Disaggregating the Group Effect: Vertical and Horizontal Keiretsu in Changing Economic Periods

Publication Type

Conference Paper

Publication Date



This paper examines the evolution of the strength of group affiliation among members of horizontal and vertical keiretsu in Japan over two time periods: 1991-1996, and 1997-2001. Our findings indicate that ties were considerably more stable in the later time period. Using multinomial logistic regression, we show that both vertical and horizontal firms undergoing increasing, decreasing, or exhibiting tie strength stability had performance and "financial tie" characteristics which significantly predicted membership in one of these groups. Firms which increased their keiretsu affiliations over time are characterized more by evolving financial ties rather than distinctive performance patterns. Vertical and horizontal firms responded to heightened foreign investment by strengthening ties with other stakeholder groups – significant shareholders in the case of vertical keiretsu firms; and creditor ties in the case of horizontal keiretsu firms. Both vertical and horizontal firms which loosened their keiretsu affiliations over the period appear to have done so without much disruption to equity ties. Rather, performance characteristics are the most important elements distinguishing "decreasing horizontal" and "decreasing vertical" firms.


Strategic Management Policy

Research Areas

Strategy and Organisation


Academy of International Business Annual Meeting, 23-26 June 2006, Beijing

City or Country

Beijing, China