Supplier Development at Honda, Nissan and Toyota: Comparative Case Studies of Organizational Capability Enhancement

Abstract

What factors facilitate and constrain the sustained development and replication of organizational capabilities at suppliers? This question is addressed in a comparison of historical case studies at Toyota, Nissan and Honda in Japan. First, as expected, replication difficulty is overcome by enabling companies to share the practice, rather than the representation, of tacit knowledge. Second, the interdependence in the hierarchy of routines, that constitute organizational capabilities, has led companies to broaden the scope of supplier development over time. Third, this broadening challenges suppliers to accept customer companies’ intervention in internal investment decisions, requiring a certain mode of corporate governance. It is argued that the boundary of a capability-based firm may go beyond legally distinct units of financial control when firms are subjected to a cumulative process of capability enhancement.