Keiretsu

The Japanese word keiretsu, which literally means “series,” denotes a set of companies that are loosely lumped together by cross-shareholding and/or long-term transactional relationships such as assembler-supplier relationships. Keiretsu can best be understood as an intricate web of economic relationships that links banks, manufacturers, suppliers, and distributors.

[Page 2018]There are two types of keiretsu: the horizontal and the vertical types. The big, leading firms that form the core of a keiretsu are horizontally linked by capital and transactional relationships, and each core company ties up with many subcontracting firms, which are in vertical relationships with the core companies. The firms that are vertically connected with the core companies through subcontracting contracts and can obtain financial and technological support from the parent company are usually termed as ...