical trials

Same products, but movefrom commodity segment toquality segment

Depending on the needs ofautomaker customers

First of all, the automotive suppliers view the automotive supply network as a tiered
architecture, and perceive no example of supply cycles, or non-hierarchical transactional
relationships -- transacted supplies from a higher-tier company to a lower-tier company 2.
In particular, they attribute such perception of “being well organized”, e.g., hierarchicalregularity in transactional links, to the maturity of the current automotive industry.
Secondly, they have similar strategic choices in terms of transactional relationships on
both purchase/supplier side and product/customer side. On one hand, the firms
emphasize that the trust and collaboration with their customers and suppliers are core for
their business. Their products are specifically tailored in design and production in orderfor the high-quality integration into the larger system products of their customers;
meanwhile they also favor specific design and production from their suppliers.
On the other hand, about product strategy, they emphasize the focus on QCD in theircurrent product portfolio for current customers, and their reluctance to develop radical
new products and explore new customer base. Explanations include: the reliance on thepull of the automakers, slow-paced “corporate DNA” formed in the historical and deep
involvement in the automotive business, some cases of failures of expanding to
unfamiliar broad products/customers, etc. For such reasons, company B, which has
expertise in electronic and electrical technologies, finds it extremely difficult to enter the
fast-paced and dynamic consumer electronics industry.

2

In our analysis on the archival data of the Japanese automotive supply network in 1993, we only found
one supply cycle of 3 companies, among 679 firms and 2,437 supplier-customer relationships among them.

9Generally speaking, perceiving the saturated status of competition in automotive
business, the supplier firms tend to value incremental improvements in QCD, and thecollaboration and trust within transactional linkages for QCD, more than the innovations
for new products to new customers in new market niches. In fact, the collaborative
efforts (aimed for QCD) at both plan level (Womack, Jones and Roos, 1990) and interfirm level (Dyer, 1996) in the Japanese automotive manufacturing industry have also
been documented by past studies.
Such strong incentive toward trust and collaborative transactional relationships may be
traced to the integral architecture of a contemporary automobile. The current dominant
design (Suarez and Utterback, 1995) of an automobile has a large number of parts andlarge amount of integrated interactions. A high degree of integrality is necessary for an
automobile to meet complex systemic requirements (technical, market and regulatory),such as energy efficiency, emission, noise, vibration, safety, stability, driving feel, design,cost, etc, in order to attract consumers (MacDuffie, 2008)
Takeishi and Fujimoto (2001) observed a “shift to integral architecture” in the Japanese
automotive industry. They found that, the functions assigned to individual parts in an
automobile became more and more complex, and the need for structural or functional
coordination in system integration had even increased.
Therefore, in nature the automotive supplier firms tend to pursue specificity in products
and production process for tight coupling and effective integration. Such pursuit ofproduct and asset specificity (Williamson, 1981) has given rise to the specificity inexisting transactional relationships (Baldwin, 2008), which are important forcollaborative effects and the QCD of the integrated products. Fujimoto (2007) argued
that the collaborative attitudes and capabilities have actually provided the Japanese firms
with architecture-based comparative advantages in the international competition of
producing and exporting integral products, for which automobile is a typical example.
However, the necessary specificities in the product design, production process andtransactional relationships (between customers and suppliers) have not only limited the
incentive of suppliers to innovate, but also the development and accumulation of theircapability to create new products for new customers. Integral product architectures may
limit the innovation dynamics and technological progress rates of that type of products(Koh and Magee, 2008). Currently, the automotive suppliers in general are either
unwilling or incapable to diversify their product portfolio, and the scope of transactions
with new type of customers. The R&D efforts in automotive supplier firms are mainly
for sustaining and incrementally improving their traditional products and business.
The lack of incentive and capability to develop new products for new customers further
locks the supplier firms at their positions where they used to be. Reversely, the lack ofradical innovation mechanism in the automotive industry will intensify the competition
on QCD which discriminates radical innovation and favors incremental innovation. The
reinforced lock-in in the relationship between the lack of radical innovation andspecificity in transactional relationships in the context of automotive supplier network isdemonstrated in the diagram in Figure 4.

10Nature of Automobile
Integration of many parts and interactions
to meet systemic requirements+
Component/Part Specificity
Attributes, interfaces, etc+
Supplier Asset Specificity
Physical asset, human asset, location asset, etc+ +Radical Innovation

Incremental Innovation(1) Incentive, (2) capability to develop new products
for new customers in new market niches

Negative
reinforcing loop

Improvements in product and process for QCD+
Facilitated by deep and trusted collaborations-+
Transaction Specificity
The scope of transactional relationships+
Compliance to Hierarchical Positioning+ Reinforcing effect- Limiting effectFigure 4. Causal relationships underlying observed patterns in automotive supply network in Japan

Over years of evolution driven by the competition on QCD favoring specificity inproducts, production assets and transactional relationships, the automotive suppliers havebeen compliant to their positions in the sequences of assembly automobiles from raw
materials to components/parts, sub-systems and entire vehicles -- the hierarchy. The
purchase and sale transactions of a company tend to follow a regular direction fromlower tiers to higher tiers. It has taken a long history of evolution for the automotive
industry to reach this status. This is agreed by the result from our quantitative analysis -the Japanese automotive supply network in 1993 was almost purely hierarchical (Luo,Whitney, Baldwin and Magee, 2009).
As for a potential next step, it will be valuable to conduct homologous interviews in anindustry where such lock-in may not exist to the degree in the automotive sector. For
instance, if a product’s systemic requirements are not so strict, or the product architecture
is not so complex, the need for satisfactory integrality might not be able to limit the
freedom of innovations and the scope of transactional relationships. The consumer
electronics industry is presumed to be such a case. Therefore, we also plan to interview
the suppliers in the consumer electronics industry.

Acknowledgements
We thank Manufacturing Management Research Center (MMRC) at the University ofTokyo and Prof. Takahiro Fujimoto for his generous support on this visit to Japan, Prof.
Daniel Heller, Prof. Christopher Magee and Dr. Daniel Whitney for their advice on theinterview questions design, and Ying Li and Yanyan Jiang for their assistance on logistic
issues and language interpretation during the visits in Japan.
In particular, we would like to express our sincere appreciation to the interviewees fortheir collaboration. The first author is responsible for any errors in the interview notes
and oversights in the analysis.
11NotesWe also conducted an informal interview with an automotive electronics supplier withsimilar questions. For some reason, it is informal and is not to be unpublicized. However,
the general insights from the unpublicized third interview were also consistent with theinsights from the two interviews and the synthesized analysis in this paper.

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