Nonmarket Strategy in Japan: How Foreign Firms Lobby “Inside the Castle” [1 ed.] 9789811573248, 9789811573255

Table of contents :
Abstract
Acknowledgments
Contents
Abbreviations
List of Japanese Terms
List of Figures
List of Tables
Chapter 1: Introduction
1.1 Nonmarket Strategy, Influence, Lobbying: Laws Fall from Heaven?
1.2 Why a Study About Nonmarket in Japan: Inside the Castle?
1.3 The Substance of This Book: A Multiformity of Strategies Leaning on the Cooperative Side
1.4 Structure of the Book
References
Chapter 2: How to Approach Nonmarket Strategy and Corporate Political Activity
2.1 Introduction
2.2 Definitions and Taxonomy
2.3 Short Literature Review and Theoretical Approach
2.4 How to Analyze CPA in a Theoretical as Well as a Practical Perspective
2.4.1 Main Threads and Ideas
2.4.2 The 2 Transversal Dimensions: Influence and Coalition
2.4.2.1 Power and Influence: The Pressure/Persuasion Dimension and the Balance of Influence
2.4.2.2 Representativeness/Credibility: The Balance of Coalition (Individual, Coalition or Collective Action)
2.5 Conclusion
References
Chapter 3: Framework
3.1 Introduction
3.2 The 3 Main Drivers
3.2.1 Institutions
3.2.2 Issues
3.2.3 Interests
3.3 The Industry-Specific Factors
3.4 Political Resources
3.5 Process and Tactical Building Block Approach
3.5.1 CPA as a Process
3.5.2 Access and Influence
3.5.3 Tactical Building Blocks
3.5.3.1 Targets
3.5.3.2 Arguments
3.5.3.3 Technics
3.6 Dynamic of Factors’ Evolution
3.7 Conclusion
References
Chapter 4: General Features of Domestic Lobbying in Japan
4.1 Introduction
4.2 Japan Inc., Corporatism or Pluralism?
4.3 Institutional Characteristics in Light of the Differences with the US/EU and Implications for CPA
4.3.1 The Diet, the Bureaucracy, and the Parties/the LDP
4.3.2 Data on Venue Selection by Interest Groups
4.3.3 The Advisory Committees (Shingikai) and the Regulatory Reform Council (Kisei Kaikaku Kaigi)
4.3.4 The Role of the METI in CPA
4.4 CPA Patterns, Business-Government Relationships, and Political Strategies
4.4.1 Coalition Building and Collective Action
4.4.2 Direct Lobbying
4.4.2.1 Specificities for Foreign Firms
4.5 Perceptions
4.6 Organizational Aspects and the Shôgai Sections
4.7 Financial Contributions and Transparency
4.8 Conclusion
References
Chapter 5: The Context for Foreign Firms: Trade, Investment, and Business Issues
5.1 Introduction
5.2 Major Issues for Foreign Firms in Japan
5.2.1 Demands from Business Communities and Governments
5.2.1.1 In the Past: A Selection of Themes from EBC 2000/2001 and ACCJ 2001 White Papers
5.2.1.2 Now: Non-tariff Measures in Treaty Negotiations (EPA/FTA, TPP), Cross-sectoral Issues
5.2.2 A Focus on Non-tariff Measures (NTMs)
5.3 Evolution in Time and Changing Paradigm
5.3.1 A Brief History of the US–Japan Intergovernmental Economic Relations
5.3.2 The ACCJ Approaches Through Time in the Context of Intergovernmental Negotiations
5.3.3 About the Role of Gaiatsu (External Pressure)
5.3.4 Final Remarks: A Shift to Persuasion and Collaboration
5.4 Conclusion
References
Chapter 6: Case Study
6.1 Introduction
6.2 Issues
6.2.1 Categorization of Issues by Strategic Feature
6.3 Institutions and Interests
6.4 Political Resources
6.5 Tactical Building Blocks
6.5.1 Arguments
6.5.2 Technics
6.6 Balance of Coalition: What Allies, with Whom?
6.6.1 Routes and Strategies: Vectors for Conveying Voice
6.6.2 Criteria of Positioning in the Balance of Coalition
6.6.3 Synthesis of the Analysis of the Balance of Coalition
6.7 Balance of Influence: How, What Stance, with What Resources Wield Influence?
6.7.1 Criteria of Positioning in the Balance of Influence
6.7.2 Synthesis of the Analysis of the Balance of Influence
6.7.3 Examples of Influence: VW and ABB, Pressure and Persuasion
6.8 The Outcomes
6.9 Conclusion
References
Chapter 7: Implications for Business Strategy and Lessons from Japan in a Global Business Perspective
7.1 Introduction
7.2 Meaning of Japan in Firms’ Global Strategy and Role of CPA as a Strategic Tool: Lessons from the Case Study
7.2.1 Creating a New Business Framework: Conditions of Market Existence/Entry
7.2.2 Boosting Sales/Enhancing Business
7.2.3 Reducing or Neutralizing Threats for Business
7.2.4 Support for Investment Decision-Making
7.2.5 Norms and Rule Setting
7.2.6 Global Strategy, Meaning of Japan, and Other Considerations
7.3 Specificities of CPA in Japan for Foreign Firms, Conditions of Success, Lessons for Firms in Japan and Globally
7.3.1 Specificities of CPA in Japan for Foreign Firms
7.3.2 Conditions of Success and Lessons for Foreign Firms in Japan
7.3.3 Persuasive Facet for Global Business and Lobbying as an Extension of Marketing by Other Means
7.4 Assessment and Theoretical Considerations
7.4.1 About the RBV/VRIO, Extension to Political Science and Bases of Influence
7.4.2 Does CPA Lead to a Sustainable Competitive Advantage, and are There Preferable Strategies?
7.5 Linking Resources, Forms of Influence, and Business Strategies
7.5.1 Recapitulation
7.6 Conclusions
References
Chapter 8: General Conclusion
8.1 Addressing the Research Question: Informational Value Filling a Gap
8.2 General Impression: Low Key
8.3 Similarities Outweigh Differences, with Specificities
8.3.1 Specificities of Foreign Firms
8.4 Topics for Foreign Firms at Macro and Industry Level
8.5 Conditions of Success in Japan
8.6 Lessons and Theoretical Contributions
8.6.1 A Framework: Comprehensive and Workable, for Analysis and Practice
8.6.2 Drivers of CPA
8.6.3 Relationship between Resources, Forms of Influence, and Business Objectives
8.6.4 For Successful Influence in a Global Business Situation
References
Chapter 9: Annexes
9.1 Summary of Cases Classified by Implication for Business Strategies
9.1.1 Creating a New Business Framework: Conditions of Market Existence/Entry
9.1.1.1 GE Smart Meters
9.1.1.2 Hartford
9.1.1.3 MC Decaux
9.1.1.4 Animal Vaccine
9.1.1.5 Rhone Merieux
9.1.1.6 Utility Firm A
9.1.1.7 Western Union
9.1.2 Boosting Sales/Enhancing Business
9.1.2.1 Nicorette
9.1.2.2 Hepatitis C
9.1.2.3 UPS
9.1.2.4 DHL Scanner
9.1.2.5 O157
9.1.2.6 Car Repair Shops
9.1.3 Reducing or Neutralizing Threats for Business
9.1.3.1 GE lands
9.1.3.2 Delta
9.1.3.3 Pay Pal
9.1.3.4 NACCS System
9.1.4 Support for Investment Decision-Making
9.1.4.1 Fluoride
9.1.5 Norm and Rule Setting
9.1.5.1 ABB
9.1.6 Global Strategy, Meaning of Japan, and Other Considerations
9.1.6.1 VW Airbags
References
Index

Citation preview

Nonmarket Strategy in Japan How Foreign Firms Lobby “Inside the Castle”

Eric Romann

Nonmarket Strategy in Japan

Eric Romann

Nonmarket Strategy in Japan How Foreign Firms Lobby “Inside the Castle”

Eric Romann Department of Management Japan University of Economics Tokyo, Japan

ISBN 978-981-15-7324-8    ISBN 978-981-15-7325-5 (eBook) https://doi.org/10.1007/978-981-15-7325-5 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Singapore Pte Ltd. 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Abstract

The question of nonmarket strategies, influence, lobbying, or Corporate Political Activities (CPA) in technical terms, is becoming increasingly significant in a world where boundaries between states and firms are blurring due to the effects of globalization and the ensuing connectivity, with the rise of transnational actors that co-opete in complex patterns. This study focuses on foreign MNCs in Japan, in which important readjustments in traditional power configuration have taken place, giving more leeway to various stakeholders. The idea is to understand in-depth “how” firms deploy their influence in a country that used to be deemed for its difficulty of access (“the castle”) and for which minimal information on this theme exists. As professionals acknowledge, and contrary to what can be usually assumed, similarities with the US or the EU outweigh local differences that must still be addressed but are no longer insuperable. With globalization and the rise of economic interdependence, foreign players with valuable assets can easier than in the past be part of the game. A significant feature is the weight of collective action and the reluctance to individual or direct lobbying as reflected in perceptions and firms’ organizations. The consequences for foreign firms are that they are often compelled to circumvent with soft strategies. Of course, the principal ally of foreign firms should be their home government through their embassies or other bodies such as the USTR, resulting in foreign pressure (gaiatsu). This used to be an instrument, but seemingly not as effective as commonly expected and certainly considerably scaled down today.

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Abstract

On this background, the journey will take the reader over 20 cases, displaying a striking multiformity of nonmarket strategies. Hopefully, this collection of stories and their lessons, by highlighting some conditions of success for foreign business in Japan, could be of interest to scholars as well as practitioners.

Acknowledgments

I am indebted to many persons without whom this book would not have been possible. I would first like to thank the Professors Shinji HASEGAWA, Tomoaki IKEYA, and Hideyuki TAKENOUCHI for their time and advice. I would also like to express special gratitude to Professor Hiroshi SUZUKI, who devoted a substantial amount of time for briefings and opened many doors. Next, my thanks go to all the interviewees who generously offered their time in answering my never-ending questions, despite a busy agenda (unfortunately, many of them chose to remain anonymous for reasons of confidentiality): Mr. Frederic BENOLIEL, Mr. William DAZY, Mr. Charles DE MARCILLY, Mr. Tad JOHNSON, Mr. Michel LACHAUSSEE, Mr. Anthony MILLINGTON, Mr. Toyonobu MIYAZAWA, Mr. Takashi OHDE, Mr. Noboru OYAMA, Mr. Sven STEIN, and all the others. My final thoughts go to my family, Kay, and Akiko for their support and patience (especially the latter).

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Contents

1 Introduction  1 1.1 Nonmarket Strategy, Influence, Lobbying: Laws Fall from Heaven?  1 1.2 Why a Study About Nonmarket in Japan: Inside the Castle?  3 1.3 The Substance of This Book: A Multiformity of Strategies Leaning on the Cooperative Side  5 1.4 Structure of the Book  6 References  8

2 How to Approach Nonmarket Strategy and Corporate Political Activity  9 2.1 Introduction  9 2.2 Definitions and Taxonomy  9 2.3 Short Literature Review and Theoretical Approach 14 2.4 How to Analyze CPA in a Theoretical as Well as a Practical Perspective 16 2.4.1 Main Threads and Ideas 16 2.4.2 The 2 Transversal Dimensions: Influence and Coalition 17 2.4.2.1 Power and Influence: The Pressure/ Persuasion Dimension and the Balance of Influence  17 2.4.2.2 Representativeness/Credibility: The Balance of Coalition (Individual, Coalition or Collective Action)  22 ix

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Contents

2.5 Conclusion 28 References 28 3 Framework 31 3.1 Introduction 31 3.2 The 3 Main Drivers 31 3.2.1 Institutions 31 3.2.2 Issues 34 3.2.3 Interests 37 3.3 The Industry-Specific Factors 39 3.4 Political Resources 41 3.5 Process and Tactical Building Block Approach 47 3.5.1 CPA as a Process 47 3.5.2 Access and Influence 48 3.5.3 Tactical Building Blocks 49 3.5.3.1 Targets  49 3.5.3.2 Arguments  50 3.5.3.3 Technics  51 3.6 Dynamic of Factors’ Evolution 54 3.7 Conclusion 55 References 56 4 General Features of Domestic Lobbying in Japan 59 4.1 Introduction 59 4.2 Japan Inc., Corporatism or Pluralism? 59 4.3 Institutional Characteristics in Light of the Differences with the US/EU and Implications for CPA 61 4.3.1 The Diet, the Bureaucracy, and the Parties/the LDP 61 4.3.2 Data on Venue Selection by Interest Groups 65 4.3.3 The Advisory Committees (Shingikai) and the Regulatory Reform Council (Kisei Kaikaku Kaigi) 67 4.3.4 The Role of the METI in CPA 69 4.4 CPA Patterns, Business-Government Relationships, and Political Strategies 71 4.4.1 Coalition Building and Collective Action 71 4.4.2 Direct Lobbying 76 4.4.2.1 Specificities for Foreign Firms  78 4.5 Perceptions 80

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4.6 Organizational Aspects and the Shôgai Sections 83 4.7 Financial Contributions and Transparency 86 4.8 Conclusion 89 References 90

5 The Context for Foreign Firms: Trade, Investment, and Business Issues 93 5.1 Introduction 93 5.2 Major Issues for Foreign Firms in Japan 94 5.2.1 Demands from Business Communities and Governments 94 5.2.1.1 In the Past: A Selection of Themes from EBC 2000/2001 and ACCJ 2001 White Papers  94 5.2.1.2 Now: Non-tariff Measures in Treaty Negotiations (EPA/FTA, TPP), Crosssectoral Issues  98 5.2.2 A Focus on Non-tariff Measures (NTMs)105 5.3 Evolution in Time and Changing Paradigm109 5.3.1 A Brief History of the US–Japan Intergovernmental Economic Relations109 5.3.2 The ACCJ Approaches Through Time in the Context of Intergovernmental Negotiations112 5.3.3 About the Role of Gaiatsu (External Pressure)117 5.3.4 Final Remarks: A Shift to Persuasion and Collaboration118 5.4 Conclusion119 References121 6 Case Study123 6.1 Introduction123 6.2 Issues125 6.2.1 Categorization of Issues by Strategic Feature131 6.3 Institutions and Interests133 6.4 Political Resources135 6.5 Tactical Building Blocks142 6.5.1 Arguments142

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Contents

6.5.2 Technics143 6.6 Balance of Coalition: What Allies, with Whom?144 6.6.1 Routes and Strategies: Vectors for Conveying Voice144 6.6.2 Criteria of Positioning in the Balance of Coalition145 6.6.3 Synthesis of the Analysis of the Balance of Coalition145 6.7 Balance of Influence: How, What Stance, with What Resources Wield Influence?149 6.7.1 Criteria of Positioning in the Balance of Influence149 6.7.2 Synthesis of the Analysis of the Balance of Influence151 6.7.3 Examples of Influence: VW and ABB, Pressure and Persuasion154 6.8 The Outcomes155 6.9 Conclusion157 References159 7 Implications for Business Strategy and Lessons from Japan in a Global Business Perspective161 7.1 Introduction161 7.2 Meaning of Japan in Firms’ Global Strategy and Role of CPA as a Strategic Tool: Lessons from the Case Study162 7.2.1 Creating a New Business Framework: Conditions of Market Existence/Entry162 7.2.2 Boosting Sales/Enhancing Business162 7.2.3 Reducing or Neutralizing Threats for Business163 7.2.4 Support for Investment Decision-Making164 7.2.5 Norms and Rule Setting164 7.2.6 Global Strategy, Meaning of Japan, and Other Considerations164 7.3 Specificities of CPA in Japan for Foreign Firms, Conditions of Success, Lessons for Firms in Japan and Globally166 7.3.1 Specificities of CPA in Japan for Foreign Firms166 7.3.2 Conditions of Success and Lessons for Foreign Firms in Japan167 7.3.3 Persuasive Facet for Global Business and Lobbying as an Extension of Marketing by Other Means168 7.4 Assessment and Theoretical Considerations171 7.4.1 About the RBV/VRIO, Extension to Political Science and Bases of Influence171

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7.4.2 Does CPA Lead to a Sustainable Competitive Advantage, and are There Preferable Strategies?173 7.5 Linking Resources, Forms of Influence, and Business Strategies174 7.5.1 Recapitulation180 7.6 Conclusions181 References182 8 General Conclusion185 8.1 Addressing the Research Question: Informational Value Filling a Gap185 8.2 General Impression: Low Key186 8.3 Similarities Outweigh Differences, with Specificities187 8.3.1 Specificities of Foreign Firms188 8.4 Topics for Foreign Firms at Macro and Industry Level188 8.5 Conditions of Success in Japan189 8.6 Lessons and Theoretical Contributions190 8.6.1 A Framework: Comprehensive and Workable, for Analysis and Practice190 8.6.2 Drivers of CPA192 8.6.3 Relationship between Resources, Forms of Influence, and Business Objectives193 8.6.4 For Successful Influence in a Global Business Situation194 References197 9 Annexes199 9.1 Summary of Cases Classified by Implication for Business Strategies200 9.1.1 Creating a New Business Framework: Conditions of Market Existence/Entry200 9.1.1.1 GE Smart Meters 200 9.1.1.2 Hartford 205 9.1.1.3 MC Decaux 209 9.1.1.4 Animal Vaccine 212 9.1.1.5 Rhone Merieux 215 9.1.1.6 Utility Firm A 219 9.1.1.7 Western Union 221

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Contents

9.1.2 Boosting Sales/Enhancing Business224 9.1.2.1 Nicorette 224 9.1.2.2 Hepatitis C 227 9.1.2.3 UPS 232 9.1.2.4 DHL Scanner 236 9.1.2.5 O157 239 9.1.2.6 Car Repair Shops 241 9.1.3 Reducing or Neutralizing Threats for Business244 9.1.3.1 GE lands 244 9.1.3.2 Delta 247 9.1.3.3 Pay Pal 251 9.1.3.4 NACCS System 255 9.1.4 Support for Investment Decision-Making259 9.1.4.1 Fluoride 259 9.1.5 Norm and Rule Setting262 9.1.5.1 ABB 262 9.1.6 Global Strategy, Meaning of Japan, and Other Considerations266 9.1.6.1 VW Airbags 266 References271 Index279

Abbreviations

ACCJ ACEA AIST AMDD ANA ANSI CAPEC CPA DE DOC DOT DPJ EBC EFPIA EPA EPC FAA FDA FDI FIT FNLIA FSA

American Chamber of Commerce in Japan European Automobile Manufacturers’ Association National Institute of Advanced Industrial Science and Technology American Medical Devices and Diagnostics Manufacturers Association All Nippon Airways American National Standards Institute Conference of Asia Pacific Express Carriers Corporate Political Activities Germany (Deutschland) Department of Commerce (US) Department of Transports (US) Democratic Party of Japan European Business Council European Federation of Pharmaceutical Industries and Associations Economic Partnership Agreement Engineering, Procurement, Construction Federal Aviation Administration Federal Food and Drug Administration Foreign Direct Investment Feed-In Tariff Foreign Non-Life Insurance Association of Japan Financial Services Agency xv

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Abbreviations

FTA Free Trade Agreement Gvt Government IB International Business IBA International Bankers Association IEC International Electrotechnical Commission IRR Internal Rate of Return ISO International Organization for Standardization JAIA Japan Automobile Importers Association JAL Japan Airlines JAMA Japan Automobile Manufacturers Association JEMIC Japan Electric Meters Inspection Corporation JETRO Japan External Trade Organization JV Joint-Venture LDP Liberal Democratic Party of Japan MAFF Ministry of Agriculture, Forestry, and Fisheries MEP Member of the European Parliament METI Ministry of Economy, Trade, and Industry Mfrs Manufacturers MHLW Ministry of Health, Labor and Welfare MIC Ministry of Internal Affairs and Communications MITI Ministry of International Trade and Industry MLIT Ministry of Land, Infrastructure, Transport, and Tourism MNC Multi-National Corporation MNE Multi-National Enterprise MOE Ministry of Environment MOF Ministry of Finances MOFA Ministry of Foreign Affairs NACCS Nippon Automated Cargo and port Consolidated System NCA Nippon Cargo Airlines NTB Non-Tariff Barriers PhRMA Pharmaceutical Research and Manufacturers of America RBV Resource-Based View SB Energy Soft Bank Energy SPS Sanitary and Phytosanitary TBT Technical Barriers to Trade TMEIC Toshiba Mitsubishi-Electric Industrial Systems Corporation TPP Trans-Pacific Partnership USTR US Trade Representative VW Volkswagen WTO World Trade Organization

List of Japanese Terms

Amakudari

Bureaucrats having left for another position but kept relationships in the ministries; literally, “descended from heaven.” Benkyôkai Study group Chinjô Claim, solicitation Chôsakai Research group, committee Dangô Bid rigging Gaiatsu Foreign pressure Gyôkai Industry Jimichi Humble, patient manner of proceeding by small steps Ka Department, division, unit Kacho Department chief Kakaricho Unit chief Kei-cars Category of small vehicles entitled to specific and favorable tax and insurance systems Keiretsu Business grouping Kenkyûkai Study group, committee Kentôkai Study, review committee Nemawashi Prior consultation and behind the scenes consensus-building process Shingikai Advisory committee also called deliberation council; an institution attached to a ministry where the policy process begins to be formalized, facilitating communication between persons who usually have few opportunities to meet Shitsu Office xvii

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List of Japanese Terms

Shôgai Tsukiai Zaikai Zoku

Every activity linked to the outside, external affairs, public relations, liaisons, contacts, negotiation, sales, as well as public affairs to some extent Social networks The big business community Members of the Diet specialized in a specific subject

List of Figures

Fig. 2.1 Fig. 2.2 Fig. 2.3 Fig. 3.1 Fig. 3.2

Fig. 3.3 Fig. 3.4 Fig. 4.1 Fig. 4.2

Fig. 4.3

Fig. 5.1 Fig. 5.2

Balance of influence Forms of coalition Balance of coalition General framework Ranking of lobbying spending by industry in the US 1998–2015 cumulated. Unit: billion US$. Source: adapted from Opensecrets.org, https://www.opensecrets.org/lobby/ top.php?showYear=a&indexType=i, accessed April 5, 2016 Ranking of corporate lobbying effectiveness as perceived by EU public officials. Unit: % of respondents. Source: adapted from Burson-Marsteller (2013), p. 15 Framework’s dynamic Points of access for firms Aggregated revenues of political parties by sources. Units: millions yens. (Source: adapted from MIC, http://www. soumu.go.jp/menu_news/s-news/01gyosei17_02000076. html, accessed 15 May 2016) Detailed sources of revenues for the LDP and the DPJ (year 2014). Unit: thousands yens. (Source: adapted from MIC, http://www.soumu.go.jp/menu_news/snews/01gyosei17_02000076.html, accessed 15 May 2016) NTM by industry and locus of solvability (manufacturing). Unit: number of issues. (Source: adapted from Copenhagen Economics (2009), p. 38) NTM by industry and locus of solvability (services). Unit: number of issues. (Source: adapted from Copenhagen Economics (2009), p. 42)

22 25 27 32

40 41 54 77

87

88 108 109 xix

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List of Figures

Fig. 6.1 Fig. 6.2 Fig. 6.3 Fig. 6.4 Fig. 6.5 Fig. 7.1

Fig. 7.2

Fig. 8.1

Major vectors for CPA coalitions available in Japan Balance of coalition with cases Balance of influence with cases Influence channels of the Volkswagen airbags case Influence channels of the ABB case Major resources by form of influence. The numbers refer to the individual cases where the resource is chiefly used according to this analysis. Only the individual cases have been plotted because strategy is related to firm-specific and individual decision. Cases not analytically detailed have not been included either due to limited information Correspondence between cases, forms of influence, and firms’ strategies. Only the individual cases have been plotted because strategy is related to firm-specific and individual decision. Cases not analytically detailed have not been included either due to limited information Strategies, forms of influence, and resources

145 147 151 154 155

175

175 195

List of Tables

Table 2.1 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 4.1 Table 4.2 Table 4.3 Table 5.1 Table 5.2

Table 5.3 Table 6.1

Additional taxonomy of corporate political activities 13 Categorization of issue types 36 Internal and external political resources 43 Categorization of arguments 51 Inside and outside lobbying technics 53 The 3 main drivers and industry specific factors 55 Political resources 56 Tactical apparatus 56 Interest groups’ venue selection in the context of different cabinets. Unit: % 65 Accessibility to political actors by type of interest group. Unit: % 66 Change in the perception of the respective importance of supportive groups for politicians. Unit: % 67 Major topics from the 2001 US-Japan Business White Paper (ACCJ) and the 2000 and 2001 Reports on the Japanese Business Environment (EBC) 95 European and American demands in 2016 based on the 2015 EBC Report on the Business Environment for the EU, the US Trade Representative National Trade Estimate Report on Foreign Trade Barriers report for Japan (2015) and on the Policy Statement of the US-Japan Business Council (March 2016)100 Major non-tariff measures; adapted from UNCTAD International Classification of non-tariff measures (2019 Version)106 Issue criteria of analysis 126 xxi

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List of Tables

Table 6.2 Table 6.3 Table 6.4 Table 6.5 Table 6.6 Table 6.7

Categorization of issues by strategic feature Cases analyzed by political resources Selection of arguments from cases Matrix for criteria of positioning in the balance of coalition Matrix for criteria of positioning in the Balance of Influence Outcomes by cases in terms of business and policy

132 136 143 146 150 156

CHAPTER 1

Introduction

1.1   Nonmarket Strategy, Influence, Lobbying: Laws Fall from Heaven? Interactions between firms and governments are not a new topic and may be as old as the market economy itself. Lobbying is one of the most well-­ known forms, albeit hardly the only one and maybe resonating excessively as a bilateral duo between business and government. The concepts of nonmarket strategy and influence offer the advantage of being more comprehensive, including the variety of stakeholders’ interactions that are found in the complexity of reality. The term “influence” may be more related to political science, while nonmarket strategy reflects a strategic management approach. However, the ultimate goal still consists of influencing and shaping the political or regulatory rules, directly or indirectly. In academic literature, the consecrated term is Corporate Political Activities (CPA). This concept will be determined with more details in the chapters related to definitions and framework, but for a first apprehension here, a simple and broad definition of the subject could be “actions taken by a firm to affect its regulatory environment in a favorable way.” In this book, the terms CPA or lobbying will be generally used as a proxy for the whole, but with the broader acceptation mentioned above and close to that of nonmarket strategy, considering the greater than usually considered variety of forms encountered.

© The Author(s) 2020 E. Romann, Nonmarket Strategy in Japan, https://doi.org/10.1007/978-981-15-7325-5_1

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E. ROMANN

The question of nonmarket strategy and influence is becoming increasingly important in a world where boundaries between states and firms are blurring due to the effects of globalization and the ensuing connectivity, with the rise of transnational actors that co-opete in complex patterns. On the states’ side, new concepts such as business diplomacy, public diplomacy, or commercial diplomacy are attempts to describe the new roles of states searching to influence the public or business. This trend should be related to the rise, from the firms’ side, of the private rule and the de jure norms as opposed to the de facto rule, which traditionally led to the emergence of a winning standard through mere market competition and selection. Various authors (Fujii 2012; Revel 2013, etc.) have noticed this growing significance of norms in terms of competitive strategy in numerous areas and institutions. The best-known example is the autonomous car whose success will depend, beyond technology, on the establishment of a relevant regulation allowing the functioning of its ecosystem by determining the necessary infrastructures, the systems to be used, and the responsibilities of each actor and stakeholder in case of casualty: manufacturers, software makers, insurers, and so on. Thus, in the context of this general trend toward a greater co-­foundation of regulations and norms by the public and the private spheres, myriads of influence levels can be observed, from operational support to shaping of the environment. Coming back to lobbying in a narrower sense, even if it is widely practiced, it has its own history with still different degrees of acceptance across countries. Historically, lobbying developed in the US, where pluralism ensured access to every kind of stakeholder to the political scene for the expression of their interests. Over time, the practice expanded in the world and throve particularly in the EU, where the political life is organized around a multiplicity of interests ranging from citizens to businesses and states. However, even if it became a common occupation at the EU level, it may not be the case in member states, for example, France, where it is still seen with suspicion and synonym of corruption, at least in the public opinion. In Japan, the situation is fairly similar with a combination of skepticism toward politicians and a conception of the political sphere completely separate and superior to the economic one. As a Daikin’s representative illustrates when faced with the necessity of initiating an action to maintain business in Europe: “we could not think of telling the government to change the law; for us, laws fall from heaven, it is impossible to modify them.”

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1.2   Why a Study About Nonmarket in Japan: Inside the Castle? After having observed the two big poles of the US and the EU that have already given birth to an extensive literature, it appeared that it might be of interest to examine the case of a third country with a similar level of political and economic development, preferably different from the Anglosphere for a better and contrasting perspective. Moreover, the focus would be on firms active on the international and global scene, that is, an international business (IB) angle, and not on domestic affairs. In the EU or the US, this distinction is often blurred since the presence of international companies and the weight of FDIs are substantial, with the participation of foreign firms in political life a long-established reality. In the EU, in a sense, all firms (of different member states) are foreign to each other since no real pan-European firm exists yet, despite the existence of the Societas Europaea. In this context, Japan seemed to offer an interesting study field and a gap to be filled. Of the numerous studies that have been conducted in the US or the EU from a domestic point of view, a large number concerns the question of the “Why” firms turn to political activities. When the “How” is addressed, it is typically at a very general level with, for example, the identification of several generic strategies. In an international business context, most approaches remain at the macro or semi-macro sectoral levels frequently in a zero-sum bargaining perspective of “states against big business,” FDIs, and so on. In the case of Japan, foreign pressure (gaiatsu) has been a dominant topic. Moreover, the phenomenon of CPA can be analyzed through various fields and theories such as economics, political science, or strategic management, but few investigations really synthesize the partial contributions and knowledge brought by each field in an interdisciplinary view. There used to be a time, not so far in the past (the 1980s), where Japan was conquering the world with FDIs and trade surplus, epitomizing the strategic association between the state (MITI) and the MNCs such as Toyota, Sony, Mitsubishi Corp. and so on to the point to be designated “Japan Inc.” As with the parallel case of present China, the major problems with that position from the vantage point of its trading partners were the lack of reciprocity and the closure of its market even though the barriers were often subtler than simple tariffs or anti-foreign investment regulations. The Japanese market was therefore perceived as a fortress to be

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invested in (in both senses of the term), as the expression “Inside the castle,” common in American documents of the time, attests. Now, with globalization and many domestic crises and reforms, the castle gates have opened, and the question has shifted from entering the castle and trading with Japan to doing business in Japan. But even now, the weight of foreign FDIs is the lowest of the OECD, and the value of endeavoring business in Japan still a challenging issue for global MNCs. Altogether, little research focuses on the very micro level of firms’ strategy with concrete business implications, and this is precisely the gap, at least partly, that is intended to be filled with this book. The purpose was to explore at a very fine level nonmarket strategies and influence situations for foreign firms in the international market, that is Japan, with concrete links to strategic and business outcomes. The primary ambition was first to understand precisely “How” firms deploy their means, with which objectives, tactics, and results in an open theoretical landscape. The first research questions could then be formulated simply as follows: • How do foreign firms engage in CPA in Japan? • Which strategies, channels, and resources? • For which outcomes? • To what extent do they adapt, “Japanize” their practices? By foreign firms, it is meant here the American and European ones which constitute the majority in Japan, but with the rise of Chinese investments in the country, it might be worthwhile to include them in further research. It must also be said that, at the beginning, it was considered a second research question, that is, to investigate whether or not the nationality of the firm has an impact on its CPA strategy. For example, in the literature,1 there used to be a debate to assess whether or not the American lobbying is aggressive compared to its European counterpart, supposedly more disposed to compromises. A consensus is seemingly emerging to say that, even if style differs, institutions are the most differentiating element determining the rules in a specific arena. In conformity with this view, most of the interviewees remarked that this question was not highly relevant so that it was abandoned. At this stage, the difficulty of access to information must be stressed due to a double wall, the inherent and universal confidentiality of the 1

 See Woll, C. (2012), Mahoney, C. (2008), Coen, D. (1998, 1999).

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matter, and the specific Japanese disinclination to discuss it openly. This is a limiting factor that had to be dealt with and explains the methodology followed. Therefore, this research should be rather considered as a propaedeutic effort to create a base for further deepening through data sampling and testing whenever possible. Hopefully, the coalescence of this book’s empirical observations and the conceptual elements brought by its framework should help to identify lessons workable for strategic management in international markets beyond Japan. The field covered is rather wide since this book did not limit itself to the traditional and most frequent understanding of lobbying, that is, modifications of laws at the legislative level. Drawing on studies and surveys describing the major issues encountered by foreign firms in Japan, as well as direct interviews, a broad range of actions extending from the approval of a new business to influence through public opinion were included, the common point being to obtain a reaction from some part of the political body in a broad sense, whether legislative, executive, judicial, or regulatory, and leading to a regulative modification with direct impact on business in terms of sales, profit, or investment decision. This extended interpretation corresponds to the concepts of nonmarket strategy and influence mentioned above.

1.3   The Substance of This Book: A Multiformity of Strategies Leaning on the Cooperative Side An overview of Japan’s political economy and institutional characteristics is presented to highlight the scenes where lobbying can take place and how it differs from its Western counterparts with the peculiar roles of the Ministry of Economy, Trade and Industry (METI) and the advisory committees, for instance. A major feature is the weight of collective action and the reluctance to individual or direct lobbying, as reflected in perceptions and firms’ organizations. The consequences for foreign firms are that they are often compelled to circumvent with soft strategies. Of course, the principal ally of foreign firms should be their home government through their embassies or other bodies such as the USTR, resulting in foreign pressure (gaiatsu). This used to be an instrument, but seemingly not as much effective as usually thought and certainly considerably scaled down today.

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With this background, the journey will take the reader over a number of cases displaying a striking multiformity of nonmarket strategies and CPA. From a political science and communication point of view, this may not be too surprising, as many scholars have already pointed out when compared to a mere strategic management perspective. Indeed, the key basic bricks of these strategies, resources, and the way they are mobilized may only be limited by the imagination. In this sense, and in all likelihood, new and subtle forms of nonmarket strategy are in potentiality somewhere, still waiting to be discovered and exploited. Meanwhile, a significant number of contrasting examples are offered for an in-depth understanding of Japanese reality. As mentioned above, access to this kind of information is difficult. Therefore, this collection of cases may be considered per se original and hopefully useful for interested scholars as well as practitioners with the suggestion of a number of conditions of success for foreign business in Japan. A major lesson is the prominence of the collaborative facet as opposed to adversarial. This is linked to many factors such as the liability of foreign firms and is echoed in various social sciences, but this is, for sure, a key for efficient lobbying in Japan and other global markets. A widely shared phantasm and prejudice in many cultures is that lobbying is about pressure and money. When asked about the phenomenon, many people tend to imagine bribery and almighty multinational companies leading the world from under the surface in a perfect illustration of conspiracy theory. It must be reminded that lobbying, in the American sense, is primarily about information provision and communication, on the persuasion side. It is, therefore, argued here that, building on the literature and this book’s findings, persuasions strategies are more widely used in international arenas with technocratic rationality as the main instrument.

1.4   Structure of the Book The first part (Chaps. 2 and 3) of the study is devoted to theoretical considerations, including a short literature review, fundamental concepts, and the extensive description of the apparatus necessary to analyze Corporate Political Activities and nonmarket strategies. Primarily, there is a problem of definition and boundary setting: the subject concerns political science, strategic management, economics, sociology, but also public affairs or public relations. As research in the field has

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been built upon diverse disciplines, each scholar tends to draw upon its own specialty to elaborate on Corporate Political Activity or nonmarket strategies. As a result, there is nothing such as a unifying theory but rather a juxtaposition or common pool of theoretical and empirical knowledge from which researchers can choose. It is by nature an interdisciplinary field even though, with time, contributions of political science and strategic management, with a particular focus on resources and capabilities, are emerging as the most relevant regarding explanatory and predictive power. The framework and its tools are built upon these perspectives. Altogether, the principal concepts and analytical bricks mobilized are: the two Transversal Dimensions (Influence and Coalition), the three Main Drivers (Institutions, Issues, Interests) plus the Specific Factor (Industry), Resources, and the breakdown of CPA as a Process with its Tactical Building Blocks (Targets, Arguments, Technics). The specificities of Japan in terms of political economy, institutions, financial contributions to the political system, as well as the characteristics of CPA within Japanese corporates (organization, perceptions), including collective action, can be found in Chap. 4. This context helps to understand the background foreign firms have to navigate. The various topics or demands originating from foreign firms that can be treated at a macro or industry level, typically subject to trade and investment agreements, are exposed in Chap. 5 with a historical perspective revealing a change in paradigm. The key issue in Japan was and still is the non-tariff measures despite the numerous treaties signed. Chapter 6, the case study, consists of the application of the framework to about twenty cases. After a breakdown by building block, a synthesis is offered along the two transversal dimensions of Coalition and Influence. The most significant differentiating drivers in choosing a CPA strategy are derived as a conclusion. For a better understanding, this chapter should be read in parallel with the annexes, where a description of the cases is provided. The implications and lessons of the cases for business strategy, whether directly at the Japanese market level or from a more global point of view, are drawn in Chap. 7. The major features of foreign firms’ CPA in Japan are examined there, as well as the conditions leading to success in Japan. The collaborative facet stands out as efficient and workable in global business situations. After a short review of theoretical considerations related to the creation, or not, of a competitive advantage, an attempt is made to link resources, forms of influence, and business strategies.

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The chapter called General conclusion (Chap. 8) summarizes the findings for each part of the book and draws general lessons and meanings of this journey. In a sense, some parts may seem to overlap with partial summaries and conclusions found in each chapter. However, it was judged convenient to adopt this form so that busy people could read the introduction and jump to conclusions fruitfully. Finally, as mentioned above, a Chap. 9 is provided for details of the cases appearing in the book. Not only a reading in parallel of the cases is recommended for a better understanding of the analysis, but they constitute the mere essence of this research, its main asset. Without, of course, pretension for literature, they are designed to be read like short stories. Presumably, the genuine insight about doing business in Japan, the deep interpretation of each lobbying instance can only be reaped by giving them the attention they deserve. At least, the ABB, VW, Hartford, Delta, Fluoride, Hepatitis C cases should be worth a look.

References Coen, D. (1998). The European Business Interest and the Nation State: Large-­ Firm Lobbying in the European Union and Member States. Journal of Public Policy, 18(1), 75–100. Coen, D. (1999). The Impact of U.S.  Lobbying Practice on the European Business-Government Relationship. California Management Review, 41(4), 27–44. Fujii, T. (2012). Kyôsô Senryaku Toshite no Gurôbaru Rûru. Tokyo: Tôyô Keizai Shinpôsha. Mahoney, C. (2008). Brussels versus the Beltway: Advocacy in the United States and the European Union. Washington, DC: Georgetown University Press. Revel, C. (2013). Développer une influence normative internationale stratégique pour la France. Prepared for Ministère du commerce extérieur. Retrieved April 11, 2014, from http://www.ladocumentationfrancaise.fr/rapportspublics/134000079/. Woll, C. (2012). The Brash and the Soft-Spoken: Lobbying Styles in a Transatlantic Comparison. Interest Groups, and Advocacy, 1(2), 193–214.

CHAPTER 2

How to Approach Nonmarket Strategy and Corporate Political Activity

2.1   Introduction This chapter begins with definitions and taxonomy of Corporate Political Activity as a Nonmarket strategy to clarify a domain where many disciplines and concepts overlap. The theme is not new, as abundant literature witnesses, but as often the case, only partially addressed. In this book, the focus is on Japan as a market for MNEs at a strategic management level, and the available research is generally centered on the West, often at a macro or industry level. Therefore, a short review of principal theoretical approaches will be conducted to finally choose to concentrate on the contributions of political science and strategic management. After a reflection on power, two essential analytical dimensions, influence and coalition, will be put forward as interpretive tools. These tools form the conceptual infrastructure on which the practical framework detailed in Chap. 3 will be built.

2.2   Definitions and Taxonomy Since the 1960s, an enormous amount of literature and research has been produced on the relationship between business and government, essentially in North American academia. The issue covers interests and actions of corporations and trade associations trying to influence legislative or regulatory processes, on a continuous or episodic (elections) basis with activities widely known as lobbying, Political Action Committees, © The Author(s) 2020 E. Romann, Nonmarket Strategy in Japan, https://doi.org/10.1007/978-981-15-7325-5_2

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contributions, coalition building, advocacy, grassroots mobilization, constituency building, and so on. The concept is generally referred to as corporate political activity (CPA), business political activity, political behavior, nonmarket activity with related keywords extending to corporate public affairs, political strategy, issue management, and so on. With time, however, the term corporate political activity (CPA) seems to have established itself among researchers. Therefore, in this study, the terminology will be generally unified under this term though it may happen that the words “lobbying” or “nonmarket strategy” are also used equivalently. As will be seen later, the term lobbying can be strictly defined as an information strategy, albeit in the common language, it rather evokes money and corruption. Money is also a CPA strategy (contribution for elections, etc.) but classified by Hillman and Hitt (1999) as a financial strategy. Moreover, it seems that there is a difference of connotation between Europe and the US, where the term lobbying is essentially used for the provision of information by individuals representing the firms’ interests, whereas in Europe, it implies political action in general. Turning now to the definition of corporate political activity (CPA), different contributions from previous researchers should be examined. In his seminal work, Epstein (1969) first makes a critical distinction between the most spectacular, but not necessarily the most important part of CPA, the electoral, and the governmental activities. Electoral activities with their financial contributions are the most known to the public but are only periodic and not policy-specific from the firm’s standpoint. More relevant are the governmental activities usually associated with interest groups and conducted on a day-by-day basis for the purpose of influencing, modifying, or having introduced new laws and regulations at every level (legislative, administrative, judicial). It also includes activities intending to influence public opinion. Epstein, therefore, proposes the following definition: all interactions by business firms with the formal or informal institutions of government and all efforts by corporations to maximize their position in society.

Boddewyn and Brewer (1994), referring to political behavior and power relations quote: “acquisition, development, securing, and use of power … to overcome the resistance of other actors,” “focused on (a) related actors located in the nonmarket environment of the firm,

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essentially governments, interest groups, the intelligentsia, and public opinion and (b) a variety of actions such as compliance, evasion, negotiation, cooperation, coalition building, and cooptation.” Others such as Getz (1997) or Bonardi et al. (2006) summarize it respectively into “any deliberate firm action intended to influence governmental policy or process” or “coordinated actions firms undertake in public policy arenas.” Baron (1995a, b), one of the principal promoters of the “nonmarket” concept, adopts an extensive view. In contrast to a market environment characterized by industry rivalries, Porter’s type competition, and agreements or economic transactions intermediated by markets, the nonmarket environment is concerned with “interactions that are intermediated by the public, stakeholders, government, the media, and public institutions.” Thus, Baron’s definition includes a very broad range of actors, arenas, and interactions related to the social, political, and legal sphere, even encompassing NGOs and various activists whose actions weigh increasingly on firms’ management. In terms of strategy, compared to market strategy defined as “an action taken in the market environment to create value by improving economic performance, a nonmarket strategy is a concerted pattern of actions … to create value by improving its overall performance”. This means that the nonmarket environment is viewed as endogenous to both, market forces and nonmarket activities. Nonmarket strategies concern and cover a wide area of issues and themes: sustainability, climate change, security, health, regulation/deregulation, intellectual property, human rights, trade policy, antitrust, social pressure/activists/NGOs, CSR, and so on. As one can see, these themes evolve with time, culture, and public opinion sensitivity, implying that the list is not exhaustive. The leading idea is that these nonmarket strategies must be fully integrated within the management with the same degree of consideration as market strategies. Substantial variations exist across industries, depending on the level of government control: consumer electronics are less likely to be subject of nonmarket strategies than local telecommunication services or pharmaceuticals. The purposes of nonmarket strategies are also evolving over time. Initially, rent seeking or defense (again rivals, government burdens, etc.) could be considered their major objectives, but currently, they may be mobilized to unlock opportunities, attract customers or create value, that is, in a more proactive manner. Thus, taking into account these precursors’ clarifications, a definition, slightly more elaborate than the first one given (“actions taken by a firm

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to affect its regulatory environment in a favorable way”), will be proposed for this book, drawing on Salorio et al. (2005): Corporate Political Activities include actions taken to favorably position the firm in its nonmarket environment, by managing those uncertainties and resources linked to the influence and/or resistance of other market and nonmarket actors, with regard to the firm’s overall economic performance.

This broad definition is meant to explicitly include the political arena for the expected outcome (a modification of regulation) as well as the standard-setting bodies, the various kind of mobilizable stakeholders (media, public opinion, civil society) along with market actors in coalition, the key concepts of resources and influence, and finally the most important in a business-focused analysis, the relevant actions as having an economic impact on the firm. In this sense, this definition of CPA is intended to be very close operationally to that of nonmarket strategies, almost commutable. The difference should be of nuances: CPA maybe more focused on the political/ power entities and nonmarket strategies maybe more diffuse. With these definitions in mind and a better understanding of the scope of the subject, an attempt can be made to summarize the strategies and tactics covered. The seminal typology offered by Hillman and Hitt (1999) remains a useful basis. In their initial classification, Hillman and Hitt (1999) distinguished the three strategies of information, financial incentive,, and constituency-building with their respective and various tactics. Information strategies consist of lobbying, commissioning research, testifying as an expert, supplying position papers or technical reports. They target political decision makers by providing information. Financial strategies are contributions to politicians or parties, honoraria for speaking, paid travels, hiring of people with political experience and connections, and so on, and target political decision makers through financial incentives. The third category, constituency-building strategies, is more indirect and influences through constituents and stakeholders’ support. They include grassroots mobilization of employees/suppliers/customers, advocacy advertising, public relations, press conferences, political education programs, and so on. To this base, it seems legitimate to add the category of judicial action by which firms can mobilize the third branch of government. This strategy can be particularly effective in a country such as the US, where the balance of the three branches is working and where a good part of the law is

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established by courts as opposed to places where the administration is stronger. However, this is not valid everywhere in the world. It can also be judged interesting to add the category that some call “rule-making” for the lack of a better name. This is not a new phenomenon and consists of succeeding in imposing one’s own norm or standard to a whole industry, often at the creation of a new product. In a more traditional view, this role was left to the market forces: the “de facto” norm. Recently, more and more firms and political entities with extraterritorial laws, compete on the “de jure” side, that is, creating a norm first and having it recognized by the rest of the world so that no one can ignore it unless risking being technologically non-complying and uncompetitive, or being denied access to the market. The last category of private politics is suggested by Baron, who notes the increasing interactions of firms with civil society, often in the form of NGOs. The phenomenon is certainly growing with greater scrutiny from the civil society and a demand for transparency from the public opinion which does not hesitate to launch boycott actions with the help of social networks. This is not completely new either, but evolution can be noticed. Compared to previous periods where the relationship between NGOs and firms was chiefly adversarial, nowadays, firms seek to cooperate with NGOs to prevent a boycott and fulfill their CSR/SDGs duties. For firms, this often used to be a reactive strategy when attacked and still is a difficult tool, a double-edge sword. However, astutely managed, this strategy deserves perfectly to be included here (Table 2.1). Table 2.1  Additional taxonomy of corporate political activities Strategies

Tactics

Judicial actions Defendant or initiator Enforce rights, obtain damages, caution the media, agencies Antitrust, unfair competition Intellectual property Rule-making Co-creation of norms/standards De jure vs. de facto

Private politic (social pressure)

Defensive interaction, self-regulation Indirect effect on regulation Confrontational or cooperative

Characteristics/targets Federal, state courts; administrative law and regulatory agencies

International and national standardization bodies/ committees; national authorities and decision makers Civil society, NGOs

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2.3   Short Literature Review and Theoretical Approach The subject can be approached through various lenses. There is nothing such as a unifying theory but rather a juxtaposition or common pool of theoretical and empirical knowledge from which researchers can choose. In economics, the collective action theory, the agency theory, the public choice theory, the theory of economic regulation, the transaction cost theory and new institutional economics, comparative capitalism, international business have all been mobilized to explain CPA. Within political science, the interest group theory, pluralism, elite pluralism, corporatism as well as international relations and transnationalism offer important contributions. Sociology and organization theory also play a substantial role with the resource dependence theory and the institutional theory. In strategic management, Baron’s nonmarket strategies are central. As already indicated, the scope of this book does not allow a detailed discussion of these theories. Interested readers should refer to the author’s previous works. As a result of the great variety of theoretical contributions and with the view of addressing the subject in a pluri-disciplinary manner, this book has selected several cross-field themes and concepts worth discussing in a transversal perspective for a better comprehension of the analytical framework and resulting conclusions. From political science can be retained the idea of pluralism with a diversity of actors playing a power and influence game based on various forms of resources. Economics offers several interesting clues in seeing the political arena as a market with exchanges between players individually motivated. Transaction costs can explain many behaviors in terms of individual or collective actions as well as nuance the parallel made between economics and politics. The international business perspective stresses the centrality of political behavior and sovereignty while assuming they are not absolute hurdles either. Legitimacy, social acceptance, or institutional resources are concepts widely recognized in IB or sociological approaches as paramount for success, particularly in a foreign context. If there must be one unifying perspective, this role should necessarily be devoted to strategic management, which ensures the cohesion of these building blocks in a

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vision of performance and competitive advantage at the firm level. As seen above, the transversal notion of resources may be the glue that holds together the different thesis. As highlighted in the review about CPA by Lawton et al. (2013), the perspective of resources and capabilities, alone or in combination with other theories, has been a major thematic thread in approaching CPA research since the very beginning, in concert with the topic of “institutions.” The important point is that the concept of resources is applicable and operating over many disciplines, economics, politics, strategy, and so on, and has been exploited as such despite different definitions and domains of validity. The number of resources, their variety in nature, their combination and skillful exploitation, their ownership, and their value differ across areas, but the basic idea of means sufficiently instrumental to be translated into something else toward a goal, whether in the political or economic realm, remains a common feature. In political science, Dahl (1963) and Dahl and Stinebrickner (2003), while investigating power and influence, theorized the amount of influence that a person can exercise as depending on three factors, among which resources presented in a nonlimitative list: “money, information, food, the ability to make credible threats, jobs, friendships, social standing, the ability to make and enforce laws, votes, and a great variety of other things” (p. 34). Epstein (1969) distinguishes eight types of resources, such as organization, riches, access, patronage, surrogateship, influence over media, backlogs of political successes, and business leader status (p. 193). Similarly, Kindleberger (1970) explains that “in economics, there is one tool: money … [In] political science, on the other hand, the armory of weapons is infinitely complex, with reason, argument, persuasion, diplomacy at one end, and force at the other. Politics, of course, includes money as a weapon: consider bribery.” (p. 14). Yoffie and Bergenstein (1985) develop the concept of political capital. In sum, compared to the economic view that tends to focus on monetized or wealth-related resources (land, labor, capital, technology, etc.), other social sciences extend the concept of political resources much further. This approach will form the backbone of this book’s analysis with the two threads of political science and strategic management.

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2.4   How to Analyze CPA in a Theoretical as Well as a Practical Perspective 2.4.1  Main Threads and Ideas All CPA theoreticians and practitioners agree that these activities are complex phenomena that must be divided into smaller components and processes to be apprehended; even reduced, interrelations between elements are still far from straightforward. This is the reason why many authors (Mahoney 2008; Lassalle-De Salins 2006) refer to Kingdon’s (1995) ideas, building on the garbage can model proposed by Cohen et al. (1972). In this view, there are three major independent streams (problems, policies, politics) that evolve in organized anarchy in a chaotic manner and come together at critical times. This framework is interesting if one wants to consider how different elements interplay in a loose manner for a policy outcome but is not sufficiently complete and explicative for the purpose of this book. Therefore, the idea of flexible coactions should be kept in mind, and further investigations undertaken. In search of a unifying framework that could take into account the different building blocks of CPA documented in the literature or during the interviews with practitioners, the intention was to stick closely to the two variables to explain: policies and business decisions, that is, the double level of CPA outcome. Consequently, as already suggested in the short literature review, the decision was made to draw on political science and strategic management to deal with this double-level requirement. More precisely, in the political science field, Mahoney (2008) conducted a remarkable comparative work about advocacy (a proxy for lobbying) practices in the US and the EU.  When comparing the manner lobbying is managed on both sides of the Atlantic, the American way is frequently described as more aggressive, whereas Europe would be more consensual. One of Mahoney’s purposes was to examine whether these differences, if established, were related to culture and/or to other factors. Drawing on predecessors, she identifies three key factors, namely, Institutions, Issues, and Interests as key determinants of the advocacy process. In the domain of strategic management, Baron (1995a, b) had already theorized these factors, adding to them the fourth pole of Information to form the Four I’s model. After an overview of the literature nourished by the feedback of fieldwork, it became clear that these three factors, Institutions, Issues, and Interests, are highly relevant for their analytic and

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explanatory power, not only in domestic situations but also on international or comparative scene. They are, of course, slightly differently defined between both authors who write respectively in distinct perspectives; nothing, however, that cannot be synthesized. Considering that they form essential building blocks of this book’s approach, they, therefore, will be called from now on, the 3 Main Drivers. 2.4.2  The 2 Transversal Dimensions: Influence and Coalition 2.4.2.1 P  ower and Influence: The Pressure/Persuasion Dimension and the Balance of Influence Considering politics, power is clearly the central notion around which everything revolves, but several definitions exist. Applied to CPA, the relationship between power and influence and the polysemy of the term lobbying that includes threat by pressure groups and provision of information, have to be clarified. Moreover, in an international situation, states, essentially in the form of home governments, may intervene for MNEs, and this has to be taken into account in the explaining patterns. Reflections on power can be traced back to Aristotle and Plato, passing through Machiavelli, Hobbes, Rousseau, and many others. The concept, nonetheless, presents a controversial and problematic status that has led to a voluminous literature and endless disputes, with scholars even doubting of its analytical utility, others stressing that it is dependent on context (Astley & Sachdeva 1984). For Weber (1947, p. 154), politics is defined “within a given territorial area by the application and threat of physical force on the part of the administrative staff” and power by “the probability that one actor within a social relationship will be in a position to carry out his own will despite resistance, regardless of the basis on which this probability rests” (idem, p. 152). Building on this idea, Dahl (1957) offers the following seminal definition: “A has power over B to the extent that he can get B to do something that B would not otherwise do.” This conception, in line with the pluralism stream, was subsequently criticized for being incomplete, particularly by Bachrach and Baratz (1962),1 who counter-proposed a second face of 1  Criticizing the elusiveness of the concept of power due, inter alia, to the different lens adopted by each school (political scientists/pluralism and sociologists/elitism), Bachrach and Baratz propose a new approach based on the analysis of dominant values, myths and, above all, existing bias to understand the dynamic of non-decision-making.

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power from an elitist point of view based on sociology. They drew attention to the fact that power is related not only to the decision-making process but also to non-decision-making, preventing people from doing, with the result that certain persons, issues, or conflicts are excluded from it. Lukes (1974)2 developed this concept of non-decision-making by focusing on the agenda-setting power and added a new face, the ideological power, that influences people’s thoughts and wishes. Later, Digeser (1992)3 included a fourth dimension originating in Foucault’s writings and associated with the subject configuration’s facet of power. A similar proposition, albeit more systematic and organically better organized, has thereafter been made by Barnett and Duvall (2005) in a perspective applicable to international politics. They synthesize all these findings in a taxonomy consisting of four entries organized along the axis of relational specificity (direct or diffuse) and power channels (interactions between actors and socially constitutive relations): compulsory power refers to direct interaction between actors; institutional power to indirect relations; structural power is the constitution of subject capacities in direct structural relations, and finally, productive power denotes a diffuse production of subjectivity in systems of meanings and significations. This framework is interesting because it allows the integration of several different aspects of the complex phenomenon of power. For example, the concept of soft power developed by Nye (2004)4, in the domain of international politics, to complement the realist emphasis on hard power echoes in some manner, albeit not overlapping totally, the concepts of institutional and productive power. Nye describes hard power as fundamentally based on military and economic power, characterized by behaviors such as coercion, deterrence, and inducement, with resources such as force, payments, or sanctions. By contrast, soft power appeals to behaviors like attraction or agenda setting, building on resources such as values, culture, institutions. 2  After having defined power in a generic manner, stating that people exert power over others when they affect them in a manner contrary to their interests, Lukes points out that people sometimes act willingly in ways contrary to their interests. To him, this constitutes the third dimension of power that can be seen in ideology where no coercion or constraints are at play. 3  This fourth dimension questions the production of the subject as well as the norms governing our self-understandings and political practices. 4  A central criticism to the concept of soft power consists of considering that soft power is only secondary to hard power and cannot exist without its backing.

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Resources have been mentioned here as a recurrent topic. Coming back to Dahl (1957), it can be noticed that, when considering the power of A over B, he completes his description by several elements, among which: (1) the basis of power, that is, the resources, rather passive and inert that must be activated to affect the behavior of another; and (2) the means, in other words, the instruments by which the resources are exploited and mobilized. As Barnett and Duvall (2005) put it, “identifiable resources that are controlled and intentionally deployed by actors are what counts about power.” This focus on resources is also represented by scholars, generally more sociologists than political scientists, such as Homans (1961), Emerson (1962), Blau (1964), Pfeffer and Salancik (1978) who share concerns about resource control, exchange, dependence, and underlying asymmetries. Therefore, it seems that a broad consensus exists on the fact that resources matter, possibly because they are actually more visible and, therefore, may prove more effective for analysis, whereas power may not be directly measurable in its causal effect. With all these nuances related to the possible aspects of power in mind, Dahl may now be considered again to clarify the relationship between power and influence. Recognizing the absence of standard terminology, Dahl (1963; Dahl and Stinebrickner 2003) discusses the concepts of desires and interests to find them respectively lacking substance and difficult to separate from theoretical assumptions, that is, Weltanschauung. As a result, he offers the following definition of influence: a relation among human actors such that the wants, desires, preferences, or intentions of one or more actors affect the actions, or predispositions to act, of one or more actors in a direction consistent with, and not contrary to, the wants, preferences, or intentions of the influence-wielder(s).

This definition has chiefly the advantages of incorporating causation between A and B and being comprehensive in its different forms covering the whole political field, in a manner that corresponds well to the problematic of CPA, ranging from persuasion to pressure. Indeed, Dahl identifies seven forms of influence: inducement and power, force and coercion, persuasion and manipulation, authority. Inducement and power are like the two faces of the same coin; power occurs “when B does what A wants because A will deprive B of something” in a threat of sanction. By contrast, inducement offers “something

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B values in return for doing what A wants.” Thereafter, Dahl describes force and coercion where force is the use of physical means to have B doing as A wants. Coercion is a very close notion, frequently not distinguished from force and consisting of the credible threat of its use, but preferably without actual exercise. He nonetheless notes that coercion can be understood “as an extreme variant of power,” the distinction being between the threat of deprivation versus the threat of force. Following comes the pair of persuasion/manipulation, which differs from the precedent forms in the sense that they consist only in communication in their exercise. Persuasion refers to conveying “information, argumentation, or explanation that lead B to do or think something different from what B otherwise would have done or thought.” It is based on rational and truthful interactions between actors and plays an essential role for professionals such as lawyers, physicians, and so on as well as politicians, assuming that they are not all corrupted or self-interested. Manipulation involves obviously distortion, misleading, or omission of a certain aspect of the truth. Persuasion and manipulation can also be seen as the two faces of the same coin depending on the degree of argument shaping. Finally, authority stands somewhat apart with a subtler nature linked to the concept of legitimacy. According to Dahl, authority can be seen as an automatic form of influence where actors feel morally obliged to comply and obey. To this extent, authority is cheaper to use compared to other forms of influences because needing a lesser mobilization of resources, provided that it has been established on solid grounds first. Taken together, power is seen as a part, a special case of the exercise of influence, which seems to be the best-suited concept for this book’s purpose. Building on Dahl’s analysis, the notion of influence will, therefore, be used to designate the whole range of actions in the political realm intending to obtain a change in behavior materialized by a policy outcome. Power and coercion will be tied up to be unified under the idea of threat of sanctions, either from voters, public opinion or from other states in an international context. However, the notion of inducement implies some difficulties. According to Dahl, it is the face of the same coin. Nonetheless, the symmetry seems to be imperfect, since a reward or an economic incentive could be interpreted as being closer to the persuasion than the coercion side if persuasion is understood with a nuance of acceptance by an actor. It then depends on the meaning attributed to persuasion: does it include any change in behavior in a symmetrical alternative penalty/reward conveying rational/emotional motivations (Funkhouser

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and Parker 1999), in which case Dahl’s distinction into seven forms could be summarized in persuasion only. Or, does it refer to an array of forms with gradual and blurred boundaries? Moreover, saying that persuasion/ manipulation consists of communication only seems misleading because persuasive communication could well be constructed with technorational arguments and, at the same time, contain material incentives. In a slightly different perspective, Nye (2004) in his explanation of hard and soft power proposes a continuous spectrum between hard and soft on a command-­ coopt axis, in which hard power includes coercion and inducement in both military and economic realms, but with inducement closer to the border of soft power than coercion. Therefore, in the CPA perspective of this analysis, it seems preferable to think of the distinctions in the forms of influence in terms of a continuum of subtle and diffuse relationships (Woll 2007), extending from hard to soft, from coercion to persuasion passing by inducement. Dahl’s forms should be considered as a general framework, non-mutually exclusive, allowing nuances and overlaps. It is more rewarding to study the phenomenon of influence through underlying resources (the basis of power) and specific combination of actions by which these resources are mobilized (the means of power) to determine changes in behaviors, all observable phenomena. Epstein did not say anything else. Consequently, as stated above, this book proposes the transversal dimension of Pressure-Persuasion (Fig. 2.1) as an essential analytical tool allowing for characterizing the elemental types of influence exerted in each CPA situation. The dimension is designed as an array represented by a matrix ranging from a Pressure pole to a Persuasion pole. In the Pressure part are naturally included all actions related to threat and coercion conducted directly by firms, such as menaces of relocation, destruction of employment, loss of tax revenue, and so on, and indirectly through their home governments. It also involves the more generic notion of Adversarial CPA that has been observed by many authors in the literature, and that corresponds to strong opposition, materializing in judicial action, for example. On the Persuasion side can be found all the CPA actions resting on information provisions (lobbying in the strict US sense), propositions for new products/services/technology, win-win arrangements, that are based chiefly on rationality (technical, economic). Considering symmetry with the Adversarial facet, the term Cooperative (Luo 2001) was added. Between these two extreme poles, a wide array of

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Fig. 2.1  Balance of influence

combinations takes place, including economic incentives, soft but real pressure by voters or public opinion, and so on. Again, this is only a tool that must help to categorize and understand each CPA strategy, and that must be seen in relation to other factors. Therefore, the classification of cases in this matrix is qualitative, with the possibility of polyvalence and overlaps, hence not absolute. 2.4.2.2 R  epresentativeness/Credibility: The Balance of Coalition (Individual, Coalition or Collective Action) As indicated in the title, this dimension refers essentially to the key distinction between individual, coalition-based, or collective actions, which have been traditionally a dominant component of CPA analysis. Similar to Pressure/Persuasion, it is an equally transversal dimension in the sense that it underlies every CPA situation in a generic manner. The choice, however, was made to call it this way rather than merely Individual/ Collective for several reasons explained below, but primarily because it

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offers a broader conceptual framework adaptable to different regional contexts and operational in the EU as well as in Japan. Many scholars such as Olson (1965), Yoffie (1987), Hillman and Hitt (1999) have stressed the role of the cost factor in the choice of individual versus collective action, taking into account the benefit per capita or the possibility of free ride. This is certainly a decisive driver, particularly for SMEs with limited resources. However, it is hardly the sole one. Another explanation, noticed by Hillman and Hitt (1999) and others, consists of institutional settings. Depending on the degree of corporatism or pluralism, firms and governments in certain countries tend to rely more on collective interactions and negotiations through peak or trade associations. Whether or not the classification as corporatist or pluralist is fully appropriate, the existence of economies attaching more weight than others to consensus-building, cooperation, and harmonious coexistence, seems undeniable as has shown the categorization of the Varieties of Capitalism school into CMEs and LMEs5. However, even though this categorization may be satisficing at a general macro or semi-macro level, it can be said that it does not adequately reflect the fast-changing economic conditions of the last decades. Moreover, in this kind of view, one essential determinant of CPA strategies, the specific Issues, are not taken into account. The role of Issues in the framework will be addressed later, but what can be said now is that Issues are maybe the starting point, the first element in the complicated chain and web of decisions leading to the initiation of CPA. This fact was already mentioned by Epstein (1969, p.  61) when he noticed the decreasing reliance on general business and trade organization and the increase in corporate emphasis on independent political activity since the end of World War II in the US. The key point is whether the Issue is strategic, related to firm-specific business and competition, or whether it concerns the whole industry or a country-wide topic. In this sense, peak associations such as the US Chamber of Commerce or Japan Keidanren deal with issues such as tax, labor, trade, or regulatory reforms, provided that a sufficient consensus can be established between its numerous and various members. At a lower level, trade associations monitor legislative and regulatory activities, conduct administrative actions, and

 CME: Coordinated Market Economy, LME: Liberal Market Economy.

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focus on technical standards or issues linked to safety, for example. They also have an important role in research and statistics. At the firm level, if the issue is not related to any of the above topics but concerns the strategic core of the firm with the risk that sensitive information such as pricing of products leaks to competitors, it is, therefore, likely that the firm would avoid relying upon trade association for this specific matter. However, again, the world is not black and white; there are cases where firms choose to use trade association as part of a package, up to a certain point, in order to gain access and attention from the government, and beyond this point interact individually with the officials. Consequently, the choice is not between collective and individual, but depending on the Issue (and other things), pertains to a combination ranging between these two poles. To these, must also be added the ad hoc coalitions, sometimes called “Transversal lobbying,” which tend to be one of the most widely used forms of CPA and lobbying, at least in the US and the EU. These patterns naturally include firms but also actors of different natures such as NGOs, or civil society groups, all having in common aligned interests. They have no formal links, cease to exist once the goal is attained, and are considered effective because of being composed only of strongly motivated actors (no free ride) forging majorities from a collection of minorities. This general trend can be seen worldwide, but it is nonetheless true that Japan, for historical and institutional reasons, still focuses heavily on “Gyôkai”6 and industry associations. Things are changing; strategic differentiation and natural selection tend to be more and more recognized, but the preference for consensus and mutual prosperity can still be considered a characteristic of CPA in this country where individual action is generally frowned upon by officials.7 This will be addressed again later (Fig. 2.2). Finally, drawing on literature and collected cases, Joint Ventures can, in all likelihood, be considered as a form mobilizable for CPA. Naturally, and contrary to the other levels of participation treated above, the purposes of a Joint Venture are far from being (only) political. Knowledge of the market and the clients, relationships with suppliers, and other stakeholders  Gyôkai: industry  Interviewees, especially the Japanese companies, report that the first thing officials ask them when they come to explain their case is why they do not use the channel of their trade association (the “normal” way), and that they cannot do anything for a single company. 6 7

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Fig. 2.2  Forms of coalition

may be more important determinants. However, in markets deemed to be difficult such as Japan, it used to be and still is a common entry mode, which can include, even though not exclusively, political and administrative purposes. Altogether, a pertinent image could be that of a chain of forms or levels of participation, as Hillman and Hitt (1999) named it, ranging from Peak Association to mere Individual activity and passing by the steps of Industry/Trade Association, Ad Hoc Coalition, and Joint Venture, depending essentially on the number of involved members. Akin to the Pressure/Persuasion dimension, they should be seen as gradations on a seamless array with overlaps and gray boundaries as firms may use several levels at the same time or sequentially. Next comes the choice of the denomination Representativeness/ Credibility instead of Collective/Individual. The terminology has been inspired by Guegen (2007), who stresses the importance of this balance, Representativeness and Credibility when building a strategy. Representativeness is undoubtedly an essential element in representative democracies, where, in an ideal world, politicians accountable to citizens for reelection, can claim for the legitimacy of the demand on the basis of the maximum number of interests involved. However, in a world overwhelmed by the variety of issues and individual preferences, aggregation and channeling of these desires and demands are a prerequisite for workable policymaking. But still, the larger the representativeness, the stronger

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the mandate, the easier are the acceptance and the adoption by politicians to satisfy constituents. On the other hand, besides this legitimacy of the numbers, Guegen explains that Credibility is increasingly becoming a key driver of CPA strategies for several reasons. Following the same logic as described above, the traditional method for European CPA through industry associations at the national and EU level, created, with EU extension, further hurdles as national interests combined with industrial ones, rendering consensus harder to obtain. Generally speaking, the larger the group, the less likely the members agree on a specific subject. Consequently, the issues promoted by these associations could (and still can) at best represent only the lowest common denominator. In addition, in the case of the EU where the Commission plays a role close to the executive and the bureaucracy of a state but without having the same budget and staff of specialists, the external resources provided by other actors, either firms or think tanks, became welcome as the workload of the Commission increased with time and the deepening of market integration. In this context, firms are in a good position to offer valuable economic and market information from a pan-European point of view or technical expertise that they are the only ones to have. This is the basis of the concept of Credibility, naturally not limited to the EU. In our global world boosted by technical and economic acceleration, any leading company in its industry has more accurate and recent information than governments on specific issues. Furthermore, as Baron (1993, 2013) shows, beyond self-evident data and analysis, Credibility requires reputation and corroboration by non-­ aligned interest (think tanks studies, for example), that is, a combination of internal and external legitimacy. Consequently, on the one side, there is Representativeness related to the legitimacy of numbers and consensus, on the other, Credibility, borne by fewer actors, which can be said relying on quality, value and legitimacy of the information or argument. Both seem equally important, differing again in the resources they mobilize and the level of participation of actors. Guegen even adds that Credibility is more important today in the case of the EU. Coming back to the problematic, it seems that these two concepts, integrated into what has been called a Balance of Coalition (Fig.  2.3), offer an excellent array of choices related to the type of coalition and the level of participation in a CPA strategy. It has the advantage to include the Collective/Individual dimensions, but also to bring a broader functional

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Fig. 2.3  Balance of coalition

and qualitative nuance in an integrated unique framework. In Japan, the phenomenon of acceleration is equally working with the government correspondingly open to innovation and information related to global trends as provided by individual firms. However, the traditional channels and features are still strong: respect of consensus, nemawashi8 and avoidance of conflict, limited proactive action toward bureaucracy and non-interference of the private sector in policymaking, high bureaucratic rationality, fear to alienate various interests in demanding a unity of voice from claimers, a vision of law as an achieved product rather than a future objective, and so on. All these logics, rooted in Japanese institutions and society, tend to give to the pole Representativeness a stronger weight than in the US or the EU. Another advantage of these concepts is that they can combine, instead of only representing, a polar and opposing division such as Collective vs.  Nemawashi: prior consultation and behind-the-scenes consensus-building process.

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Individual. Indeed, an action in a coalition with broad representativeness supported by strong arguments and credibility is far from uncommon, although not suitable for all business issues. This type of winning strategy would offer the strongest association of legitimacy by numbers and quality.

2.5   Conclusion This chapter presented an overview of the theoretical approaches through which the CPA phenomenon can be analyzed. The number of related fields and disciplines as well as the volume of literature is so extensive that the choice was made to only briefly review the fundamentals and focus for this book’s analysis on a combination of political science and strategic management. A discussion of the concept of power led to the adoption of the broader and better-suited notion of influence as an elemental analytic dimension that can be understood as ranging from pressure to persuasion. This dimension is substantiated in a tool, the Balance of Influence matrix. A second central dimension underlying any CPA situation consists of the conceptual pair Representativeness/Credibility. These notions encompass the more traditional ideas of Collective/Individual actions but are meant to describe better and comprehensively a nuanced reality. They give birth to the second essential tool, the Balance of Coalition. These two dimensions could be seen as the conceptual infrastructure on which the practical CPA tactics are built in the framework that is the subject of the following chapter.

References Astley, W. G., & Sachdeva, P. S. (1984). Structural Sources of Intraorganizational Power: A Theoretical Synthesis. Academy of Management Review, 9(1), 104–113. Bachrach, P., & Baratz, M. S. (1962). Two Faces of Power. The American Political Science Review, 56(4), 947–952. Barnett, M., & Duvall, R. (2005). Power in International Politics. International Organization, 59(1), 39–75. Baron, D.  P. (1993). Business and Its Environment. Englewood Cliffs, NJ: Prentice Hall. Baron, D.  P. (1995a). The Nonmarket Strategy System. Sloan Management Review, 37(1), 73–85.

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Baron, D. P. (1995b). Integrated Strategy: Market and Nonmarket Components. California Management Review, 37(2), 47–65. Baron, D. P. (2013). Business and Its Environment (7th ed.). Upper Saddle River, NJ: Prentice Hall. Blau, P. (1964). Exchange and Power in Social Life. London: John Wiley and Sons. Boddewyn, J., & Brewer, T. L. (1994). International Business Political Behavior: New Theoretical Directions. Academy of Management Review, 19(1), 119–143. Bonardi, J.  P., Holburn, G.  L. F., & Vanden Bergh, R.  G. (2006). Nonmarket Strategy Performance: Evidence from U.S.  Electric Utilities. Academy of Management Journal, 49(6), 1209–1228. Cohen, D.  M., March, G.  J., & Olsen, P.  J. (1972). A Garbage can Model of Organizational Choice. Administrative Science Quarterly, 17(1), 1–25. Dahl, R. A. (1957). The Concept of Power. Behavioral Science, 2(3), 201–215. Dahl, R. A. (1963). Modern Political Analysis. Englewood Cliff, NJ: Prentice Hall. Dahl, R.  A., & Stinebrickner, B. (2003). Modern Political Analysis (6th ed.). Upper Saddle River, NJ: Prentice Hall. Digeser, P. (1992). The Fourth Face of Power. The Journal of Politics, 54(4), 977–1007. Emerson, R.  M. (1962). Power-Dependence Relations. American Sociological Review, 27(1), 31–41. Epstein, E. (1969). The Corporation in American Politics. Englewood Cliffs, NJ: Prentice-Hall. Funkhouser, G. R., & Parker, R. (1999). An Action-based Theory of Persuasion in Marketing. Journal of Marketing Theory and Practice, 7(3), 27–40. Getz, K.  A. (1997). Research in Corporate Political Action: Integration and Assessment. Business and Society, 36(1), 32–72. Guegen, D. (2007). European Lobbying. Brussels: Europolitics. Hillman, A. J., & Hitt, M. (1999). Corporate Political Strategy Formulation: A Model of Approach, Participation, and Strategy Decisions. Academy of Management Review, 24(4), 825–842. Homans, G.  C. (1961). Social Behavior: Its Elementary Forms (Rev. ed. 1974). New York: Harcourt Brace. Kindleberger, C. P. (1970). Power and Money. New York: Basic Books. Kingdon, J.  W. (1995). Agendas, Alternatives, and Public Policies. New  York: HarperCollins. Lassalle-De Salins, M. (2006). Le meta-lobbying ou comment les entreprises influencent les décisions des organisations intergouvernementales: Le cas des stratégies politiques de l’industrie française au Codex Alimentarius. (Doctoral dissertation, Humanities and Social Sciences, HEC PARIS). Retrieved April 3, 2014, from https://tel.archives-ouvertes.fr/pastel-00004621/document.

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Lawton, T., McGuire, S., & Rajwani, T. (2013). Corporate Political Activity: A Literature Review and Research Agenda. International Journal of Management Reviews, 15(1), 86–105. Lukes, S. (1974). Power: A Radical View. New York: Macmillan. Luo, Y. (2001). Toward a Cooperative View of MNC-Host Government Relations: Building Blocks and Performance Implications. Journal of International Business Studies, 32(3), 401–419. Mahoney, C. (2008). Brussels versus the Beltway: Advocacy in the United States and the European Union. Washington, DC: Georgetown University Press. Nye, J. S. (2004). Soft Power. New York: Public Affairs. Olson, M. (1965). The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge MA: Harvard University Press. Pfeffer, J., & Salancik, G.  A. (1978). The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row Publishers. Salorio, E. M., Boddewyn, J., & Dahan, N. (2005). Integrating Business Political Behavior with Economic and Organizational Strategies. International Studies of Management and Organization, 35(2), 28–55. Weber, M. (1947). The Theory of Social and Economic Organization (A. M. Henderson & T. Parsons, Trans.). New York: Oxford University Press. Woll, C. (2007). Leading the Dance? Power and Political Resources of Business Lobbyists. Journal of Public Policy, 27(1), 57–78. Yoffie, D. B. (1987). Corporate Strategies for Political Action: A Rational Mode. In A. A. Marcus, A. M. Kaufman, & D. R. Beam (Eds.), Business Strategy and Public Policy. Westport, CT: QuorumBooks. Yoffie, D. B., & Bergenstein, S. (1985). Creating Political Advantage: The Rise of the Political Entrepreneur. California Management Review, 28(1), 124–139.

CHAPTER 3

Framework

3.1   Introduction Following the theoretical and conceptual dimensions of Chap. 2 related to power, influence, and coalition, this chapter focuses on the operational side of the analysis. Indeed, the framework presented here is intended to organize and recapitulate the various building blocks available for investigating CPA, not only from an academic standpoint but also from a practitioner’s point of view. The elements introduced here have their source in the literature, but they are reassessed and reorganized in a single process so that they might offer a workable scheme. The cases proposed in this book illustrate the practicality of this toolbox. Figure 3.1 shows the entire framework and process in a compact form that will be detailed throughout the chapter.

3.2   The 3 Main Drivers 3.2.1  Institutions Institutions can be simply defined as the “rules of the game” (North 1990) and, as Baron (2013) specifies, “provide an arena in which interests seek to influence the outcomes on issues.” The manner in which policy and rulemaking are organized at each level determines where, when, and who is targeted to obtain the expected effect. The major government institutions include legislatures, the executive branch, the judiciary branch, © The Author(s) 2020 E. Romann, Nonmarket Strategy in Japan, https://doi.org/10.1007/978-981-15-7325-5_3

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Fig. 3.1  General framework

administrative or regulatory agencies. Within the same countries, both local and central government levels are concerned, whereas outside, international organizations such as the WTO, the Codex Alimentarius, the ISO, or the various treaties regulating exchange or relations between countries such as the Trans-Pacific Partnership (TPP), are targets for influence activities. Moreover, even in the same ministry of the same government of the same country, there are different departments with different sections having different power and agenda that give birth to distinct rules and regulations. In the literature, all these diverse subdivisions frequently tend to be subsumed into oversimplified and monolithic situations such as “business vs. government,” but in the reality of the ground, practitioners must take this multiplicity into account to be relevant. It can even be said that this complexity lies at the core of CPA strategies as it widens the opportunities for action in a pluralistic sense. Consequently, this analysis will try to proceed at the finest level possible and include the specific and semi-formal institutions consisting of the various committees playing an important role in decision-making.

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Naturally, the detailed functioning rules of the system must also be studied to gain a complete picture. For example, a simple but powerful difference between the EU and Japan largely explains the differences of targets and timing in seeking influence. Whereas in the EU, the system requires that each new law’s amendment is voted one by one by the Parliament, which gives lobbyists leeway to convince MEPs1 to oppose individually and have it modified/suppressed in the final version at a later stage, in Japan, laws are proposed in package and voted in one bloc, which means concretely that, to change the content of a law, action must be taken well in advance, much more than in the EU, before the project is presented to the Parliament. Furthermore, as Mahoney (2008) points out, the degree of democratic accountability is also an important determinant of the institutional level. The idea here is that there are two types of officials, those who are facing elections and those who do not, and, therefore, that the implied lobbying strategy is not the same. Members of parliaments and presidents in some countries, at least in democracies, belong to the former category, and one of their major motivations, even if it may not be the only, can be considered to be reelection. In this sense, they are accountable to citizens but primarily to their own constituents. This means that if a lobbyist trying to influence policy can convey information about the desires and grievances of these constituents, he is likely to be heard, and strategies such as letter-­ writing campaigns or grassroots mobilization can be elaborated. On the other hand, many officials are not elected but appointed to their positions to form the cohorts of bureaucrats and technocrats. Some institutions such as the European Central Bank are even specially designed to insulate their staff from electoral or national pressure. Their motivations and drivers are hence necessarily very different with the consequence that arguments and influence strategies will accordingly vary. Niskanen (1971, 1975) offers a model based on the assumption that a bureau acts to maximize its budget, which is certainly highly explanative worldwide, and particularly in Japan, a country of strong bureaucratic culture. However, enthusiasm for the public interest, as well as personal career ambition, are certainly not less significant factors. Nevertheless, to succeed in moving bureaucrats, instead of grassroots mobilization, face-to-face lobbying and provision of serious technical information or alternative policy are essential tactics, not to mention the proposition of job or even bribery. 1

 Member of the European Parliament.

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Besides, the role of money can also be mentioned as the rules related to its mobilization in politics are notably different across countries. Without entering too many details here, in countries such as the US or Japan, contributions by firms or individuals are allowed, under conditions, whereas not at the EU level. At the same time, contributions by foreign firms are not authorized in Japan. Finally, the respective contributions of institutions and cultures to the difference between influence strategies across countries can also be questioned. Michalowitz (2005), Mahoney (2008), and Woll (2012) explore this problem in their comparisons between the EU and the US, attempting to sort out the differences in style frequently pointed out. Their general answer is that the real differences lie in the opportunity structures provided by the respective systems that lead to variation in tactics while recognizing divergences in style. The institutionalist school has already stressed the links between institutions and cultural values with their retroaction loop. Without denying the importance of cultural factors, it seems that institutional elements have a stronger explanative power and present the advantages of being more easily apprehended and observable. 3.2.2  Issues According to Baron (2013), Issues are the “basic units of analysis and the focus of nonmarket action.” Everybody, from firms to practitioners, from politicians to scholars, agrees that Issues are certainly the starting point when trying to think about CPA. Guegen (2007) states, for example, that the American Chamber of Commerce to the EU, one of the best performing lobbies in Brussels according to him, owes his influence not only to the importance of its members and the quality of its staff but also to its original methodology of intervention, known as issue management. Instead of mobilizing a whole sector with its supplier and appeal to the institutions in a traditional manner, the Chamber of Commerce set up a working group composed of experts from the concerned firms supported by consultants and lawyers in a transdisciplinary perspective. As a result, several classifications are possible, depending on the lenses used. Overlapping may naturally occur accordingly, and they are not mutually exclusive. Doing business in the domestic and international arena does not imply the same problems either. Simply taken from a domestic perspective, issues related to themes such as environment, sustainability, human rights, and safety may attract public

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opinion and lead to private politics, whereas more technical issues such as intellectual property protection or antitrust would be treated within a closer circle of specialists. In addition, depending on cultural differences, some matters such as the use of genetically modified organisms in food may be much more the subject of controversy in some areas, for example, the EU, than in others such as the US. In their comprehensive review, Hillman et al. (2004) classify Issues as essential antecedents of CPA and propose the two categories of Issue salience and Issue competition. Salience, understood as visibility to the public, is indeed pointed out by many scholars. In the Issue competition group, they include Lowi’s (1964) distinction between distributive, redistributive, and regulatory policies, Wilson’s (1980) distribution of the benefits and costs of policies, and Buchholz’s (1992) issue life-cycle model. Besides, Mahoney (2008) distinguishes six types of Issues in her study: scope, salience, conflict, focusing event, history of the issue, type of issue/ policymaking procedure. Scope refers to the number and the extent individuals and industries are involved. Salience is, similar to Hillman et  al. (2004), the degree of visibility measured essentially by media exposure. Conflict relates to the level of controversy and contention. The idea of the focusing event is linked to policy debates and decisions made after a crisis such as an airplane crash leading to the strengthening of safety criteria. The long history of an issue or its newness is a major factor frequently observed. Finally, the procedure, that is, whether the policy is decided by the Parliament or in a technical agency, legislative or regulatory, can obviously be considered decisive. Although interesting because designed for an international comparison, which is rather scarce in the literature, these criteria are however related to the study of advocacy and lobbying in general, without a specific focus on business, which generally prefers to operate behind the scenes, contrary to other actors of the civil society who are skilled at fully exploiting the saliency of an issue. Therefore, the criteria must be adapted to fit more closely to the subject: firms in an international business situation, in a country where foreign firms have a much lower economic weight than other average OECD countries, and where the adopted laws and policies do not have the global standard-setting power of the EU or the US. Consequently, building on the above literature and the patterns noticed in the interviews, the following categorization of Issues, seemingly the most relevant for this book’s purpose, could be proposed (Table 3.1):

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Table 3.1  Categorization of issue types Firm-specific vs. Without anticipating the conclusions, it appears to be one of the most industry-wide important factors in deciding whether the firm will act alone or go with groups like peak or trade associations. If the issue is related to strategic business questions involving sensitive and competitive information, then the firm will interact individually or in a narrow coalition with the government. In cases concerning a whole industry such as safety criteria or taxes, the framework of a trade association is better adapted. Approval, This category is numerically the most important as many interactions certification, between firms and the administration in Japan are related to the conformity authorization of new products (or services) based on different standards assessment and norms that must be adapted to the Japanese market. Newness of the Newness has been recognized in the literature as a key strategic element product, in the sense that it is assumed to be easier to create new categories and technology or battlefields than move old entrenched interests. As reflected in the cases, concept this criterion should be read as an indicator of the probability of success. Level of This dimension is naturally essential and universal. The level of decision policymaking results from the institutional setting and the nature of the policy. It can and procedure be a law needing to be passed by the Parliament, or a simple regulation taken at Ministry or Agency levels. The distinction Political/Technical is frequently seen in the literature to indicate whether an Issue is to be treated at the highest political level, say Prime Minister, or whether it will be solved by the firm’s engineers and a few civil servants in a technical agency. However, it can be noticed that the classification is not always straightforward: in some cases, part of this distinction overlaps with the Scope criterion. Moreover, as observed from the cases, some Issues can evolve, beginning as a very technical and niche question to end at the highest political level. Finally, Issues linked to inter-states negotiations and that are settled at a bilateral level such as aviation are also included here. Scope Following other authors, the scope of an issue can be considered a significant determinant of CPA strategy. The tactics unfolded will not be the same if the issue touches a large public, including numerous industrial sectors at the national level or few individuals in a local community. The Scope criterion, understood as magnitude, may also be considered a key factor in deciding whether conducted at individual, trade or peak association. In this category can also be included Non-election vs. Election issues, assuming that election issues, due to the number of actors and the variety of interests involved, could not be attractive for firm CPA considering its probability of success. (continued)

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Table 3.1 (continued) Salience

Salience implies media coverage and movement from public opinion. This dimension is certainly important in lobbying activities in general, but for business, a fortiori operating in a foreign country with limited legitimacy, must be understood as an indicator working in the opposite direction: the lowest profile and salience, the greatest chances of success as many studies show. However, for some industries such as healthcare, it may be different. Level of conflict Whether or not the issue is consensual or has strong opponents, has and long been a paramount element in deciding to conduct CPA and how. competition As stated above, the nature of political competition in terms of distribution of costs and benefits (concentrated or widely distributed) on a specific issue (Lowi 1964; Wilson 1980)a impacts the incentive for an interest group to mobilize or not. Bonardi et al. (2005) make an interesting analysis of competition, proposing a parallel between economic and political marketsb a According to Lowi, distribution, regulation, and redistribution are the three major categories of public policies and correspond to real arenas of power. Distributive policies refer to the nineteenth century-type “patronage” with highly individualized, clientelistic services and benefits to constituents (land policies, defense procurement etc.). Regulatory policies are also specific and individual in their impact but cannot be disaggregated to the same extent as distributive policies (sector level); they directly raise costs and reduce/expand the alternatives of individuals. Redistributive policies impact broad categories of individuals, close to social classes, and correspond to shifts in property or wealth such as income tax or welfare programs. Wilson proposes a classification of policies on the basis on whether the costs and benefits are widely distributed or narrowly concentrated from the point of view of those who bear the costs or enjoy the benefits when considering modification of policies. In this sense, the focus is on change compared to the rather structural view of Lowi. Thus, he distinguishes the four categories of Interest group politics, Entrepreneurial politics, Client politics and Majoritarian politics

Bonardi et al. (2005) note that, low rivalry among firms on the demand-side renders the political market more attractive, which conforms to the logic of economic markets. However, on the supply-side, that is, the providers of policies, things are less straightforward. For elected officials, high rivalry generally increases the attractiveness of the political market for firms as politicians compete for themes and constituents. On the contrary, for non-elected bureaucrats, they argue that high rivalry tends to reinforce the status quo, thus decreasing the attractiveness of political markets. This analysis may seem counterintuitive compared to economic markets where high competition between suppliers benefits to the demand side. b

3.2.3  Interests The concept of Interests seems relatively universal and easy to apprehend but is not without ambiguities and difficulties. From a political science perspective, as Mahoney (2008) and many others define it, organized interests participate in the advocacy and policymaking process with the major characteristics of having financial resources, membership resources, being an actor formalized into an organization

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such as a citizen group, a foundation, an NGO or an individual firm. The advocacy strategy will obviously depend on these different factors. In the more focused perspective of foreign firms’ CPA, the implied actors are slightly different even if the general meaning remains the same. However, before detailing this point, one should remember with Baron (1993, 2013) that the term Interests has dual use. On the one hand, it refers to an individual actor, firm, or other organization, which has a stake in an Issue. In this sense, it overlaps with the notion of Stakeholder. On the other hand, it relates to the stake itself, its magnitude in terms generally of benefit or cost from a business perspective. To this point, Dahl’s (1963; Dahl and Stinebrickner 2003) reservation regarding the notion of Interest can be considered. They stress that the term Interest, as it has been used in many definitions related to power and including a statement such as “favorable to one’s interests” or “contributing to one’s interest,” is not sufficiently precise because the meaning of what Interests are is problematic, ambiguous, and finally depends heavily upon the implicit or explicit theory of interests borne by the person making the judgment. What A thinks of being good for B is not necessarily what B or a third-party C would consider good. It presupposes of theory about the world, a Weltanschauung, which is rarely universal. Coming back to CPA, it could be said that Dahl’s remarks are exactly at the core of the question. Baron (2013, p. 197) quotes that “the task of the lobbyist is to provide information that links the interests of the firm with those of legislators”; similarly, as one practitioner puts it, in CPA “you are trying to demonstrate that your interests are aligned with Japan real interests as understood by the people making regulations in Ministries and that they should act in accordance with what you wish.” In attempting to demonstrate that Interests are aligned, the practitioner brings his vision of what real interests are supposed to be even if not perceived consciously in the same manner by the interlocutors. Shaping the Issue, that is, proposing a lens to frame a question, and bringing the accordingly elaborated arguments to convince, is precisely at the heart of influence and lobbying. In conclusion, with these considerations in mind, the term Interest will still be kept in this analysis for its conceptual convenience with its dual, but undoubtedly related meanings, of actor and its stakes, while focusing on how arguments and issues are shaped and developed. Therefore, the

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interests of firms, supporting and opposing actors, competitors, as well as those of office holders, politicians and bureaucrats, without forgetting states or local governments, will be taken into account.

3.3   The Industry-Specific Factors The propensity to undertake CPA differs across industries as many scholars have noticed. The key drivers for this tendency are naturally the degree of control over the sector exerted by the government and the change that occurs, that is, essentially deregulation and liberalization in OECD countries but also nationalization or new restrictions in some emerging economies. Strategic and national securities interests are usually areas where governments intervene mostly throughout the world, meaning that defense or oil industries are either narrowly controlled or heavily regulated. Therefore, firms whose growths depend on public policy cannot avoid CPA activities. Historically, infrastructure businesses were all more or less in this category, but depending on the country, liberalization and privatization have taken place, opening the business to newcomers and restructuration. Thus, the so-called network industries such as rail transport, energy and electricity, telecommunication services, postal services, and so on have more or less recently experienced extensive changes. In many countries, direct regulation by Ministries has been transferred to independent agencies. Even if competition has been introduced and pricing more or less liberalized, the level of regulation of these industries is still relatively high for political, safety, or strategic reasons. Consequently, all these sectors tend to be subject to a higher degree of CPA than others. In the same idea, pharmaceutical/healthcare and finance are also significant contributors. On the other hand, more market-driven industries, such as consumer goods, are considered to be less likely, as compared to the sectors above, to present strong CPA. However, IT firms such as Microsoft, Google, or Apple that evolve at the boundaries of these industries, have issues such as antitrust and standards setting. The automobile industry can be seen as ranking somewhere in the middle. Figure 3.2 shows the top spending industries in lobbying, as reported in the disclosure reports of the US Senate. Healthcare, Insurance, and Electric Utilities are indeed leading the ranking; in the 4th position is

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Pharmaceuticals/Health Products Insurance Electric Utilities Electronics Mfg & Equip Business Associations Oil & Gas Misc Manufacturing & Distributing Education Hospitals/Nursing Homes Telecom Services Securities & Investment Real Estate Civil Servants/Public Officials Health Professionals Air Transport Misc Issues Defense Aerospace Automotive Health Services/HMOs TV/Movies/Music 0

2

4

Fig. 3.2  Ranking of lobbying spending by industry in the US 1998–2015 cumulated. Unit: billion US$. Source: adapted from Opensecrets.org, https://www. opensecrets.org/lobby/top.php?showYear=a&indexType=i, accessed April 5, 2016

found the Electronic Manufacturing and Equipment industry that includes all the big names such as Microsoft, Oracle, Qualcomm, IBM, Apple, and so on. From a European and slightly different perspective, a survey by Burson-­ Marsteller (Fig.  3.3) shows that industries where corporate lobbying is perceived to be the most effective, are Energy, Healthcare, Financial Services, Agriculture, IT/Telecom and Defense. This is, naturally, qualitative but can be considered as a proxy giving a good image consistent with the above general trends.

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Energy Healthcare Financial Services Agriculture IT/Telecoms Defense Trade Transport Chemicals Mining/Natural Resources Sport Retail Consumer Goods 0

20

40

60

80

Fig. 3.3  Ranking of corporate lobbying effectiveness as perceived by EU public officials. Unit: % of respondents. Source: adapted from Burson-Marsteller (2013), p. 15

3.4   Political Resources As seen in the literature review section, the angle of resources has been widely used for analysis, either in political science as the basis of influence or in strategic management as tools for competitive advantages. Indeed, as empirically observable variables, resources can be deemed central to CPA studies and this book’s framework.

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Resources can be tangible, immaterial, organizational, financial, human, and so on. From an economic or corporate/strategic management perspective, their control has frequently been considered important for the development of these means toward a goal, but not necessarily their full ownership, as long as privileged access was secured (Wernerfelt 1984, etc.). In an influence perspective, as Dahl, Epstein, Kindleberger, and others have noticed, resources are not limited and can be of any nature, provided that they have an impact on the strategic choices of others: “a relevant resource is a means by which one person can influence the behavior of other persons. Such resources include money, information” (Dahl 1963; Dahl and Stinebrickner 2003, p. 34). Epstein (1969, p. 223) points out that “corporations do not have a monopoly over political resources,” “labor unions possess organization and riches,” “educational and professional interest group have access, and social status and reputation,” “certain resources possessed by other social groups such as a large number of voters, unimpeachable legitimacy”. In CPA studies, a number of scholars have used the concept of resource with nonetheless a frequent emphasis on its internal facet, probably under the influence of the resource-based view. At the same time, many authors, feel that limiting the applicability of the notion to internal resources forces them to appeal to some external factors and additional theories (for example, Agency) to describe the activities of firms in their full extension, including CPA through trade associations. Thus, some of them found it rewarding to include in the same framework the internal and external resources, in a vision corresponding to the definition of influence. In an attempt to answer this challenge, Oberman (1993) distinguished the idea of “institutional resources” and “actor-controlled resources” rather than “firm controlled resources” to include the external activities conducted by trade associations. In this view, actor-controlled resources can be owned, whereas institutional resources can only be borrowed. Later, Dahan (2005), building on his predecessors and criticizing Attarça’s (1999) interno-centric view, offered his own list of resources, both internal and external. Drawing on this, the following classification (Table 3.2) is proposed, broadly divided into the two essential facets. The internal resources can be considered as controlled or semi-­ permanently tied to the firm and, in this sense, firm-specific and possible source of competitive advantages. Expertise and financial resources are rather straightforward but obviously essential in CPA; organizational

Money, wealth, funding (direct or indirect)

Access, formal (membership of committees, etc.), informal (interpersonal)

Image, reputation, communication skills, STATE POWER history/tradition of past success. May be related to the firm itself or to some external symbol used by the firm to enhance its image. May be seen as close to legitimacy, in a sense the other side of the same coin, but different in terms of degree of control and specificity of the image.

RELATIONAL

SYMBOLIC

PUBLIC OPINION MEDIA

LEGITIMACY

FINANCIAL

ECONOMIC

Internal staffing, know-how, procedures; in-house public affair/government relation section, hired lobbyists/lawyers/consultants Economic power, employment, tax revenues, interdependence with the government (defense, etc.)

Several kinds of legitimacies, based on acceptance/recognition by a third party or society: social good, social norm (environment, health, etc.), other actors/interest groups’ independent opinion (NGO, Think Tank), external expertise, tradition, charisma, etc. General public views as reflected in polls, media, etc. Mass media, news media, social media, specialized media (technical, academic, etc.) influenced through advertisement, ownership, or communication action. Specific to international politics and IB situation; ranges from soft to hard power threat/inducement

EXTERNAL/MOBILIZED BY ACTORS SUPPORT OF Support of clients, allies, constituents, STAKEHOLDER local interests, coalition partners, trade association (organizational strength) NUMBER Quantitative strength, number of voters, of a social group, etc.

ORGANIZATIONAL

INTERNAL/CONTROLLED BY FIRMS INFORMATIONAL/ Technical, economic, managerial, legal, EXPERTISE scientific, sociological

Table 3.2  Internal and external political resources

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resources chiefly refer to the existence of formal department/section/staff in charge of public affairs or government relations. Economic resources must be understood in terms of employment, tax revenue, and so on, important for a country or community. In the relational resources are included any kind of networks (school, region of origin, committees) usually mobilized to gain access. The symbolic resources, linked to the image and reputation of the firm, are becoming increasingly important nowadays with social networks. This list is assumed to be relatively exhaustive even though discussion may occur to decide whether or not another kind of resource should be included or added. For example, Dahan distinguishes the “recreational capability” consisting of organizing events, wining and dining, offering free trips, and so on. This is certainly an important activity in CPA as will be seen below, but, presumably not a resource per se, rather a combination of resources (financial, relational, reputational, etc.) giving birth to a tactic. Regarding the external resources, the first possible remark is that they are less likely to be exhaustively listed. For the purpose of this analysis, the most important ones were assumably selected but, as noted above, possibilities are infinite, and in different circumstances, different resources could be more relevant. For example, state power was included because, in an international business situation, firms rely on their home government through their embassies or directly to influence the host country’s government, but this is a specific situation. Generally speaking, the external resources, as mentioned here, cannot be seen at the same level as the internal ones because they are not owned by firms, only borrowed, exploited, or mobilized temporarily until the goal is attained. Only their usage is specific to a given situation in a certain combination. They are, however, not less powerful than the specific internal ones; they simply maybe harder to orientate and control in the desired direction. To this extent, their employment is more uncertain and needs skills. In the broad category of Support of stakeholders are included all kinds of external assistance provided by the different coalition partners, either limited to a few stakeholders such as clients, or large peak associations. Number is a generic notion referring to a mere quantitative idea, such as the number of voters related to a business or a social group. Furthermore, a distinction was made between Public opinion and Media, even if they can be considered close areas. The objective of a CPA campaign, in certain industries, and with certain issues, could naturally be

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simply to influence public opinion through the media and see the result in polls, for example, as reflected in the media. Nonetheless, there are differences between the support, the media, and the result, the public opinion, which is not necessarily a consequence either, with causation sometimes going the other way round as well. Media can be mass-oriented (news, social media), industry-specific or academic; public opinion can be influenced by street speeches, events, or other kinds of direct interactions. Now turning to the question of Legitimacy already briefly approached in the description of the Balance of Coalition, it was decided to isolate it as a specific resource because it is believed that it plays a decidedly prominent role for CPA in general, but particularly in international business situations. Undoubtedly, it seems linked and/or produced by other resources such as Public Opinion, Media, Number or Stakeholder’s support, but in this book’s perspective, it deserves a category per se because it pertains to many different sources that combine to form this essential aggregate, a mix of objectivity and subjectivity which has the “magic” power of “subsuming one’s specific interests into public interest” (Fujii 2012), that is, the essence of advocacy. Similar to the shaping of interests examined above, legitimacy can be considered as the successful convergence of different Weltanschauung. Weber (1947, p.  328) distinguished three pure types of legitimate authority whose validity of legitimacy claims are based on (1) Rational ground resting on a belief in legality (legal authority), (2) Traditional ground resting on a belief in the sanctity of traditions (traditional authority), (3) Charismatic grounds resting on specific and exceptional sanctity of an individual person (charismatic authority). According to Dahl (1963; Dahl and Stinebrickner 2003, pp. 42, 60), authority is a form of influence that stands apart from other forms (coercion, persuasion, etc.) because it is more nuanced and linked with legitimacy. He notes that authority implies a sort of automatic pattern of obedience, led by a moral obligation. Compared to other forms of influence, authority is “cheap and easy to use.” As a result, leaders in a political system “try to convert their influence into authority … based on perception of legitimacy” because it is economical and leads to automatic acceptance. The idea of social acceptance seeming to be at the core, the following Suchman’s (1995) broad-based definition will be adopted here: “Legitimacy is a generalized perception or assumption that the actions of

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an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions.” The extent to which the ideas of the Institutional theory emphasize the concept of legitimacy and social acceptance has already been underlined. Kostova and Zaheer (1999), Kostova and Roth (2002), and Hillman and Wan (2005) explain the liability of foreignness and the institutional duality MNEs have to face between home and host countries. New institutionalism sees legitimacy enhancement as a central driver to explain their survival and preservation, which means that organizations adopt new institutional forms because they are socially appropriate, that is, legally sanctioned, morally authorized, or culturally supported (Scott 2008). However, these views are fairly general, tending to present firms as rather passive actors in a deterministic environment. From the point of view of management, and furthermore CPA, several authors have promoted a more strategic exploitation of legitimacy. Pfeffer and Salancik (1978) stress that organizations purposively act to achieve social legitimacy by identification to legitimate actors. Boddewyn and Brewer (1994) found that profits have three major sources: efficiency, market power, and legitimacy because some firms trade on their nativeness (“buy American”). Suchman (1995) proposes three legitimation strategies: gain, maintain, and repair. More explicitly, many authors (Baron 2013; Hillman and Hitt 1999; Bouwen 2002; Dahan 2005) have noted the relationships between resources, access, credibility, and legitimacy. As a general pattern, credible resources, such as information, give access to policymakers in a process of legitimization. However, legitimization can operate from various sources such as stakeholders in coalition, think tanks, NGOs, and so on. Dahan (2005) even suggests that “legitimacy competition” can occur with political rivals mobilizing more resources or downplaying the value of their rivals’ resources in attempting to appear more legitimate. Consequently, after this overview of the concept of legitimacy, it can assumably be considered a means and a goal at the same time, as the literature suggests. It is essential to the functioning of politics in “clothing” leader’s influence, stems from various origins like other political resources, and can blend with other resources. As a means, it could be said that it is rather interactive and dynamic, working as a process, and, as a result, that it is, in CPA, an intermediary semi-goal, a step for the final objective which is a behavior, a change in policy. It can be built on technical and

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intellectual expertise, economic social good, social norms such as environment and health, the essential point being the social acceptance it conveys, and the recognition by independent third parties it brings, that is, without visibly aligned interests. Finally, leading to authority that is more reliable than coercion, legitimacy allows the minimization of expenditure of other political resources and is powerful because it avoids alienating diverging interests, one of the fundamental motivations of politicians and public officials if they want to last. To this extent, it is easily understandable that its use is privileged in CPA strategies more than money and coercion. Not all CPA or lobbying actions are clothed with legitimacy, but, as will be seen later, in terms of effectiveness in an environment where requirements for transparency and attention to image and reputation are increasingly prominent wherever in the world, it can be one of the best in the range of the available tools. There used to be inglorious lobbying practices in the past, particularly trying to limit the adoption of environmentally restrictive laws, for example, but the trend is now rather in virtuous lobbying aiming at the conciliation of private and public interests. As a conclusion to this section on resources, it appears important to stress again that they are all combinable, not finite, non-mutually exclusive and that it is the modes of Influence and Coalition as presented above that will determine which resources will be mobilized and how.

3.5   Process and Tactical Building Block Approach 3.5.1  CPA as a Process Before going further in the description or the toolbox, a point frequently overlooked deserves to be highlighted: the vision of CPA as a process, a succession of stages, including access. As the focus is on the How rather than the Why of CPA, it seems important to devote a few lines to detailing this question. To better analyze advocacy, Mahoney (2008), drawing on Lowery and Gray (2004), suggests that it is necessary to understand it as a process and to dissect the principal steps and components of a CPA strategy into the following major elements: Position

Argument

Target

Tactic

Alliance

Outcome

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These steps are not to be seen following a deterministic chronological pattern but rather as a set of analytical segments interacting to form the base of the decision to be taken. Position relates to the issues that arise or that the firm may proactively promote. In the case of proactive action, it is likely that the firm will attempt to advocate its own views, whereas, when facing a nonawaited and challenging issue, it will expectedly try to modify or block it. Arguments refer to the major type of discourse that will form the backbone of its communication with an emphasis on specific impacts such as economic implications, social costs, fairness, and so on. Targets are the organizations and the people (politicians, bureaucrats, etc.) toward which the firm will deploy its advocacy efforts. Tactics such as face-to-face meetings, position papers, and so on, frequently confused with strategies, have been the object of many CPA studies. They will be detailed in a following section. The choice of Alliance and Coalitions, as observed above, is an essential leverage of CPA. Finally, the Outcome, understood as the success in having a policy change, or not, is the logical conclusion of the process. It has been decided to rename what many authors call Tactics as Technics, which is more adapted to the purpose and integrates these building blocks in the framework with a special focus on Targets, Arguments, Technics, and Alliance. In this book’s interpretation, Tactics are a combination of these elements and Strategy is the general mix of factors and transversal dimensions that lead to the Outcome. 3.5.2  Access and Influence The issue of access has long been a significant question for CPA scholars and practitioners. Baron (2013) writes that “lobbying requires access”; Dahan (2005) stresses that many authors just explain that political influence is built on political resources but without paying much attention to the process itself that begins with political resource investment and exploitation and ends with political influence. Following Bouwen (2002), he clearly asserts the necessity to distinguish two phases: one of access to the target and one of influence. As many practitioners explain, some people, firm CEOs, members of trade associations or foreign delegations in the case of international business situations, tend to think that once they have done their “doorknock”2 tour, had a tea and talked to a Minister or 2  Doorknock: intensive meetings of government officials or Members of Parliament by firms’ representatives concentrated on a specific and short period of time.

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Members of Parliament, the job is done. This is obviously not the case, as this is only the first part of the task. Actions of influence, those which bring actual results, only begin in the second part. It is one thing to get an appointment for a meeting to read a position paper and another to be taken into account in the final decision. Bouwen (2002, 2004) develops an interesting Theory of Access in a perspective of exchange of critical resources with the key concept of Access Goods. He distinguishes three types of Access Goods in the European context: (1) Expert Knowledge, (2) Information about the European Encompassing Interest, (3) Information about the Domestic Encompassing Interest. The criticality of these resources will determine the degree of access that the EU institutions will grant to the private interest’s representatives. Similarly, in the US, there had been considerable discussions among scholars about what are supposed to buy the campaign contributions, votes, or other benefits? One reasonable answer is that contributions buy first access to politicians who still need to be convinced in a second stage. The concept of Access Goods echoes that of Political Resources, in a less detailed manner, but with an important emphasis on one functional facet. Therefore, this complementary aspect should be kept in mind. However, the important point of this section is to further clearly distinguish the different stages involved in the advocacy concept. As Nye (2004) illustrates with his “paradox of plenty,” in a world of over-solicitation and excess of information, actors compete fiercely for politicians’ attention, which becomes a rare resource. 3.5.3  Tactical Building Blocks This section focuses on the lobbying building blocks as they are deployed by practitioners on the ground. In combination, they materialize and perform the execution of the strategy at the operational level. 3.5.3.1 Targets Targets are formed by all the people having some influence at a final or intermediate level, belonging to governments, ministries, agencies, stakeholders, or influencers, knowing that they are not necessarily the final decision makers. They can be broadly classified as understanders (recognizing the firm arguments but doing nothing), active supporters (effectively mobilizing for a change), opponents, or neutrals. An important part

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of CPA consists of identifying their positions and try to make them change (passing from opposing to neutral, etc.). Stakeholder analysis technics or specific mapping software can be used for this. 3.5.3.2 Arguments As Mahoney (2008) puts it, advocacy is about argumentation. Even if CPA involves other strategies such as money or constituency building, to follow the broad classification of Hillman and Hitt (1999), and even in the worst case of corruption, justification is almost always necessary to explain a position taken. Harris and Lock (1996) explain that lobbying is clearly part of the broader field of public relations and belongs to the group of scholars who stress the common points with marketing communications. Indeed, many marketing principles are applicable to politics, giving birth to the subdiscipline of political marketing3: anticipating the wants and needs of the customers (constituents), developing innovative products and services (policies), promoting these products in a communication campaign, and so on. On the other hand, corporate lobbying presents many similarities with B to B marketing, offering value to specific clients. Public relations can be said unilateral, building chiefly on emotional communication and targeting the public opinion, whereas lobbying is rather interactive (between mutually interested interlocutors), mobilizing essentially rational argumentation with a very specific target. In this sense, albeit argumentation by definition lies on the rationality side, the use of emotional motivations is not unusual, as in any communication activity. Therefore, drawing on Mahoney (2008), the following categorization of CPA arguments, adapted and augmented to fit the context, will be proposed for this analysis. Again, all these arguments are combinable and non-mutually exclusive (Table 3.3). 3  Political marketing has developed to a discipline by itself with journals such as the Journal of Political Marketing, which aims “to be the leading scholarly journal examining the latest developments in the application of marketing methods to politics,” university courses, academic literature, and so on. According to the site www.political-marketing.org (The University of Auckland), political marketing is “a fundamental part of political life. Presidents and prime ministers; politicians and parties; government departments and councils all use marketing in their pursuit of political goals. Market research is used, when deciding on policies and service design, to understand what the people they serve and seek votes from want and need; voter profiling helps create new segments to target; strategy guides creation of the political brand to develop an attractive vision; internal marketing guides the provision of volunteer involvement; analytics and experimental research test and refine communication messages; and delivery management sets expectations and helps to convey progress once a politician is elected or a programme has begun.”

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Table 3.3  Categorization of arguments Commonly shared goals

Technical argument

Cost or economic impact Feasibility

Discriminatory or fairness Constituency, public opinion

Impact on bilateral relations

This is one of the most exploited and powerful argument types, frequently in combination with others. It corresponds to the essence of advocacy, that is, to convince the interlocutor that mutual interests are aligned, that a win-win solution exists and is operational. It is often based on the degree of social contribution (good for the environment, etc.). All the argumentation stressing the conformity to government strategies and policies can be included in this category. Based on scientific data, this category is also at the core of the convincing process, representing firms’ principal assets and often working in parallel with the political level. Legal arguments are also included. For firms, another strong argument related to their economic power and frequently concerning the economic viability of a policy and its translation in terms of tax revenue, employment, or bankruptcy. More straightforward than the technical argument but in the same line, this kind of logic stresses the fact that a new policy simply cannot work. It may be used, for example, for new business models in new industries emerging in a context where the legal framework is inexistent, maladapted, and where efforts to establish new legislation are not meeting the challenge. With the central concept of “level playing field” widely heard, this argument is regularly used in lobbying in general as well as in international negotiations. Voters or public opinion are powerful determinants of politicians’ behavior in democracies. Based on legitimacy as expressed by polls, these types of arguments are not necessarily the most widely used by firms, but the threat to create an issue is always taken seriously by politicians and bureaucrats whose primary concern is to avoid opposition and criticism. This dimension takes into account the international context where state power may be exerted in a soft (mutuality) or hard (threat of retaliation) way to support the demand from a firm of a specific nationality.

3.5.3.3 Technics The so-called lobbying tactics are redenominated technics in this analysis for clarity. They have been extensively researched by many authors, beginning with Baumgartner and Leech (1998) and Kollman (1998), with various classifications. A first remark that can be made is that the variety of technics is infinite, depending on the issue, the industry, the country, and so on. Therefore, only broad and non-exhaustive categories can be presented here. Without anticipating the conclusion, it can be said that the

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most powerful determinant of the choice of technics must be the institutional factor. For example, in the US, it is not unusual that parts of bills are directly written by lobbyists to be submitted by a supporting member of Congress; this kind of technic is, however, unthinkable in Japan where bills are carefully prepared by the bureaucracy. An important and widely used differentiation criterion could be the inside/outside dimension, more or less overlapping with direct/indirect. The two dimensions will be used as there seems to be a consensus about it in the literature, although it must be noticed that no classification by any author is entirely rigorous. Due to the very broad variety of activities covered and the lack of clarity of the criterion (e.g., does the inside dimension relates to the target or the medium?), a degree of flexibility in the categorization should be allowed; for convenience, they should rather be considered as a descriptive tool. The first clear distinction between inside and outside is whether the action is addressed directly to political decision makers with emitter and receptor of the message acting within the framework of a sort of “elite” insider circle, or whether the public or the citizens (working as a medium through their opinion and interests) stand between the firm conducting its CPA and the politicians (or bureaucrats). Within the inside technics, the most easily understandable and clear items for this classification are the direct face-to-face meetings between public officials and firm representatives. Position papers or letters directly addressed to politicians are also well-known. Assistance in writing part of the legislation, or insertion or articles directly written by lawyers or lobbyists are possible in some institutional settings. Testimony or hearing before Members of Parliament is frequent and probably widespread worldwide. Public comments are certainly also close to universal (in democracies). Coming to elite mobilization, also called grass top, it takes various forms related to the level of people involved, but one common technic consists of taking public officials to sites for visits and direct understanding of the implied stakes. All the above technics are usually considered as inside/direct lobbying actions. Mahoney (2008) distinguishes within the inside category non-­ direct actions such as events and outsourced research. Events consist of organizing cocktails, breakfasts, dinners, conferences, parties, and may resonate with the most immediate stereotype about lobbying (“wining and dining”4). This is nonetheless a widespread and powerful technic, but  However, “wining and dining” are organized on an individual, man-to-man basis rather than a collective event. 4

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Table 3.4  Inside and outside lobbying technics Inside lobbying

Outside/indirect lobbying

Face to face Position paper, letter Drafting language Testimony/hearing Public comment Elite mobilization Expert mobilization Events (cocktails, breakfasts, conferences, etc.) Outsourcing research

Civil society  Grassroots mobilization  Media   Issue advertisement   Public education campaign, PR Influencers (business)  Client  Supplier   Other interested stakeholders

whether it is less direct than the other actions mentioned above seems less certain. There might be a difference of degree in the accuracy of targeting with more people concerned, but it greatly depends on the type of event, broad cocktail, or targeted breakfast. Regarding outsourced research, the fact that it is produced by an actor different from the firms can advocate for a non-direct dimension, but the usage of the final product, the report, if sent directly by the firm to Members of Parliament can hardly be said non-direct. Therefore, due to these reservations, the usage in this book will be limited to a broad category of inside lobbying (Table 3.4). Turning to the outside (indirect) part, it can be stressed again that it refers to a wider circle than the insider circle, but sometimes the boundary may also be blurry. Grassroots mobilization (of employees for example), use of media, issue advertisement, public education or any other public relations campaign can be mentioned as recognized technics. The variety is vast. However, to these traditional types of action, the category of influencer should presumably be added. This concept is well known in marketing, but it was found that it is also astutely mobilized in CPA, especially in an international business context where access to public officials by a foreign firm may lack legitimacy. In this category are included the other firms, clients, or suppliers that act on behalf of the CPA firm to have its message received. In this sense, these firms can be considered closer to the insider circle than the general public, but it seems interesting to have this explanatory category standing apart because of its importance, also reflecting the competitive side of the chessboard.

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3.6   Dynamic of Factors’ Evolution The issue of factors’ dynamic within the framework is equally important. Indeed, understanding how factors are linked, unfold, and evolve in space and time seems highly precious. CPA is structurally a long and evolving process. The temporality of business and politics is different, implying that, to change regulation or law, the usual time unit is the year, not the month or the week, despite possible exceptions. Moreover, obstacles are numerous, from bureaucratic logic to strong opposition from divergent interest, all factors not necessarily fully foreseen at the beginning and leading to an intermediate reevaluation of tactics and strategy. For a better understanding, the framework was reorganized in a process view (Fig.  3.4) to synopsize the dynamic of factors. The starting point consists of the issue that arises from the outside world or is created by the firm in a proactive prospect. This specific issue is then framed by the general level of rules (country, laws, regulations=Institutions) and the specific regulations of the industry as well as its competitive chessboard. An assessment is then made of the Interests (supporting, opposing) at stake, and of

Fig. 3.4  Framework’s dynamic

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the Resources mobilizable for the action. A level of Coalition (with Whom) and a mode of Influence (How: pressure/persuasion) are therefore adopted, from which will follow the technical implementation: targets, arguments, and so on. Frequently, the Resources are insufficient and need to be built: stakeholders convinced, legitimacy created through media and external research, and so on. When the expected outcome does not materialize within a reasonable time limit (from the business standpoint), a reconfiguration becomes necessary, with the extension of coalitions or the mobilization of new resources and stakeholders (industry associations, state power, media, etc.). Thus, the whole process is generally iterative with several feedback loops.

3.7   Conclusion This chapter introduced this book’s framework and analytical toolbox, building on interactions between the literature and findings on the field. It may seem complicated, involving many elements. This is, however, a deliberate choice to encompass the various facets and factors of CPA in the international business context of Japan. Simplification and better modeling should occur after this exploration phase. The major elements and building blocks are adapted to the case of Japan, and those that will be used in the rest of this book may now be summarized in the following tables (Tables. 3.5, 3.6, 3.7). Table 3.5  The 3 main drivers and industry specific factors Issues

Institutions

Interests

Industry specific

Firm specific/ industry wide Newness of the concept/product Approval, certification, conformity Level of policy making Scope Salience “Conflict/ competition”

Governments (central/local) Diet Bureaucracy: Ministries, Agencies, Bureaus (Ka, Shitsu, etc.) Courts Committees (Shingikai, Kentokai etc.) Treaties/negotiations (EPA/TPP etc.)

Private interests (supporting/opposing domestic actors, competitors) Policy interests of officeholders (politicians, bureaucrats) States Local governments

Highly regulated/ policy driven growth (pharma, medical, energy, etc.) State level/bilateral Antitrust Standard setting

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Table 3.6 Political resources

Internal/controlled by firms

External/mobilized by actors

Informational/expertise Organizational Economic Financial Relational Symbolic

Support of stakeholder Number Legitimacy Public opinion Media State power

Table 3.7  Tactical apparatus Targets

Arguments

Technics

Understanders Supporters Opponents Neutrals

Commonly shared goals Technical argument Cost or economic impact Feasibility Discriminatory or fairness Constituency, public opinion Impact on bilateral relationships

Inside Outside: civil society Outside: influencers

References Attarça, M. (1999). Une introduction au concept de stratégie politique d’entreprise: une étude du lobbying pratiqué par les entreprises françaises en France [An Introduction to the Concept of Corporate Political Strategy: A Study of the Practice of Lobbying by French Firms]. (Ph.D. dissertation, HEC Management School, Jouy-en-Josas, France). Retrieved July 24, 2014, from https://tel. archives-ouvertes.fr/pastel-00918268/. Baron, D.  P. (1993). Business and Its Environment. Englewood Cliffs, NJ: Prentice Hall. Baron, D. P. (2013). Business and Its Environment (7th ed.). Upper Saddle River, NJ: Prentice Hall. Baumgartner, F.  R., & Leech, B.  L. (1998). Basic Interests: The Importance of Groups in Politics and in Political Science. Princeton: Princeton University Press. Boddewyn, J., & Brewer, T. L. (1994). International Business Political Behavior: New Theoretical Directions. Academy of Management Review, 19(1), 119–143. Bonardi, J.  P., Hillman, A., & Keim, G. (2005). The Attractiveness of Political Markets: Implications for Firm Strategy. Academy of Management Review, 30(2), 397–413. Bouwen, P. (2002). Corporate Lobbying in the European Union: The Logic of Access. Journal of European Public Policy, 9(3), 365–390.

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Bouwen, P. (2004). Exchanging Access Goods for Access: A Comparative Study of Business Lobbying in the European Union Institutions. European Journal of Political Research, 43(3), 337–369. Buchholz, R. (1992). Business Environments and Public Policy. Englewood Cliffs, NJ: Prentice-Hall. Burson-Marsteller. (2013). A Guide to Effective Lobbying in Europe. Brussels: Burson-Marsteller. Dahan, N. (2005). A Contribution to the Conceptualization of Political Resources Utilized in Corporate Political Action. Journal of Public Affairs, 5(1), 43–54. Dahl, R. A. (1963). Modern Political Analysis. Englewood Cliff, NJ: Prentice Hall. Dahl, R.  A., & Stinebrickner, B. (2003). Modern Political Analysis (6th ed.). Upper Saddle River, NJ: Prentice Hall. Epstein, E. (1969). The Corporation in American Politics. Englewood Cliffs, NJ: Prentice-Hall. Fujii, T. (2012). Kyôsô Senryaku Toshite no Gurôbaru Rûru. Tokyo: Tôyô Keizai Shinpôsha. Guegen, D. (2007). European Lobbying. Brussels: Europolitics. Harris, P., & Lock, A. (1996). Machiavellian Marketing: The Development of Corporate Lobbying in the UK. Journal of Marketing Management, 12(4), 313–328. Hillman, A. J., & Hitt, M. (1999). Corporate Political Strategy Formulation: A Model of Approach, Participation, and Strategy Decisions. Academy of Management Review, 24(4), 825–842. Hillman, A. J., Keim, G. D., & Schuler, D. (2004). Corporate Political Activity: A Review and Research Agenda. Journal of Management, 30(6), 837–857. Hillman, A.  J., & Wan, W.  P. (2005). The Determinants of MNE Subsidiaries’ Political Strategies: Evidence of Institutional Duality. Journal of International Business Studies, 36(3), 322–340. Kollman, K. (1998). Outside Lobbying. Princeton, NJ: Princeton University Press. Kostova, T., & Roth, K. (2002). Adoption of an Organizational Practice by Subsidiaries of Multinational Corporations: Institutional and Relational Effects. Academy of Management Journal, 45(1), 215–233. Kostova, T., & Zaheer, S. (1999). Organizational Legitimacy Under Conditions of Complexity: The Case of the Multinational Enterprise. Academy of Management Review, 24(1), 64–81. Lowery, D., & Gray, V. (2004). A Neopluralist Perspective on Research on Organized Interests. Political Research Quarterly, 57(1), 163–175. Lowi, T. (1964). American Business Public Policy, Case-Studies, and Political Theory. World Politics, 16(4), 677–715. Mahoney, C. (2008). Brussels versus the Beltway: Advocacy in the United States and the European Union. Washington, DC: Georgetown University Press.

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Michalowitz, I. (2005). Service Bureaux of Decision-Makers or Successful Spin-­ Doctors: Assessing Interest Group Influence in the EU and the US. Paper prepared for the EUSA Ninth Biannual International Conference, 31 March–2 April 2005, Austin, TX. Niskanen, W.  A. (1971). Bureaucracy and Representative Government. Chicago: Aldine. Niskanen, W. A. (1975). Bureaucrats and Politicians. Journal of Law and Economics, 18(3), 617–643. North, D. (1990). Institutions, Institutional Change and Economic Performance. Cambridge, UK: Cambridge University Press. Nye, J. S. (2004). Soft Power. New York: Public Affairs. Oberman, W. D. (1993). Strategy and Tactic Choice in an Institutional Resource Context. In B. M. Mitnick (Ed.), Corporate Political Agency: The Construction of Competition in Public Affairs (pp. 213–241). Newbury Park, CA: Sage. Pfeffer, J., & Salancik, G.  A. (1978). The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row Publishers. Scott, W.  R. (2008). Approaching Adulthood: The Maturing of Institutional Theory. Theory and Society, 37(5), 427–442. Suchman, M.  C. (1995). Managing Legitimacy: Strategic and Institutional Approaches. Academy of Management Review, 20(3), 571–610. Weber, M. (1947). The Theory of Social and Economic Organization (A. M. Henderson & T. Parsons, Trans.). New York: Oxford University Press. Wernerfelt, B. (1984). A Resource-based View of the Firm. Strategic Management Journal, 5(2), 171–180. Wilson, J. Q. (1980). The Politics of Regulation. New York: Basic Books. Woll, C. (2012). The Brash and the Soft-Spoken: Lobbying Styles in a Transatlantic Comparison. Interest Groups and Advocacy, 1(2), 193–214.

CHAPTER 4

General Features of Domestic Lobbying in Japan

4.1   Introduction Without entering into too many technical details, this chapter will describe the policymaking process in Japan in relation to CPA, and interactions between business and politics with some comparisons with the US and EU to put things in perspective. An overview of the political economy and system from a domestic vantage point will be given first. Then, institutional characteristics such as the Diet, the bureaucracy, the role of the political parties, the various advisory committees, the METI will be considered in light of the differences with the EU/US and the implications for lobbying. Collective actions, lobbying patterns, points of access, and leeway for direct lobbying will be scrutinized with regard to foreign firms’ opportunities. A section will be devoted to perceptions by the traditional domestic actors, still relatively negative, and another to the organizational facet, underdeveloped for direct lobbying compared to Western standards. Finally, a review will be done on the legal environment and the financial contributions that constitute a significant pillar of CPA in the country.

4.2   Japan Inc., Corporatism or Pluralism? Beginning with general theories, it can be said that the Japanese political system has been described through several lenses that more or less correspond to historical developments but also structural features. The power © The Author(s) 2020 E. Romann, Nonmarket Strategy in Japan, https://doi.org/10.1007/978-981-15-7325-5_4

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elite model was traditionally used to explain Japan’s evolution from prewar imperial system to postwar government-led growth: in this view, the leaders of the ruling party (the LDP), the high-levels bureaucrats and the leaders of the business community (zaikai) form a de facto tripartite alliance referred to as the “iron triangle” in the literature (Muramatsu et al. 2001; Hamada 2010). Within the framework of a private sector-led economy, the government plays an important and distinctive role in initiating new industries through a primacy of the bureaucracy and a highly collaborative rather than adversarial pattern of relationship with business. This corresponds to the time of the Japanese “miracle,” when the term “Japan Inc” was coined (Abegglen 1970; Kaplan 1972),1 and when Johnson (1982)2 proposed the concept of “developmental state.” Corporatism, defined by Schmitter (1974) as a system of peak organizations in a monopolistic representation relationship with the state, has also been applied to Japan. Despite some reservations regarding the limited role of labor as a powerful actor (Pempel and Tsunekawa 1979), this perspective is reflected in the Varieties of Capitalism approach where Japan is classified as a Coordinated Market Economy with specific coordination mechanism including the various consulting bodies (shingikai), intrafirm industrial relations, and so on. While debates continue about the degree of explanatory power still relevant nowadays for these theories, since the 1980s, many studies point out a change in paradigm also observable from the various reforms of the political system in the 1990s and suggest that Japan has evolved toward a more pluralist pattern. Although it cannot be denied that policymaking is more fragmented with numerous and various actors competing for their interests, a distinction is often made with Western (American)-style pluralism, with additional descriptors such as “bureaucracy-led mass-­ inclusionary pluralism” (Inoguchi 1983), “patterned pluralism” (Muramatsu and Krauss 1987), “canalized pluralism” (Sato and Matsuzaki 1  According to Abegglen, the term “Japan Inc.” was already in use in the 1930s and was found by him in the Asahi Evening News. The real popularity of the term came with Kaplan’s book and is due to its appealing descriptive power for the public and reporters. Abegglen meant a complex combination of cooperation and competition, but the posterity remembered only the sensationalist image of a collusive scheme. 2  In his analysis, Johnson distinguishes the regulatory state such as the US, and the developmental state such as Japan where the state, centered on the MITI, leads the economic development. This pattern occurs where industrialization is late and produces very different business–government relationships.

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1986). These precisions try to take into account the principal characteristics of the Japanese pluralism, that is, the institutionalization of the relationship between the LDP and the bureaucracy, and the internalization within the LDP of the representation of various interests in a manner enabling the party to respond and incorporate them into the policymaking process.

4.3   Institutional Characteristics in Light of the Differences with the US/EU and Implications for CPA Without anticipating the conclusions, it might be important to stress first that, according to many practitioners, despite natural specificities that have to be known, Japanese politics is nothing so exotic and is similar to the power game elsewhere in the world. When it comes to influencing policymaking, many interviewees consider that politics is politics, that similarities outweigh differences, and that whoever has experience of lobbying in some country can acclimate to the Japanese situation, provided some adaptation. There are nevertheless institutional particularities. 4.3.1  The Diet, the Bureaucracy, and the Parties/the LDP The Diet, the highest organ of state decision-making, is divided into two houses with unequal power. The lower house, the House of Representatives, is more powerful and the principal place of legislative activities. The prime minister is selected by the majority in the lower house, which means that the executive and the legislature function in parallel. The houses of the Diet work in a committee structure aligned with the ministries and the sections of the LDP’s Policy Research Council. The LDP itself is composed of factions that are not ideological but formed around leaders, sharing power and ministerial positions in function of their size. Zoku are members specialized in a subject and interacting with interest groups and the bureaucracy. There are also caucuses supporting specific policies cutting across factions and Zoku. In addition, the Policy Research Council formalizes the internal decision-making process with its sections and policy jurisdictions corresponding to the organization of the administration, which enables the bureaucracy and the Policy Research Council to

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propose and draft policies. The bureaucracy is viewed traditionally as the dominant force in government due to its expertise, its dedication to the national interest, the leadership of some ministries, but also to the degree of discretion it enjoys in policymaking without having to have new laws passed. Exchange relationships have also been developed with interest groups, giving the bureaucracy a certain political strength. The whole system, thus, used to be seen as a structure of interactions between the LDP (Zoku and Research Council’s committees), the ministries and the different interest groups, aligned by nature of policies: agriculture, health, construction, and so on, which is not without reminding the Tripartite Elite concept. Okimoto (1989) once proposed for this system a categorization where interest groups provide political support in the form of campaign contributions and votes in exchange of benefits from the government, the difference between categories lying in the degree of implication from the interest groups, the return expected (immediate or deferred), the sectors and the nature of policies and benefits involved. Since then, Japan went through economic turmoil and restructuration, political reforms including a changeover with the Democratic Party of Japan (DPJ), deepening of transparency, opening to foreign investment, globalization, liberalization, and so on. This evolution has changed the weight of this clientelistic structure, but the general organization, the spirit of the system, can be considered to have remained in some form as the footprint of institutions is always very deeply entrenched and takes time to be modified. An important and structural difference with the US that can be first emphasized is the role of the Diet. At the US Congress, thousands of bills are submitted every year, but only a handful actually become laws (Mahoney (2008) quotes a passage rate of 11% in 2004). Any member can submit a bill, and much time is spent in debating about bills that will never pass. By contrast, most of the bills presented to the Diet in Japan become laws. At the end of the process, the number of actually passed laws is not that different between Japan and the US, one to several hundreds per year on average. In Japan, Diet members vote in the respect of their party’s discipline and line, not along their individual preferences. Laws are adopted as a package with options generally limited to yes or no. At the EU Parliament, for example, amendments are voted one by one, which takes a long time and gives the opportunity and room for lobbyists to introduce substantial modifications during the process. In Japan, bills are prepared carefully by the bureaucracy and designed in such a way that no change is supposed to be brought at the Diet. In the US, bills contain an

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average of several thousand pages, similar to a telephone book as an interviewee puts it, and go to a level of detail that does not give the executive branch the leeway to make decisions on their own. At the Japanese parliament, the average bill that becomes law amounts to a few dozen pages, generally not much more than a hundred, and the details are decided by the administration and promulgated as decrees or ordinances. This fact that bureaucrats lead politics and almost exclusively draft law is well known, and this was a central focus of reforms for Junichirô Koizumi and later the DPJ when it came to power in 2009. Before, the bills were prepared within the sections of the LDP’s Policy Research Council; since then, the Prime Minister Office (Kantei) took more leadership in policymaking with the help of external brains. However, after the failure of the DPJ and the return of the LDP to power, the bureaucracy retrieved its active role. Even if the possibility exists for politicians to propose a bill, at the operational and clerical level, the bureaucracy is still unavoidable. Unlike the US, Japanese politicians do not have the capacity to draft law in the current system. In the US, the average number of aides for a senator is about twenty-five, and it may reach seventy-five whereas, in Japan, the maximum budget (on public funds) for hiring assistants allows only three. Similarly, the Legislative Bureau of the Diet is frequently pointed out as insufficient compared to its US counterpart, with the consequence that the reliance on the administration is reinforced. It should be noted, however, that despite these limitations, which make structural changes slow, improvements have taken place regarding the lack of transparency of which the Japanese regulatory system has been accused of for many years. In 2006 the law was modified3 to require the publication of proposed regulations and invite public comments; similarly, since 2007,4 analyses related to the regulatory impact must be conducted for new laws and decrees. Yet, the widely known fact that the real debate occurs before bills are submitted to the Diet remains valid and naturally has consequences for influence and CPA.  As a practitioner puts it, Japan has a low center of gravity for decision-making, which means that many decisions that would be taken by the politicians in the EU are taken by the bureaucrats such as, for example, the issue of CO2 emissions, highly politicized in the EU and  Administrative Procedure Act (Act No. 88 of 1993), Chap. 6.  Implementation Guidelines for ex-ante Evaluation of Regulation, Ministry of Internal Affairs and Communications. 3 4

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left to the bureaucrats in Japan. This implies that most of the time, CPA must be directed toward the bureaucrats while keeping a balance with the politicians because they are the decision makers in last resort and knowing that they must be targeted before bills become public. In this sense, in contrast to the US, where the process of lobbying could be considered rather top-down, in Japan greater coordination and synchronization, topdown and bottom-up, is necessary to ensure success, indicates an interviewee. Consequently, most of the time, the debate takes place in the party’s committees and thereafter is put in form by the bureaucrats who will try to build a consensus by visiting and explaining the bill to the opposition or the smaller parties in various study sessions. Generally speaking, in this pattern, it is no longer possible for these potential critics or opponents to bring modifications at this stage, and even less in the parliament. It means that, with a view to influencing, one has to find out in some manner what is happening behind this non-transparent scene because what materializes in the bureaucracy as well as in the political parties is not public: the public debate occurs when everything is already decided, and it is too late to change something. For practitioners, it means that one has to go and meet people to chase information, which is far from impossible but demands a good knowledge of the system. Indeed, another facet of the system is that there is always a process of making public early ideas, with bureaucrats trying to find out how interest groups will react and, based on the results, deciding whether or not they need to change the draft bill. This informal side of Japanese political life has been stressed by many authors (Zhao 1993; Hamada 2010, etc.). Cooperation, specific social networks, informal political actors and organizations, personal contacts, and so on are essential for consensus building and conflict avoidance, which are characteristic of the Japanese practice. Acceptance of informal authority, as well as legal authority, is much greater in Japan than in the US (Zhao, 93), which gives a supplementary channel to the legislative and publicized one. According to several interviewees, these capacities are remarkably operational in Japan, where the preference for “Wa” (harmony) and “Kyôson-Kyôei” (Co-existence and co-prosperity) are not void concepts. In Japan, a majority is not considered constituted at 51/49 but rather at 70/30 or 80/20. Undoubtedly, these informal mechanisms such as “nemawashi” (prior consultation, behind-the-scenes consensus building) or “tsukiai” (social networks) are not limited to Japan, but their scope and degree can be said to be specific (Zhao 1993).

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These general institutional and cultural features are commonly known but not always fully understood by businesspeople, especially foreigners, who consequently tend to underestimate the influence of the parliament and overestimate the role of bureaucrats. According to a practitioner, most businesspeople, in the end, go to the parliament for courtesy visits and short meetings because they know somehow that politicians have some power, but they are not really effective. They take it as a formality but are not really creating connections as much as they should, even if foreign CEOs visiting Japan rarely have the time to establish this kind of relationship. 4.3.2   Data on Venue Selection by Interest Groups Numerous studies have been conducted to determine whether interest groups lobby the politicians or the bureaucrats (Muramatsu 2010; Naoi and Krauss 2009; Tsujinaka and Mori 2010). The general conclusion is that, indeed, bureaucrats are the main targets, thus confirming the qualitative knowledge emerging from the literature and the experience of practitioners. According to Tsujinaka and Mori (2010), the choice for the interest groups is not bureaucrats versus politicians, but rather a fundamental approach directed first toward the bureaucrats with information as a medium and a complemental contact to politicians used as an indirect medium in the case of non-direct access to the bureaucrats. In the survey, the rate of access to the bureaucrats by the economic and industry groups is particularly high at 61.1% versus 44.1% for the Diet members (Table 4.1). Table 4.1  Interest groups’ venue selection in the context of different cabinets. Unit: % Diet members Agriculture Economic/industry Labor Education Administration Welfare Experts Political groups Civil society Academic/culture Leisure/sports Religion Others Total

57.9 44.1 77.5 47.8 40.8 45.7 40.4 86.8 66.9 30.3 46.6 35.1 44.6 48.5

Members of Central Local local administration authority assemblies executives 50.9 30.6 78.8 43.4 36.9 48.6 33.3 73.6 66.1 22.8 38.9 38.6 50.6 44.4

41.2 61.1 26.1 50.3 62.1 36 46.1 45.3 39.7 51.8 30.5 8.8 35.6 44

Source: adapted from Muramatsu (2010), p. 165

43.4 23.4 41.4 37.1 35.9 35.4 25.5 54.7 52.9 23.8 37.4 22.8 42.3 34.8

Local authority News paper Television journalists deprtament journalists chiefs 57 43.4 22.4 39.8 54 16.4 38.7 41.4 21.2 45.9 53.5 29.6 57.3 37.9 21.4 40 49.1 25.7 44.7 48.9 24.8 54.7 60.4 41.5 57 78.5 54.5 32.9 49.5 24.1 39.7 61.1 42.7 14 17.5 15.8 49.7 51.5 30.6 43.9 50.6 26.2

N 228 483 222 159 103 175 141 53 121 307 131 57 435 2615

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It can be noted that in the same survey, the major voicing channels for citizens are, first, the newspaper journalists (78.5%), and second, the Diet and local assembly members (over 66%), which is in line with what is observed in democracies. Muramatsu, who conducted three interest groups surveys in 1980, 1994, and 2003 on their choice of lobbying venues, notes that the groups tend to lobby their friends first, but also that the venue selection is affected by the stability of the government and the party in power. Indeed, during the Hosokawa-Hata and Murayama Cabinet of the 1994 survey, lobbying directed toward the political parties decreased sharply, whereas the access to bureaucracy passed the 60% mark, probably due to the uncertainties linked to these coalition cabinets (Muramatsu 2010) (Table 4.2). In addition, when asked which interest groups are more important, Diet members give fairly different answers between the two surveys of 1994 and 2003, suggesting an evolution linked to the changes in political life. While in 1994, agricultural groups followed by labor groups were respectively the most important, thus reflecting the traditional pattern of Japanese politics, by 2003 the politicians seem to have taken their distances with agricultural groups, now paying much more attention to civil-political and business (big and small) groups (Table 4.3). Table 4.2  Accessibility to political actors by type of interest group. Unit: %

Ohira Cabinet ('80 survey) Hosokawa-Hata Cabinet ('94 survey) Murayama Cabinet ('94 survey) Koizumi Cabinet (02-'03 survey)

Political Party (%)

Bureaucrats (%)

Courts/others (%)

%

N

46

48

6

100

252

33

60

7

100

208

23

64

13

100

39

36

51

13

100

235

Source: adapted from Yamamoto H. in Tsujinaka and Mori (2010), p. 230

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Table 4.3  Change in the perception of the respective importance of supportive groups for politicians. Unit: % Agricultural groups Welfare groups Big business groups Small business groups Labor groups Administrative groups Educational Professional Civil/Political Others NA

1994 survey 28.6 9.2 0.8 18.5 21 5.9 5.9 0.8 4.2 5 0

2003 survey 5.1 6.6 2.9 23.5 11.8 8.1 2.2 2.9 24.3 2.2 10.3

Source: adapted from Muramatsu (2010), p. 161

4.3.3  The Advisory Committees (Shingikai) and the Regulatory Reform Council (Kisei Kaikaku Kaigi) The numerous committees often referred to as “advisory” or “shingikai” can be considered in a certain manner as a specificity of the political system even if working in committees is a phenomenon observed in almost every country. An important feature of the Japanese system is that they are an integral part of the administration, recognized and regulated by law with formal organizational structures, which can contrast with their Western counterparts often run on a more ad hoc basis. They are counted in dozens in the different ministries and are supposed to be a place of representation of the various interests of society and of consensus building about policies and regulations to be proposed or implemented. They are used to persuade and convince beforehand the related interests, beginning with business, or at least ensure that they do not oppose the newly introduced policies. To this end, their members are carefully chosen in a balanced manner under the auspices of experts, generally from leading universities. In a general manner, they serve as a communication channel functioning both ways between business/other interests and the bureaucracy so that each side can be kept informed of their respective latest problems and developments. Until the late 1980s, they were typically closed to the foreign presence and frequently accused of having a responsibility in rendering difficult the access to the Japanese market for foreign firms. Since then,

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things have changed with more openness observed, but it seems that foreign companies are still fairly rare in these committees, whatever the possible reasons (opacity, lack of capacities and resources to devote, etc.). According to their level of organic development or their position in the decision chain, they can also be called “benkyôkai,” “kentôkai,” “kenkyûkai,” “chôsakai,” etc. Opinions diverge regarding their real role in the decision process and the importance of being part of them when one tries to influence a political outcome. A majority of observers explain that, when the committee meets, things are already decided, and the meetings are only a formality, a kind of rubber stamp that gives legitimacy to the decisions made. According to this view, the bureaucrats prepare the propositions carefully with their questions and answers following a pre-­ established scenario, choose members with no sharply opposing opinions, do everything such as nemawashi and prior informal consensus building to avoid long debates and conflicts, and finally gain social acceptance by the presence of experts, preferably professors from the Tokyo University. Besides this certainly correct aspect of the functioning of the shingikai, some practitioners stress the room of maneuver and the possible interests of the system. First, in the case of a new business or technology, it is possible to initiate the process and propose the establishment of a specialized committee to examine the question, in which case it could be called kentôkai or benkyôkai (studying committees) because it is still in its infancy. With time, new actors will join, concrete projects will be launched that could include mixed participation with public and private financing, and finally, regulations will be prepared and passed. As a university professor puts it: “Bureaucrats do not have ideas.” However, this may be limited to new technologies in which Japan strategically has a particular interest, such as renewable energies or the likes. Another observer having participated in a shingikai on behalf of a foreign firm notes that, despite the formalism, the interests of the shingikai lie in the access to information, in the possibility of monitoring the future regulatory changes that might affect business. According to this person, whose firm has lost its business in the renewable energies because of a non-anticipated regulatory change and despite heavy investments, the shingikai are an important place to scan the environment in a non-­ transparent context. The shingikai also gives the opportunity to know the key people, stakeholders, or potential clients and to understand the lobbying and influence process that can be pursued through university professors, for example. It must be noted, however, that influencing professors

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is not something that is done in a direct but rather in an indirect manner through academic publications or other mediums. In the same line of idea, a practitioner, while confirming that having a seat does not permit to exert real influence, emphasizes the fact that, by virtue of being a member, one is being given the right to be consulted by the ministry before the proposal, where the real debate occurs. Based on his experience as a member of an advisory committee to the government, he explains that “if one has good arguments, the bureaucrats will listen; the power of rational arguments should not be underestimated.” To conclude with the subject, it may be worth quoting a certain number of interviewees who cite the Regulatory Reform Council as the biggest shingikai of the country and the place devoted to reforms, as the name indicates, where business and other actors can proactively ask and propose changes. In its current form, it was established in 2013, but its origins can be traced back to the 1990s when a committee in charge of regulatory reforms and reporting directly to the prime minister was created and survived until our times through several metamorphosis and appellations. It was especially active in the times of Junichirô Koizumi and Heizô Takenaka, who urged for structural transformations of the Japanese economy. Consequently, many business actors took advantage of this opportunity to promote their interests with a direct voice to the Cabinet Office, more efficient according to some of them than through the ministries. In a sense, through this Council, the Japanese government is systematically conducting regulatory reforms by asking and aggregating the demands of business (and other actors), and therefore it can be considered as an important place of influence. However, it naturally functions on a collective, coordinated, and compromise basis, which can constrain certain issues for individual firms. 4.3.4  The Role of the METI in CPA The MITI, as everybody knows, played a major role in Japan’s economic success in its time. As its successor, the METI retains a special aura and influence regarding the relationship between business and politics, despite the changes that occurred in the Japanese political economy. The history of the MITI/METI is not going to be rewritten here, but the positioning of this ministry from the perspective of firms trying to influence policies or modify regulations in a manner favorable to them may be shortly highlighted.

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As a high-level official of this administration puts it, the METI can be considered as the biggest business lobbying entity of Japan. This is not fresh news, but the METI has for major mission the development of the economy through the promotion of business; in this sense, and despite its diminution of power compared to the past, the METI still frequently acts as a mediator between a firm (or an industry) and other parts of the administration to an extent that has no equivalent in the US or the EU. If a firm goes to the US Department of Commerce or the EU DG Enterprise and Industry for a problem linked to another administration, for example, an environmental issue, it is doubtful that it can find the same support the METI would offer toward other bureaucratic entities, explains this observer. The fact of having this unexampled and powerful ministry of industry leads many Japanese companies to externalize the lobbying function to the METI. Firms come to the METI to complain, ask the ministry to do something with the result that the officials generally respond positively to and take action; it has been however observed that this reliance prevents Japanese firms from developing fully proactive lobbying skills and capacities such as elaborating and proposing alternative schemes by themselves, as many do in Washington or Brussels with the help of lawyers and lobbyists. This role of the METI as a wedge into the monolithic-looking “government” as opposed to “business,” is confirmed in this book’s interviews and cases. For example, the METI has been mobilized in issues involving the MLIT or the Ministry of Environment who focus on their own missions, that is, respectively, safety and environment for cases regarding the automotive or renewable energy industries. In some cases, interests and subsequent supports also diverge within the METI and between its divisions or bureaus. For example, in one of this book’s cases (Volkswagen/Airbags), the incriminated product for which the issue was raised (the hydrogen airbags) is being governed by a law (High-Pressure Safety Gas Act) administrated by an agency belonging to the METI (at that time), the Nuclear and Industrial Safety Agency. The industry association in charge of the issue, the Japan Automobile Importers Association, therefore went first to the section of the METI with which it is registered and has usual contacts, the Automobile Division, which happened to be supportive and helped the association to deal with their colleagues in charge of the High-Pressure Safety Gas Act.

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4.4   CPA Patterns, Business-Government Relationships, and Political Strategies After the above overview of the institutional (or semi-institutional) characteristics of the Japanese system, the focus will be now on the political strategies, the patterns available for CPA in this context with special attention to the specific implications for foreign firms. At a general level and as already seen, the principal features of the Japanese CPA system are the behind-the-scenes aspects, the propensity to compromises and collective action. Compared to the US, where the principal political strategies mobilized are lobbying, grassroots, coalition building, electoral, and public advocacy, in Japan, grassroots strategies are rarely used by business as well as public advocacy. Consequently, the most significant strategies are electoral, coalition building, and lobbying. Electoral strategies are centered on campaign financing as well as other contributions and can be said to be fairly representative of Japanese-style CPA, particularly when compared to the EU, where these sorts of financial approach are nearly inexistent. They will be treated further in the text, together with the transparency and disclosure regulations. 4.4.1  Coalition Building and Collective Action The term coalition building will be used here in the broad sense, as defined in the framework section and drawing on Baron’s interpretation. Indeed, CPA can be understood as activities unfolding in a seamless space of cooperation between actors having the same interests, ranging from individual to peak associations and passing through different degrees of association, formalized in legal persons (for example Joint Venture) or not. This view allows the entailing in a single framework of the various types of collaborations observed across countries and similar in nature and essence, if not in form. Thus, in the US, ad hoc coalitions formed around specific issues are very common strategies, whereas in Japan, because of the particular organization of business–government relationships, coalitions are less fluid and less often issue-specific, as are many of the interactions taking place through regular associations. In Japan, industry associations are indeed central to policy formulation and implementation. They are numerous, politically active, and hierarchically organized. The first level corresponding to peak associations is formed by the so-called zaikai that includes the Keidanren (Japanese Federation of Economic Organizations), the Keizai Dôyûkai (Japan

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Association of Corporate Executives), and the Nisshô (Japanese Chamber of Commerce and Industry). The Keidanren is representative of the big business and deals with the government on numerous domestic and international issues with important means but, unlike its European counterparts, does not interfere much in labor-management relations except on the question of wage rises. Membership fees are highly expensive, depending on the status, but when a firm searches influence and aims at a seat at the Board of Directors, it must be prepared to disburse several millions of dollars yearly, which limits the participation to multinational firms. There is a debate among foreign firms in Japan about the respective advantages of the Keidanren and the Dôyûkai. The foreigners tend to appreciate better the Dôyûkai, which is composed of managers on an individual, not corporate, basis, and is more informal even though it also makes policy propositions to the government. According to the Keidanren and some practitioners, the contact with the Dôyûkai can appear easier and fruitful to the individualist westerners because CEOs visiting Japan can conveniently meet the notorious Japanese CEOs of the time, exchange ideas, and find many reciprocal affinities in the sphere of global management or political economy. However, as the members of the Dôyûkai are only speaking in their individual names, they are not representing their companies, and this makes an enormous difference in terms of implementation and effectiveness of influence. The biggest difference lies in the size of the staff and the implication of their respective members as corporate. Contrary to the Keidanren, the Dôyûkai has only a limited number of personnel, and even if an issue is recognized worth to be promoted, the follow-up work has to be taken up and continued within the respective companies to which the Dôyûkai’s members belong, but without necessarily having the capacity or the same willingness and passion as corporate as their individual leaders. By contrast, the Keidanren can rely on a diverse, specialized and skilled staff that prepares and follows up the issues upstream and downstream, aggregating demands from firms or industry associations and going to the ministries to explain the details of the issues. It is organized in committees, most of them permanent and parallel to those of the Diet or the LDP. The Keidanren also has a research and statistical capacity that is essential to provide data without which it is difficult to convince. Once a decision is taken, it means that a long process of consultation and consensus building have taken place beforehand, implying that the implementation will go smoothly and effectively without any opposition.

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However, besides this operational capacity, the most significant strength of the Keidanren is obviously to offer a direct channel between firms through their CEOs or chairmen and politicians who want to test an idea and hear the voice of business. This aspect is, however, similar to peak business organizations wherever in the world, but, compared to the US and the EU, it can be said that Japan presents more parallels with Europe with the corporatist traditions of Nordic countries and their formalized processes of interaction between governments, industry, and peak associations. To conclude, with the Keidanren and its utilization by foreign firms in Japan in search of influence, it can be noted that according to an interviewee, approximatively twenty years ago there was a specific committee for foreign firms that has disappeared now, implying that Japanese firms having globalized themselves and Japan being fully part of the global market, the distinction is much less relevant nowadays. As he puts it: “what is good for foreign firms is generally good for Japanese ones,” the focus being on the business-friendly degree of policies such as taxes or environmental constraints, for example. This is certainly true for global firms that form the heart of the Keidanren. The second dimension, after the zaikai and the peak associations that deal only with general issues, consists of the various industry and trade associations that manage the issues specific to each sector, the gyôkai level. These associations address issues such as industrial standards, statistics, and information on foreign markets; one of their principal roles is to coordinate the competing interests among individual firms within their spheres and to represent an industry as a whole in their close contacts with the bureaucracy (Hamada 2010). For Japanese firms, industry associations are the most traditional and natural way of exerting voice, particularly if they do not have the sufficient size to be active alone or on the board of the Keidanren. As in many countries, having the voice of an industry unified under an aggregated demand offers two major advantages for policymakers: rationality and legitimacy. Rationality can be understood as the establishment of a limited number of priorities with clear logic, easily manageable by politicians instead of a list of hundreds of demands. Legitimacy refers to the representativeness of the demands that must reflect the interests of the greatest number of actors and intends to ensure that no interest will be forgotten or severely harmed with the risk of strongly manifesting its opposition afterward, putting in danger the career of the concerned

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bureaucrat/politician. Thus, the search of unanimity and the desire of the administration to deal only with industry associations as opposed to a single or a small group of companies is far from being limited to Japan, but in this country, it takes a very specific and essential dimension. This aspect must be appreciated in the context of a working style based on thorough consultations before consensus, avoidance of conflict, wariness about risk-­ taking and initiatives, and propensity to a rather passive stance in policy input leading to the natural acceptation of policy guidance by bureaucrats and politicians. An important consequence of this background is its impact on the competitive environment. Things are changing, but there was a time not so far in the past (2001) where, as an interviewee explains, the Financial Service Agency repeatedly refused authorization to an American financial institution to sell customized funds within the framework of an insurance product, already authorized but only with a specific firm’s funds, under the reason that all insurance products sold in Japan must be the same. Insurance is certainly a product heavily regulated, but another interviewee confirms that regulators in Japan tend to limit the movements that would benefit in an unbalanced manner to one company at the expense of others, with the aim of protecting the market from too brutal upheaval. When a new product or service is invented, the regulators ask for the positions of the industry association and the competitors and make the decision accordingly with a view of absolute egalitarianism excluding favoritism. From a regulator and citizen perspective, this seems rational and legitimate, but, according to practitioners, this leads to very narrow interpretations of the authorization processes, with the consequence of having only very similar products that every company rushes to copy. In this context, the only possibility to benefit from a small competitive advantage is to obtain from the regulators an advance of two or three months before the competitors get their own selling authorization. Again, the “winner takes all” type of behavior is not accepted; instead, the “Kyôson-Kyôei” (co-­ existence and co-prosperity) is seen as fundamental in Japan. Things recently changed with the acceptation of more differentiation, competition, and creative destruction, but this mindset can be said to be still strongly entrenched in the mentalities as well as the importance given to the industry associations in the policymaking process. Besides this apparently consensual approach, it must be remarked, however, that the same problem as in other parts of the world can be observed, that is, the representativeness. One aspect of this issue is the fact

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that the search for consensus may often lead to an agreement limited to a very broad framework or the lowest common denominator. Another side of the problem is that the position of the industry actually reflects only the interests of the biggest or most influential members, which is not completely surprising. This explains that, when a firm cannot promote its interest through this traditional and natural channel for these reasons, it has to search for other ways, provided that it has the willingness and the means to do it outside the usual framework of the industry association. Since this means transgression and efforts, the firms coming to these ends are not numerous, and the reasons why they persevere are merely strategic in the sense that it is a question of life or death, their business being at risk of disappearance. A good example of this situation is given by Daikin,5 that approached the government directly instead of going through the industry association and was criticized for this. Turning now to the implications and issues for foreign firms, the views reflected by many commentators are that Japanese industry associations used to be, and still are, to some extent conservative, and despite some changes, not always as open as one could expect in a globalized world, with sometimes a willingness of obstruction. Associations with big and globalized Japanese companies seem more open than the ones composed of a majority of domestic actors. In a certain heavily regulated industry where the weight of foreign firms is important but led by a handful of powerful domestic actors (namely insurance), foreign firms are members but, according to an observer, when their interests diverge from the Japanese leaders, their voice is not taken into account. Sometimes, they have to be a member for regulatory and monitoring reasons, but often, the investment in time and money is not worth it, analyze other practitioners. 5  Daikin had several cases. In Europe, in 2005, they realized that a new regulation limiting the use of HFCs (Hydrofluorocarbons, gases used as refrigerants in air conditioners) was about to be passed, in which case they could lose a significant part of their business. They initiated actions which were successful and were the starting point of a proactive CPA strategy worldwide with a number of issues following. But, within Japan, the bureaucracy was and still is reluctant to deal individually with firms, asking for a collective demand from the relevant industry association. However, the association members, general electric appliance manufacturers with differentiated products range, do not share the same interests as Daikin, whose strategy is centered on a specialization in air-conditioning. Therefore, they are not supportive despite the benefits they enjoy for their air-conditioning divisions (free-ride), thanks to the continuous actions by Daikin worldwide in an environment becoming increasingly sensitive for greenhouse gases.

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In this context, in some industries, foreign firms decided to establish their own association to be better represented, although not always because of their nationalities but also because they feel they have very specific claims and issues that cannot be adequately treated, not only in the Japanese associations but also by the American Chamber of Commerce in Japan (ACCJ) or the European Business Council (EBC). However, to be effective and representative, these associations must be recognized by the Japanese authorities, which seems not to have always been easy. According to a practitioner, a newly reorganized foreign-firm-based association had to threaten the authority to split into two entities, a European and an American, which would have greatly complicated the task of the regulators. Regarding the operational side, a practitioner points out that, an important difference between the Japanese associations and the ACCJ is that, most industry associations never issue a viewpoint or a position paper, everything being done informally without policy documents, except on some transversal issues such as taxes in the automotive industry, for example. For him, the so-called viewpoints are important because they, first, create a consensus and, second, force to unfold a clear logic that is able to convince the Japanese counterparts rationally with a constructive critique of the current situation and realistic propositions. Finally, a practitioner explains that, due to the acceleration of the economic and technological environment, governments can get fresher and more accurate information about the latest trends from leaders such as GE or Philips rather than from their administrations or associations, and that this trend is coming to Japan too, despite the still important role of industry associations. 4.4.2  Direct Lobbying As mentioned above, lobbying in Japan chiefly consists of behind-the-­ scenes interactions with few public manifestations such as grassroots campaigns as in the US. Since the policy formulation process begins before the information goes public, it is essential that a firm is informed when an issue is considered at a ministry level or within the leading party specialized committees. To this end, the firm needs to develop a network of relationships and points of access that can be summarized in Fig. 4.1. The relevant points of access depend on the issue, but the important thing is that they are not independent because of the close interactions between the bureaucracy, the leading party, and the Diet. The zoku play a major role in linking different parts of the system with their expertise,

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Fig. 4.1  Points of access for firms

network of relationships, and power. Regarding the Diet members, Japanese companies make regular campaign contributions or support politicians through participation in parties or political seminars. Contrary to the US, corporate contributions are legal and even tax deductible (see below). However, for foreign firms, this channel is severely restricted since the Lockheed scandal of the 1970s.6 Access to Diet members may also be conducted through the provision of information highly relevant for politicians through “breakfasts” or other informal workshops. For the bureaucracy, access is equally diverse but amakudari (bureaucrats having left for another position but maintaining relationships in the ministries), old boys and personal ties based on region or school of origin, inter alia, are highly valuable channels as well, the point being the extensiveness of one’s network and connections. 6  A series of bribes and contributions made by the US aerospace company Lockheed in an attempt to sell its aircrafts that had ramifications in several countries, West Germany, the Netherlands, Italy and Japan. In Japan, the Prime Minister, Kakuei Tanaka, was arrested.

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4.4.2.1 Specificities for Foreign Firms As personal and subsequently long-term-based relationships are so essential in the information-gathering and influencing processes, it is easily understandable that newcomers and foreign firms face difficulties to deal with the system chiefly because the timespan of their managers or their return on investment requirement is limited (generally three to five years). Industry associations and Keidanren are naturally useful sources of information regarding the potential and not-yet-public legislative activity, but their support is also limited when the firm’s interests diverge from the collective entity. In this case, the firm must build its own capabilities, which means, inter alia, to know which ministry has jurisdiction on a particular issue, the relevant persons in the organization with their history and career, the retirement pattern of their predecessors, and so on. Indeed, the cohort system for bureaucrats, together with the associated decision-­ making process, is difficult to understand and follow for a foreign business executive. Career bureaucrats of the same cohort are promoted in the ministries at the same pace, and consequently, their title seems to reflect the same level of position. However, their real responsibilities are not equal, and one significant challenge is to identify precisely who is relevant to what. The same problem exists for the shingikai or other committees, and the real problem is not knowing who is a member, but who is the key person. Furthermore, identifying the appropriate point of access and the relevant person is a necessary but insufficient condition as broad consultation and consensus building may be required before a decision is made. To address this kind of difficulties that are hardly visible, lengthy, and expensive to develop alone, foreign firms may use local partners in the form of Joint Venture, as many did until now, to resolve individual problems such as approval of a new product. Another solution consists of hiring a consultant or a well-connected person. This seems fairly obvious but is a real prerequisite if one wants to be in contact with politicians. Diverse kinds of persons are available, but a clear distinction must be established between the amakudari and the others. First, the amakudari are bureaucrats whose career is considered a success and who are going to finalize it in a consultative rather than operational position, with frequently a lucrative facet attached in such a manner that it is being said that a good bureaucrat is someone who finds a good re-employment position for his boss, in a life-income perspective. This kind of practice used to be very opaque, but according to a practitioner, the recent evolutions of Japanese political life have led to a substantial

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increase in transparency and general cooling-off of the phenomenon. For many reasons, the amakudari did not tend to descend to foreign firms, although changes are noticed. One evident reason is the lack of a long-­ term relationship. Besides, a practitioner stresses the fact that for foreign firms, amakudari are not really useful because they are too specific and linked to particular zoku when firms would need polyvalent persons capable of managing a great variety of issues. Foreign firms want generalists having the largest possible circle of acquaintances without consideration of the content or specialized knowledge. The same informant says that ex-­ Self-­Defense Forces members, for example, are valuable because they can offer a wide array of relationships. The other persons available for these types of positions are those who can be subsumed under the term “old boys.” Another practitioner remarks, however, that many of those who work for foreign firms are, in a sense, people who left the bureaucratic system without going to its end with the reward and the success attached to the full career. As the bureaucrats are considered and consider themselves the elite, positioned higher in the social hierarchy than the people evolving in the private sphere, they tend to despise those who left, thinking of them as dropped out. To be successful, the old boys acting in government relations would have to bow before their former colleagues in a humble soliciting approach, which is not without causing difficulties for their egos; it has implications on the efficiency of their actions. According to these observers, the bureaucrats are difficult to meet and a fortiori to move. In this sense, the Diet members are easier to reach, whereas the bureaucrats will not move unless a politician calls them. A significant part of the lobbying process consists of small and very patient steps (jimichi). It is unlikely that an executive would fly to Tokyo, telephone a minister or an LDP official, get an appointment, and arrange a meeting to solve a problem. Even if it does actually happen sometimes, it is highly frowned upon and unlikely to bear results. It is hardly sufficient to say that one has met the minister and that they agreed on a subject; a consultation is necessary. There seems to be a double structure: on the visible side, foreign executives or CEOs meet politicians or people in ministries with high positions and titles, often under the auspices of the ACCJ, which allows them to justify their action to their stakeholders or supervisors, but in reality, they are not efficient, the real work being done behind. As a practitioner puts it, the real result consists of patiently establishing a dialog with a kacho (department chief), beginning with the bottom of the

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ladder (kakaricho=unit chief), and having your issue taken up by the kacho as its own theme to the upper levels for a decision. The proper way is to be followed. The kacho of the Japanese bureaucracy are very powerful, deciding the topics and the budgets of the bureaus. Their hierarchical level is considered equivalent to private firms’ CEOs. The actual operational lobbying work is done at their level. However, this does not mean that politicians must be neglected, as mentioned before. They are the final decision makers, have the power to move the bureaucrats, and unblock an issue with a phone call when a file remains stuck at the bottom of the pile for months as in a case encountered. Even though foreign firms cannot contribute pecuniarily, they can be creative in offering assets to politicians who appreciate the variety and richness of information brought by them, the comparison with other countries, and the hindsight it can give. A good example consists of the Health Policy White Paper, jointly made by the ACCJ and the EBC. According to one of the first promoters of this publication, in treating health issues in a broad public policy perspective, the White Paper is the result of demands from the Diet members who, instead of lobbying about the drugs or the devices of a specific healthcare company, expressed the preference to rather have a global picture related to topics such as diabetes, breast cancer, and so on. This kind of publication offering a holistic view was not available in Japan and allowed many Diet members, especially the non-specialists that have to make decisions in their belonging committees, to be informed, to take up some issues as their own and to ask relevant questions to the bureaucrats or at the Diet. It has the advantage of defining the problems, examining the current policies, and proposing solutions that include devices, services, diagnostics, medicines, that is, all the issues linked to the health chain from a user point of view. It also gives the opportunity to meet the relevant ministers for a presentation and therefore gain access.

4.5   Perceptions A few words will now be devoted to the lobbying or influencing phenomenon as it is generally perceived in Japan, by firms and other stakeholders, building on literature and material gathered in the interviews. The Japanese propensity to collective action, consensus building, and low-key approach to individual direct lobbying has already been mentioned. This approach can be linked to a general attitude toward the

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government that was and still is considered as the legitimate entity creating the laws and the rules in a top-down direction, whereas the private sector can only passively wait and listen to what is prepared for it. In this view, participation in politics or activities to change the rules is not seen as appropriate: politics is politics, economics is economics, and firms should not meddle in policymaking (Nishitani 2011; Fujii 2012). This mentality can lead to various implications. For example, an interviewee reports that, on an issue where foreign and Japanese firms had aligned interests, when coming to manifesting their position to the authorities, the Japanese companies preferred to let the foreign firms go to the front line to express their claims than appearing to oppose the Japanese government, and not only for tactical reasons. Another consequence is that firms tend to rely on the administration for the interpretation of the rules. Fujii (2012) stresses the difference with the European mentality with the example of a directive not very precise in its field of application and for which a Japanese company asked the representative of the Japanese government to interrogate the European Commission for a detailed interpretation, to make clear whether or not the new rules would apply to its products. Thus, the Japanese firm preferred to rely on the authorities, whatever the result, rather than remain in the uncertainty, which upset an American company working in the same industry. From the American company’s point of view, many products are borderline as every time a new regulation is established and therefore, judging whether or not the regulation applies to one’s products must be done by the firm first and not the other way round. Otherwise, it equates to make a rod for one’s own back. In the case of a problem, it is still possible to appeal to justice. In a Japanese perspective, laws and regulations must be as elaborated and perfect as possible at promulgation, which explains the long work of legislation makers checking all the existing laws to avoid contradiction, whereas in western countries the law is rather seen as an objective and a guideline that may need adjustment later (Fujii 2012; etc.) In a sense, this disinterest toward the rules can be linked to the strong technical tradition of Japanese companies. As many observers emphasize, the Japanese manufacturers and exporters have always adapted their products to foreign markets and rules through the power of their technology. Fujii (2012) calls this overconfidence the paradox of technology and explains that it leads many firms to neglect the rule-making process; he also stresses that nowadays, the de facto rules which used actually to win by the power of market and technology, tend to be insufficient when confronted to the de jure rules that are mobilized for the global standards of

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new types of businesses. For this battle, the Japanese companies are far to be well prepared. Compared to this Japanese attitude, western manufacturers do the opposite, trying to create first global standards at a highly strategic level, implying the top management as well as the public affairs or government relations teams, and extend these standards to the world, analyze some observers. In the automotive industry, the European or American firms claim to be the world standards when confronted with approval problems in Japan, whereas the Japanese automakers strive to adapt to each local market, indicates a practitioner. This lack of strategic interest and implication in rules and policymaking at the top management level may represent the biggest difference between Japanese and foreign firms, according to an observer. In foreign firms, the top management often knows the issues well and can sustain a discussion when meeting a political decision maker, which is rarely the case in a Japanese company where the leaders tend to be more oriented toward their field of predilection, marketing, engineering, R&D, and so on. As a matter of fact, this phenomenon is not limited to Japanese companies and many French firms, for example, suffer the same problems with an alternation of CEOs coming from business and others from engineering; in the latter case, they often cannot see the interest of CPA and leave the network their predecessors took so much time to build uncultivated. Nevertheless, this kind of interest is generally limited in Japanese companies as several firms testify. For example, at Daikin, the strong involvement of the chairman was key to the building and the sustainability of the public affairs team, but it must be said that this was also due to the fact that results have been obtained very rapidly, which is far to be always the case in CPA where the general rule is rather the opposite with the implied difficulties of justifying the related posts. In this sense, Daikin is, if not an exception, part of a small number of firms active in this domain on the global scene. The persons in charge concede that, domestically, they have a feeling of guilt, of non-recognized behind-the-scenes behavior. At Hitachi, the manager in charge declared that when he was in post in Washington, he had to explain regularly to the headquarters in Tokyo what lobbying was and what he was doing. According to him, there was nothing in Japan corresponding to its activity in Washington; this was not in the mentalities7 to say things to the government. 7  Historically in Japan, private persons were not supposed to address the government directly; this legacy is still alive in some public officials’ mindset who cannot completely do away with the feeling that their position places them above criticism.

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4.6   Organizational Aspects and the Shôgai Sections After the perceptions related to CPA, the focus in this section will be on the differences between Japanese firms and foreign firms from an organizational point of view. Traditionally, key industries such as automotive, infrastructure, or energy kept very strong links with the government with, for example, a strong dedicated shôgai department at Toyota, or Toshiba former chairman’s Keidanren activities. There were also firms with CEOs of strong personality such as Yamato, Uniqlo, or Softbank doing the job themselves. However, a first general ascertainment is that in many Japanese organizations, there is no (or rarely) dedicated team or section called government relations or public affairs. Instead, firms frequently have a section or a manager for the so-called shôgai activities, but the meaning is much wider and refers to every activity linked to the outside: external affairs, public relations, liaisons, contacts, negotiation, sales, and so on. It is so broad that no company seems to have the same definition. Therefore, the function shôgai should be understood as a point of contact without assumptions of influence seeking. It is frequently associated with the sales function, not necessarily linked to the government, and described as a post where one tries to understand the demands and needs of the clients to make proposals, therefore, close to marketing either.8 Despite the different perceptions described above, this does, however, not mean that Japanese companies do not interact with their legal environment. As observers explain, the apprehension, the content, and the manner are different. First, in Japanese firms, the functions concentrated in foreign firm’s public affairs section, and especially the lobbying, may be dispersed over various departments such as strategic planning, CEO office, communication, general affairs, research, or even sales. In some firms and industries, for example, in the heavily regulated sectors, contacts are regular, salesmen can go every day to meet the bureaucrats they have to interact with, and lobbying, in the sense of broadly promoting the firm’s interests, may be part of daily business operations. To this extent, CPA can be considered as integrated and immersed in the firm at the operational 8  In firms such as Daikin, there is a clear organizational distinction between the team dealing with public affairs worldwide and the shôgai office which is in charge of the relations with the industry association within Japan.

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level, without being organizationally and strategically standing out as such. Sometimes the CEO himself acts in this sense, or another person may be required to do the job, in parallel with his other functions, and without his colleagues knowing necessarily about it. In addition, the custom of job rotation in the Japanese firms further contributes to the confusion as someone can be in charge of lobbying and be shifted to another function, not necessarily in direct relation to what he has done until then. This naturally can be said of every function in the Japanese organizations, but in the case of lobbying which needs time to build relationships with its interlocutors, it may be more damaging because, as a practitioner remarks, long-term commitments and specializations are more essential in this practice, and once the links are cut, it is difficult to rebuild them from scratch. The same practitioner cites the case where, when trying to set up an ad hoc coalition on a specific issue and meeting the different persons in charge in various organizations, he frequently has been confronted with people not specialized in this function or, in charge of the relations with the industry association, or even people about to retire within a few years with no intention of long-term commitment. In many cases, CPA is not conducted in a strategic and systematic manner with a view to creating economic value in an integrated section with a dedicated staff and a budget, reporting at the highest level of the company. A practitioner even qualified the general practice of “individual-­ based” as opposed to organization-based in the sense that when an issue arises, the major channels mobilized are the personal connections that are incidentally available in the firms rather than a systematic and constructed approach. A majority of firms seems to think of interactions with the legal environment in terms of relationships with the collective entities (trade association and Keidanren) or chinjô to the authorities. Several analysts stress this interpretation, opposing chinjô, the classical form of manifestation for Japanese firms that could be rendered by claim or solicitation, to the proposal of an alternative policy. Traditionally, the Japanese firms tend to complain only, asking the authorities (the METI, etc.) to do something for them; they lack the capacity or the willingness to go further. This fundamental attitude also tends to be repeated abroad despite an entirely different configuration. Turning to the role of the shôgai sections or the managers in charge, it seems, according to observers, that their major activity consists of the relationships with the trade associations, the Keidanren, or other stakeholders.

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As seen above, they can belong to various sections, and there is not necessarily a shôgai department. They are supposed to tour the firm’s different departments and factories, synthesize the information, and transmit it to the Keidanren, for example, to be channeled to the government. Again, individual lobbying and CPA for a specific issue does exist but seems limited and low-key. There is no club or association of shôgai managers such as the lobbyist associations of the US or the EU, but the Keidanren plays somewhat this role, according to one of its representatives. At the Keidanren, the committee members are the chairmen or the CEOs, but at the operational level, this role is fulfilled by the shôgai managers. Things, however, appear to be changing. With globalization, first, the battle for standards has shifted from the domestic to the global scene, and the big players such as Canon, Sony, or Toyota do not lobby through their trade associations any longer; they are much less interested in domestic issues and standards. They can interact directly with the government who can hence access accurate, global, and fresh information that it could not obtain from a domestic industry association. Other firms, albeit in limited number, have understood that CPA and proactive participation in rule-­ making and standard setting on a global stage can create economic value and sometimes save their business. To this end, a special section was created in the METI, the Strategic Rule-Making Office, that was in charge of the support and the promotion of these kinds of activities. The Strategic Rule-Making Office used to deal with firms on an individual basis, which was considered significant progress. At the same time, its staffing was very limited, a point of concern for firms using its services. Finally, its functions were transferred to the Japan External Trade Organization (JETRO), the governmental organization in charge of external trade and investment, which now finances the lobbying actions of Japanese firms linked to social issues and rule-making abroad. Besides, the Japanese government is now supporting more private firms abroad through the Ministry of Foreign Affairs (MoFA) and the METI than it used to do ten or twenty years ago, especially in the infrastructure activities, report a number of firms, thus integrating the concept of economic diplomacy. Organizational aspects are also evolving. For example, the head of Hitachi’s shôgai department explains that, back from Washington DC, where he was in charge of CPA in the US, he tried to reorganize the headquarters organization in a centralized manner where until now each business unit had its own shôgai section. Another point consists of training a pool of specialists who can manage government relations with a long-term perspective. Moreover, a network of CPA specialist is also being unfolded on the global stage with

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the appointment of managers in key areas of the globe. Finally, with the recent participation to the board of the Keidanren as well as various advisory committees (METI, Cabinet Office, etc.), Hitachi seems to put more emphasis on zaikai activities than it traditionally used to do.

4.7   Financial Contributions and Transparency As mentioned above, financial contributions, together with collective action through industry associations, are the fundamental pillars of the Japanese CPA system. Money has been a constant feature of politics in the postwar period with the unavoidable scandals and reforms that have accompanied it. From 1955 to 1993, in what is called the “1955 system,” the LDP used to be the main receiver of funds from business, especially the biggest companies. During this period, a number of famous scandals such as Lockheed, Recruit,9 etc. burst out, leading to several revisions of the regulation for stricter control. In 1993, the LDP lost power, and the new coalition government managed to pass reform in 1994 that replaced the multi-member single nontransferable vote (SNTV) electoral system with a mixed one, combining single plurality voting rule with proportional representation (Carlson 2011).10 The new system was designed to reduce many of the issues of Japanese politics, including corruption, high costs of elections, and one-party dominance. The legal system itself is chiefly composed of the Public Office Election Law (Kôshoku Senkyohô first enacted in 1950), the Political Funds Control Law (PFCL = Seiji Shikin Kiseihô, enacted in 1948 and frequently revised), and the Law for Government Subsidies for Political Parties (Seitô Joseihô), which was introduced in 1994 together with the reform of the 9  In 1988, a human resources company, Recruit, offered shares of one of its subsidiaries, Cosmos, to politicians and business leaders before it went public, leading to a significant insider profit for the beneficiaries. Several high-level politicians had to resign. 10  Under the multi-member SNTV system, electoral districts were constituted of three to six seats. The candidates with the highest votes fill the positions. In a four-member district, for example, the top four vote-getters were elected and the candidate who came fifth lost. Each voter was allowed to cast a ballot for only one candidate in a multi-member district, making elections an area of competition between the parties and among the candidates within the same party. A voter could not transfer his vote in any preferential manner. With this system, politicians had to compete on a personal and clientelistic basis rather than on policies. Moreover, the urban areas were underrepresented compared to rural ones. The new organization consists of two parallel tiers, a Proportional Representation (PR) and a First Past The Post (FPTP) single-member district system. Each voter cast one vote in each tier.

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electoral system in order to ensure an alternative source of financing by government subsidies rather than by private interests. The entire system is supervised by the Ministry of Internal Affairs and Communication (MIC, Sômushô), but the implementation of the Election law is under the jurisdiction of local authorities. The Ministry is in charge of publishing the statistics regarding campaign financing and parties’ disclosure obligations. With the introduction of subsidies, the 1994 reform of the PFCL aimed to reduce the flow of donations to individual politicians and to strengthen the role of political parties in campaign financing, by channeling large donations to parties’ headquarters. Until 1994 individual candidates could use an unlimited number of the so-called fund-management organizations (shikin kanri dantai) to collect money, but with the reform, their number has been restricted to one, with a ban on donations from companies, trade unions, or other organizations. Corporate contributions to individual candidates were also banned with the consequence that nowadays, they can only receive donations from individuals within a limit. Corporate contributions to parties are, however, still permitted with limits (Blechinger-­ Talcott and Hasebe 2006). The shifts in sources of financing can be observed in Fig. 4.2, where a sharp decrease in contributions from corporations can be seen. It should, 400000 350000 300000

Other (subsidies, membership, loans)

250000

Parties

200000

Commercial activities

150000 Individuals

100000 50000

Corporations & political groups 2013

2010

2007

2004

2001

1998

1995

1992

1989

1986

1983

0

Fig. 4.2  Aggregated revenues of political parties by sources. Units: millions yens. (Source: adapted from MIC, http://www.soumu.go.jp/menu_news/snews/01gyosei17_02000076.html, accessed 15 May 2016)

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30000000 25000000 20000000 15000000 10000000 5000000 0

LDP DPJ

Fig. 4.3  Detailed sources of revenues for the LDP and the DPJ (year 2014). Unit: thousands yens. (Source: adapted from MIC, http://www.soumu.go.jp/ menu_news/s-news/01gyosei17_02000076.html, accessed 15 May 2016)

however, be noticed that the downturn began in 1992, after the peak of 1991, which means that factors other than the reform have played a role, beginning with the crash of the stock market and the economic recession that reduced the available amounts from business (Carlson 2011). On the other hand, subsidies increasingly gained importance, accounting by 2014 to nearly 50% of the total revenue for the LDP and 75% for the DPJ (Fig. 4.3). Membership fees and other commercial activities such as publications are slightly weakening, whereas the revenue from parties, seminars, and event organization is rather stable over the years, approximately 7% of the total. Regarding the differences between the LDP and the DPJ, it can be noticed that, besides subsidies, contributions from corporations and individuals still account for nearly one-third of LDP’s revenues with respectively 22% and 8%, while for the DPJ this combined amount only reached

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12% in 2014. To put these figures in perspective, before the introduction of the subsidy system, these contributions represented approximately half of LDP’s revenue (Carlson 2011). Coming to the regulation of lobbying per se, there are no specific regulations in Japan other than the above-cited laws and maybe other general anti-bribery provisions in the Penal Code (Blechinger-Talcott and Hasebe 2006). There is no registry of transparency either. Regarding foreign companies, the Political Funds Control Law strictly forbids contributions by foreign individuals or corporates. The restrictions have been recently loosened, allowing a possibility, provided that the entity be a Japanese corporate (with foreign shareholders) listed at least five years on a stock exchange. However, as a matter of fact, the conditions are greatly limitative. As seen above, the sale of party tickets is another important source of financing for the politicians. These parties are considered as seminars with speakers and dinner, thus providing a real service as a counterpart of payment and therefore are not treated as donations. In addition, except for a limitation of 1.5 million yens per party, there are no quantitative limitations, neither obligation for disclosure for the purchase of these tickets, which allows a looser financing framework than contributions. This is criticized as a loophole but follows a certain logic. Consequently, it may be considered a gray zone for foreign companies and an excellent opportunity to meet key politicians to advocate one’s case. Some practitioners recommend it, provided that one not break the spirit, if not the letter of the law, whose essence remains the forbidding of foreign donations. The key points are networking and exchange of information, not financing, with a good cost–performance ratio: a cheap ticket against the possibility of having one’s issue defended. The problem may come from the foreign firms themselves, fearing of being accused of corruption and self-limiting themselves. Another option is to have the tickets bought directly by employees or consultants, but, here again, uncertainty remains with some firms crossing the bridge and others not.

4.8   Conclusion This chapter reviewed the main characteristics of Japan’s political economy, political system, and lobbying patterns from a traditional domestic standpoint with the implications for foreign firms attempting to navigate this landscape.

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A prime general feature is that, as a power game, Japan is not so different from other parts of the world, but nevertheless, presents some institutional, organizational, and cultural specificities: prior consultations, behind-the-scenes consensus building, early consolidation of bills before vote, weight of the bureaucracy. In Japan, the traditional channels for influence are collective (industry or peak associations) or pecuniary via contributions to parties. Direct individual lobbying is less developed and often takes the form of solicitations to the authorities rather than proactive propositions of alternatives. From an organizational point of view, rare are the firms having a specific public affairs section despite the close but more ambiguous and dispersed concept of shôgai. With globalization and the shift of the battlefield to the de jure rather than the de facto standards, some firms are organizing themselves in a more proactive manner on the global stage, while the Japanese government shows more support abroad than it used to do. For foreign firms in Japan, the accurate apprehension of the behind-the-scenes processes is a real challenge that requires investment not always judged worth in terms of business return. Moreover, grassroots or public advocacy strategies are limited, while foreign firms are not allowed to activate financial leverages. Consequently, they have to concentrate on collective action, hire/use well-connected people, and provide valuable information/expertise.

References Abegglen, J. (1970). Business Strategies for Japan. The Boston Consulting Group (Ed.). Tokyo: Sophia University/TBS Britannica. Blechinger-Talcott, V., & Hasebe, Y. (2006). Japan. In T.  D. Grant (Ed.), Lobbying, Government Relations and Campaign Finance Worldwide (pp. 297–317). Oxford: Oceana Publications. Carlson, M. (2011). Money in Japanese Politics. In A.  Gaunder (Ed.), The Routledge Handbook of Japanese Politics (pp. 70–80). London: Routledge. Fujii, T. (2012). Kyôsô Senryaku Toshite no Gurôbaru Rûru. Tokyo: Tôyô Keizai Shinpôsha. Hamada, Y. (2010). Japanese Business-Government Relations. In D.  Coen, W. Grant, & G. Wilson (Eds.), The Oxford Handbook of Business and Government (Oxford Handbook Online). Oxford: Oxford University Press. https://doi. org/10.1093/oxfordhb/9780199214273.003.0015. Inoguchi, T. (1983). Gendai Nihon Seiji Keizai no Kôzu. Tokyo: Tôyô Keizai Shinpôsha.

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Johnson, C. (1982). MITI and the Japanese Miracle. Stanford, CA: Stanford University Press. Kaplan, E. J. (1972). Japan: The Government-Business Relationship: A Guide for the American Businessman. United States Department of Commerce, Bureau of International Commerce. Retrieved April 6, 2016, from https://archive. org/stream/japangovernmentb00kapl/japangovernmentb00kapl_djvu.txt. Mahoney, C. (2008). Brussels versus the Beltway: Advocacy in the United States and the European Union. Washington, DC: Georgetown University Press. Muramatsu, M. (2010). Seikan Sukuramugata Rîdâshippu no Hôkai. Tokyo: Tôyô Keizai Shinpôsha. Muramatsu, M., Ito, M., & Tsujinaka, Y. (2001). Nihon no Seiji (2nd ed.). Tokyo: Yuhikaku. Muramatsu, M., & Krauss, E. (1987). The Conservative Policy Line and the Development of Patterned Pluralism. In K. Yamamura & Y. Yasuba (Eds.), The Political Economy of Japan (Vol. 1, pp.  516–554). Stanford: Stanford University Press. Naoi, M., & Krauss, E. (2009). Who Lobbies Whom? Special Interest Politics Under Alternative Electoral Systems. American Journal of Political Science, 53(4), 874–892. Nishitani, T. (2011). Paburikku Afêzu Senryaku. Tokyo: Tôyô Keizai Shinpôsha. Okimoto, D. (1989). Between MITI and the Market: Japanese Industrial Policy for High Technology. Stanford: Stanford University Press. Pempel, T.  J., & Tsunekawa, K. (1979). Corporatism Without Labor? The Japanese Anomaly. In P. C. Schmitter & G. Lehmbruch (Eds.), Trends Toward Corporatist Intermediation. London: Sage. Sato, S., & Matsuzaki, T. (1986). Jimintô Seiken. Tokyo: Chûôkôronsha. Schmitter, P. (1974). Still the Century of Corporatism? Review of Politics, 36(1), 85–131. Tsujinaka, Y., & Mori, H. (Eds.). (2010). Political Functions of Social Organizations in Contemporary Japan: Faces of Interest Group and Those of Civil Society. Tokyo: Bokutakusha. Zhao, Q. (1993). Japanese Policymaking: The Politics Beyond Politics. London: Praeger.

CHAPTER 5

The Context for Foreign Firms: Trade, Investment, and Business Issues

5.1   Introduction This chapter attempts to review, identify, and refine the issues foreign firms are encountering on the ground. The major sources will be the information published by the two main international Chambers of Commerce, the ACCJ and the EBC, the trade and investment treaty negotiations, and the perceptions of the interviewed practitioners. In the first part, a selection of main themes dating back to the beginning of the century will offer an overview of American and European claims. Their evolution will then be followed until the recent treaty ­negotiations. Regarding trade, since Japan has already lowered tariffs on industrial goods to a great extent, the question of non-tariff barriers is central for foreign business and will be described in some details. For the following part, US-Japan intergovernmental history will be briefly reminded to put in perspective the paradigm change that occurred at the turn of the century. From an adversarial relationship, American business “entered the caste” rather than exporting from outside. In this context, the role of gaiatsu (foreign pressure) is evaluated along with the evolution in lobbying strategies coming to include a more collaborative and win-win stance as foreign business becomes part of the Japanese economic landscape.

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5.2   Major Issues for Foreign Firms in Japan 5.2.1  Demands from Business Communities and Governments 5.2.1.1 I n the Past: A Selection of Themes from EBC 2000/2001 and ACCJ 2001 White Papers Before proceeding to the detailed analysis of this book’s cases, it might be meaningful to put the issues found in perspective by comparing them to the available information related to the problems encountered by foreign firms in Japan. The subject is broad and can encompass different levels of analysis since no database exists that would gather and compute micro- or firm-level CPA activities. One, therefore, has to rely on macro-level information such as bilateral trade and investment negotiations, semi-macro/ sectoral issues as aggregated by the foreign Chambers of Commerce in Japan or similar bodies, or surveys conducted by various actors. However, it may be deemed that, as it will be seen, there are sound correspondences between these aggregated topics/trends and the actual cases of this book. Things are evolving; some issues are solved or cease to be relevant, whereas others are still identified as problematic. As an interviewee puts it: “if one wants to find changes, he will find some; if one wants constants, he will find them either.” It could be said that it depends on the lens adopted, the level of analysis, and the expected results. Consequently, to follow the constants and the evolutions, the focus will chiefly be on the semi-macro level as represented by the publications of the American Chamber of Commerce in Japan (ACCJ) and the European Business Council (EBC), which form a trackable thread across time. Other sources will naturally complement this approach. In Table 5.1, the major topics found in the 2001 US-Japan Business White Paper (ACCJ) and the 2000 and 2001 Reports on the Japanese Business Environment published by the EBC,1 whose acronym at the time stood for European Business Community, are synthesized.2 The two issues of the European side correspond to the biennial one of the American side, the total covering the two years of 1999 and 2000. It could have been 1  ACCJ (2001). US-Japan Business White Paper. Tokyo: The American Chamber of Commerce in Japan; EBC (2000). The EBC Report on the Business Environment. Tokyo: The European Business Community in Japan; EBC (2001). The EBC Report on the Business Environment. Tokyo: The European Business Community in Japan. 2  The European Business Community became the European Business Council in 2005.

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Table 5.1  Major topics from the 2001 US-Japan Business White Paper (ACCJ) and the 2000 and 2001 Reports on the Japanese Business Environment (EBC) Regulatory/relations with the government/ cross-sectoral topics for foreign firms

Product approval Regulatory burden

Standards harmonization

Regulatory transparency

Government procurement Tariffs

Taxation

Border control

Legal environment

Insurance, animal health, medical diagnostics, medical equipment, etc. Onerous filing and licensing requirements in diverse sectors such as health sciences, cosmetics, telecommunications, civil aviation, shipping, etc. Acceptance of foreign data in the approval process, extension of the recognition for medical devices, animal health products, cosmetics, and other goods requiring retesting for approval in Japan. Lack of transparency, making it difficult for foreign firms to predict the consequences of business decisions and plan for new regulatory developments (particularly the financial sector and the tax system), bureaucratic arbitrariness, implementation of a government-wide “no-action” letter system Lack of transparency and competition in a number of important sectors such as construction, aerospace, defense An important barrier to trade in key sectors such as industrial materials and food products Corporate tax rate, tax reliefs, consolidated taxation, transparency, withholding rates, stock options, etc. Quarantine laws, customs clearance procedure, arbitrary control (applying tariffs, testing products, etc.), inadequate handling facilities, high costs Prohibition on partnerships between Japanese lawyers and foreign lawyers, restrictions preventing foreign lawyers from advising on third-country law, barriers for transnational legal services provision (continued)

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Table 5.1 (continued) Structural/economic reform/investment related

Regulatory oversight

Government influence in the private sector Commercial code, corporate governance, corporate transactions

Healthcare reform

Pension reform

Labor market reform

Establishing independent regulatory authorities with pro-competitive mandates such as the FSAa in sectors such as telecommunications etc., strengthening of the Japan Fair Trade Commission (JFTC) State-owned or state-sanctioned monopolies in areas as telecommunications, electricity, postal savings, insurance Strengthening corporate governance, independent directors on company boards, review of cross-shareholdings schemes, allowing cross-border share swaps to facilitate M&As, reducing registration/ incorporation fees and simplifying the procedures, reforming accounting practices and enhancing disclosure to better reflect the market value of assets and liabilities, etc. Improvement on product approval process (speed, harmonized global standards, acceptance of foreign clinical data), adequate price setting encouraging innovation, cost containment Reforming the pension schemes to make them more financially sound, improving portability to enhance labor mobility; implementing effectively the recently passed Defined Contribution (DC) legislation and being careful not to set too restrictive conditions Emphasis should be put on securing labor mobility through education, retraining, increasing of professional service providers, and further deregulation, including immigration laws, visas and work permit to promote efficiency

FSA: Financial Services Agency

interesting to go back further in time, but unfortunately, the documentation on the European side is not available with the same level of detail. The beginning of the new century is an important turning point for the Japanese political economy as many reforms engaged under the Hashimoto administration (1996–1998), such as the restructuring of the bureaucratic

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system went into force in parallel with the arrival of Junichiro Koizumi in 2001. In this context, both American and European Business communities hailed this atmosphere of reform and expressed their support in their respective publications. A particular emphasis is put on structural reforms that are expected to boost the ailing Japanese economy. More details will be seen in a section devoted to the historical perspective on how the foreign business stance (chiefly on the US side) has changed, but what can be said here is that, compared to previous publications, which were rather comminatory, in 2001 the tone changes to become supportive and constructive. However, when looking at the details under the surface, the thing is that the issues remain the same. Moreover, they are so similar between the Europeans and the Americans that there was, in all likelihood, no point in distinguishing between them so that the decision was made to unify their claims into one single table. There might be arbitrariness and overlap in the process of aggregation, but the resulting table can be deemed giving a good general idea of the major topics foreign business complains of, many of them being still relevant. Particularly, in the category of “regulatory/relations with the government/cross-sectoral issue,” most topics such as product approval, standards harmonization, regulatory transparency, government procurements, border control, legal environment, and so on, are still current, with some reflected in this book’s cases. Regarding taxation and tariffs, even if the categories exist as such, the content has evolved with time, and tariffs will be subject to changes with the new trade agreements.3 The same can be said of structural reforms for which much has been done since 2001 in many of the fields mentioned.4 However, structural reforms, even if welcomed by the business community, cannot be seen at the same level as the “regulatory/relation with the government” type of issues because they concern the domestic actors primarily, are not specific to the foreign business, and therefore are not per se the direct object of CPA. Similarly, foreign business frequently complains about issues such as the high cost of business/labor/living in Japan, business practices (keiretsu, etc.), collusion, the distribution system, and so on, but these problems are less

3  Japan has low tariffs in general, except for specific goods such as agricultural products, petroleum, textile, leather and so on. 4  See Vogel, S.  K. (2006). Japan Remodeled: How Government and Industry are Reforming Japanese Capitalism. Ithaca, NY: Cornell University Press.

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dependent on the government and are more market/business structurerelated, which cannot be addressed with CPA only. 5.2.1.2 N  ow: Non-tariff Measures in Treaty Negotiations (EPA/FTA, TPP), Cross-sectoral Issues It is time now to turn to the present state of demands by the European and American sides at the moment of research (2016). Despite many similarities between the Europeans and the Americans, whether at the cross-­ cutting or sectoral level, and which, in all likelihood, outweigh by far the differences, it seemed interesting to distinguish between the two essentially because the two blocs were not exactly at the same level regarding the advance in their trade and investment negotiations. At the time of research, the Trans-Pacific Partnership (TPP) deal has just been signed and was reaching the following step of ratification and detailed negotiations whereas the Economic Partnership Agreement/Free Trade Agreement (EPA/FTA) with the EU was still under discussion but expected to be in the final line. As a consequence, the reference taken was the 2015 White Paper for the EU,5 which emphasizes its commitment to finalize the negotiations within the year 2016 and presents a shortlist of its top priorities. For the US side, the selection of topics was based on the latest US Trade Representative report (National Trade Estimate Report on Foreign Trade Barriers) for Japan (2015) and the Policy Statement of the US-Japan Business Council6 published just after the TPP deal. Time has passed, Donald Trump was elected at the presidency, and the US withdrew from the TPP. The remaining countries negotiated a new agreement called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which entered into force at the end of 2018. On the European side, the EPA was finalized and went into effect in February 5  EBC (2015). The EBC Report on the Business Environment. Tokyo: The European Business Council in Japan. 6  US Trade Representative (2015). National Trade Estimate Report on Foreign Trade Barriers, Japan (211–226); US-Japan Business Council (2016). Re-centering Abenomics: New Structural and Regulatory, Reforms Remain Vital for Economic Growth. Policy Statement. US-Japan Business Council: The US-Japan Business Council (USJBC) is a Washington, DC-based business association whose mission is to support US business interests in Japan and promote stronger economic ties between the United States and Japan. The council and its member companies act for the mutual benefit of both countries; it has been merged in 2012 with the US Chamber of Commerce to amplify the voice of the American business community on US–Japan economic relations.

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2019. However, since the focus here is on the issues and topics, this is not really problematic as a line had to be drawn somewhere, and the US might well re-enter the TPP in one form or another in the future. Historically, trade conflicts between the US and Japan were centered on the promotion of export to the Japanese market and the sectors of semiconductors, automobiles and their components, pharmaceutical and medical devices, wood products, and so on, as well as government procurements and standards/certifications. For cars and semiconductors, bilateral negotiations aimed at the establishment of numerical targets in terms of share of the Japanese market, with limited results (Ishikawa 2013).7 Today, tariffs on industrial goods in the manufacturing sector being already very low in Japan, their elimination is not a top priority for the US, but the variety of non-tariff measures that hinder trade is. By contrast, tariffs are considered essential in the agricultural trade as well as government-controlled mechanisms and Sanitary and Phytosanitary (SPS) rules, all key themes for the TPP. Compared to this very brief summary of the TPP spirit, the EPA/FTA with the EU is definitely centered on the removal of non-tariff measures as the priorities stated in Table 5.2 show. Hence, it can be noticed that the EU side put in the initial position its demands regarding the mutual recognition of standards, product certifications, marketing authorizations, and adoption of international standards in the domains of medical equipment, environmental technology, consumer products, cars, and food. This position and the corresponding difficulties were indeed reflected in many of this book’s cases, with several interviewees stressing the important leverage of the EPA/FTA negotiation in their individual situation. Turning again to the distinctive American requests, it can be observed that they emphasize not only transparency, which is not new, but specifically the possibility for deeper participation in policy making via advisory councils or public comment procedures. Compared to 30 years ago, when in spring 1984, the Japanese government agreed to permit American ­representatives to participate in the advisory councils,8 how should this 7  Ishikawa, K. (2013). Buppin bôeki no shôheki no genjô to mondaiten. In Nihon keizai no seichô ni mukete: TPP e no sanka to kôzô kaikaku. Tokyo: The 21st Century Public Policy Institute. 8  In March 1984, the Japanese government led by Mr. Nakasone agreed after long debates to allow foreign representatives in these councils where the Japanese industrial policy is discussed.

Cross-cutting issues/ business fundamentals

Advisory Councils/Committees:  Given the opacity in the functioning of the various advisory committees, ensure transparency on the formation and operations of these groups. Public Comment Procedure (PCP):  Ensure further revisions to improve the system such as lengthening the comment period for rulemaking Identify and eliminate impediments to cross-border M&A, ensure that shareholder interests are protected when adopting anti-takeover measures, improve corporate governance by augmenting the role of outside directors, etc.

US (USTR+USJP Business Council after TPP signature)

Shortlist of top EBC • Mutual recognition of standards, Cross-cutting Transparency priorities for the FTA/ product certifications and marketing issues/business EPA authorizations, adoption of fundamentals international standards, for example, in terms of medical equipment, environmental technology, consumer products, cars, and food. • Lifting of barriers, such as high costs and unnecessary bureaucracy that prevent or delay products from Commercial law reaching the market—for example, in terms of tariffs on materials and foods, and Japan-only product labeling requirements. • Ensuring fair competition and equal treatment for all companies, domestic and foreign, for example, in the airline, express delivery, and insurance sectors. • Ensuring fair and open tenders for public contracts in the railway and construction sectors. • Improving conditions for foreign direct investments, including the removal of requirements unique to Japan in the banking and asset management sectors

EU (EBC), in the view of an FTA/EPA agreement within 2016

Table 5.2  European and American demands in 2016 based on the 2015 EBC Report on the Business Environment for the EU, the US Trade Representative National Trade Estimate Report on Foreign Trade Barriers report for Japan (2015) and on the Policy Statement of the US-Japan Business Council (March 2016)

Government procurement

Customs

Intellectual property

Legal services

Key FTA/EPA issues  Recognize foreign lawyers if they are recognized in their home jurisdiction Other issues  Amend or abolish the restriction on branching Key FTA/EPA issues  Address in sufficient depth the issues of counterfeit product (luxury goods) and parallel importation, as well as adopt a tighter definition of “for personal use.” Create a single customs area, streamline the administration requirements, enable greater flexibility Key FTA/EPA issues  Ensuring fair and open tenders for public contracts in the railway and construction sectors

Remove restrictions on the ability of foreign lawyers to qualify for provision of international legal services; limitation to establish branch offices in Japan

Government procurement

(continued)

Despite the WTO’s GPAa and two bilateral public works agreement in effect, problematic practices such as bid rigging (“dangô”) continue to limit the participation of US firms in the construction sector

Intellectual property Continue to improve IPR protection and enforcement, especially against piracy in the digital environment (technological protection, extension of the term of copyright protection, etc.) Customs Improve processing and facilitate treatment of goods at the border

Legal services

Other financial services

Insurance

Express delivery

Sector-specific Food and agriculture

Other financial services

Insurance

Express delivery

Food and agriculture

Reforms in the areas of online financial services, defined contribution pensions, credit bureaus, sharing of customer information; transparent practices, and written interpretation of Japan’s financial laws.

Level playing field with the Postal Insurance (access to network for private providers, difference of supervisory treatment, cross-subsidization); kyôsai; Policyholder Protection Corporations (PPC)

Sanitary and phytosanitary barriers  Food safety (beef, food additives, gelatin, and collagen, fungicides, residue limits); plant health (potatoes) Import policies  Rice, wheat, pork, beef, fish and seafood, high tariffs (beef, citrus, dairy, processed food, etc.) Unequal conditions of competition with Japan Post (customs procedures, subsidization of international express service, privatization)

US (USTR+USJP Business Council after TPP signature)

Key FTA/EPA issues Sector specific  Tariffs and quotas  Additives and enzymes Other issues  Maximum residue levels, beef, and by-products (casings, gelatins), listeria monocytogenes, malt and quota, cured meat Key FTA/EPA issues  Level playing field between Japan Post and private companies (customs procedures, application of Parking Law, inspection of quarantine related goods) Key FTA/EPA issues  Fair competition and equal treatment; complete privatization of Japan Post; kyôsaib; Other issues  Harmonization with global solvency; product approvals; bancassurance; Policyholder Protection Corporations (PPC) Key FTA/EPA issues  Removal of requirements unique to Japan in the banking and asset management sectors (banking agency system etc.) Other issues  Avoid unnecessary administrative burden (multiple supervision); information sharing; globalization of operational platform in asset management, etc.

EU (EBC), in the view of an FTA/EPA agreement within 2016

Table 5.2 (continued)

Medical Devices and Pharmaceuticals

Automotive

Telecommunications

Key FTA/EPA issues  True mutual recognition of product certifications; increase the scope of products covered by SVCs.c Other issues  Creation of an independent regulator; fair competition (NTT); harmonization of spectrum for IMTd systems Key FTA/EPA issues  Harmonization of technical standards and certification procedures on the basis of UN Regulations, elimination of unique Japanese requirements; take further measures to make it possible for European compact and subcompact cars to compete on a level footing with kei-carse Medical devices: Key FTA/EPA issues  Shorten the time required for equipment examination; harmonize clinical evaluation with ISO 14155, mutual approval and alignment of Quality Management System (QMS), etc. Predictability of the reimbursement system must be improved. Pharmaceuticals:  Pricing system (continuation of innovation premium and the current biennial repricing system, abolition of the 14-day prescription rule); extend the scope of the Existing Mutual Recognition Agreement (MRA) for EU and Japanese Good Manufacturing Practice (GMP)

A variety of non-tariff barriers to be addressed: Transparency (opaque regulatory process), standards, and certification, extension of the Preferential Handling Procedure (PHP), zoning rules for vehicle distribution and repair facilities

(continued)

Medical Devices and Medical devices: Pharmaceuticals  Eliminate Foreign Average Price (FAP) rule for medical device evaluation; stable reimbursement policy (see below) Pharmaceuticals:  Predictable and stable reimbursement policy (continue the current biennial repricing system, make permanent the innovative premium program), abolish the 14-day prescription rule, further harmonize on international standards in clinical developments and trials. In general, accelerate the review time to reduce the approval lag.

Automotive

Telecommunications Dominant carrier regulation (NTT continues to dominate the “last-mile” connection on fixed-lines). No use of auction in allocating spectrum for mobile wireless licenses

Key FTA/EPA issues  Harmonize quasi-drug and cosmetic ingredients; abolish import notification and accept electronic customs clearance Other issues  Reform of the quasi-drug approval system Despite bilateral agreement between some European countries and Japan, the materialization in terms of procurements or industrial partnership remains limited Defense

Cosmetic and Quasi-Drugs

Reform of the premarket approval system of the so-called medicated cosmetics classified as quasi-drugs under the Pharmaceutical Affairs low. Furthermore, restrictions on advertising and complex import notification procedures also are problematic Despite contracts won by US firms, many contracts for defense equipment are not open to foreign bid

US (USTR+USJP Business Council after TPP signature)

b

a

GPA: Agreement on Government Procurement within the framework of the WTO. Kyôsai: according to the FSA, a scheme, formed by residents in the same region or persons engaged in the same occupation, which provides a certain amount of benefits from the pooled financial contributions of the membership for disaster, death or accident. Kyôsai are categorized as regulated Kyôsai (established by specific laws) and unregulated Kyôsai (without specific law for establishment). Regulated Kyôsai are exempted from Insurance Business Law, their business operations are under the special laws and supervision of each responsible authority. Unregulated Kyôsai are not considered to conduct insurance business as long as Kyôsai target specific groups of persons c SVC: Supplier’s Self Verification of Conformity d IMT: International Mobile Telecommunications e Kei-cars: category of small vehicles entitled to specific and favorable tax and insurance systems. They account for about one third of the market in terms of new sales

Defense

Cosmetic and Quasi-Drugs

EU (EBC), in the view of an FTA/EPA agreement within 2016

Table 5.2 (continued)

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demand be interpreted? A number of interviewees and a previous survey (Sone 1987) indicate that indeed participation was possible but that the difficulty was precisely to know whether, how and when the councils would be held, not to mention the language barrier, which altogether has actually limited the foreign presence to these fora (cf. Sect. 5.3). When considering the other cross-cutting issues, one can remark that they are not only fairly similar between the EU and the US but also durable in time. For example, the problem of recognition of foreign lawyers has been on the table for decades without much evolution. Regarding intellectual property, the topic is similarly constant on the agenda but with a different focus for each side: luxury goods for the Europeans and digital piracy for the Americans. The question of customs is equally old but seems to evolve toward a significant reform.9 According to the interviews, this is an area where foreign firms have contributed by various inputs but not limited to them: many Japanese importers face the same problems and have the same interests to a modification of the existing system. Finally, the government procurements also never disappeared from the agenda; in this field, the Americans give priority to the construction sector, whereas the Europeans try to sell their railways systems and related technologies. Regarding the industry level, the major concerns for both sides are in automotive, medical devices/pharmaceutical, insurance, express delivery, and food industries with fairly similar issues. The important issue of Japan Post straddles on the two domains of insurance and express delivery. 5.2.2  A Focus on Non-tariff Measures (NTMs) With the view of refining the whole picture of possible CPA issues, it seems worth focusing on a study made by Copenhagen Economics (2009) to assess the existing barriers to trade and investment between the EU and Japan prior to the start of EPA/FTA negotiations. Tariffs being low in Japan, except for agricultural goods, the major question was: what explains the relatively low level of trade with the EU? The focus shifted to the nontariff measures (NTMs) that have been quoted for a long time in various documents, as seen above, but the real problem was to identify precisely,

9  Simplification of customs procedures and deregulations of customs jurisdictions, allowing remote filing of clearances at locations independent of the territory of the responsible customs office.

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classify, and quantify them, which has rarely been done, and this is why this study is valuable. Before going into the details, the concept of NTMs should be examined to get a better understanding of its implications. Table 5.3 represents the classification established by the UNCTAD Multi Agency Support Team (MAST)10 and can be considered the most complete to date. Of this, Copenhagen Economics retains for Japan the categories of technical measures, border procedures, distribution restrictions, pricing and reimbursement rules, public procurement, intellectual property, and other measures. The types and importance of NTMs vary across industries: border procedures are more important for exporters of perishable food products or express delivery, whereas pricing and reimbursement rules are essential for pharmaceutical and medical devices. Table 5.3  Major non-tariff measures; adapted from UNCTAD International Classification of non-tariff measures (2019 Version) Import

Technical measures

Non-technical measures

Export

Sanitary and phytosanitary measures Technical barriers to Standards and technical trade requirements Conformity assessment requirements Pre-shipment inspection and other formalities Contingent trade-protective measures Non-automatic licensing, quotas, prohibitions and quantity control Price-control measures, including additional taxes and charges Finance measures Measures affecting competition Trade-related investment measures Distribution restrictions Restrictions on post-sales services Subsidies (excluding export subsidies) Government procurement restrictions Intellectual property Rules of origin Export-related measures

 UNCTAD (2019). International classification of non-tariff measures.

10

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An important point is that the differences in regulatory environment understood in terms of standards, technical regulations, and conformity assessments, often quoted as the most important for international business, cannot be removed simply by identifying them as such, and by arguing that they hinder trade. These regulations are established by governments to protect the health, safety, and well-being of citizens and the environment; the essential question and difficulty are to determine whether a norm serves the public interest or protectionism. Many times, both are true to a varying degree, which leads to conflictual and unsolvable CPA, both sides being right. An interviewee explains that the differences in norms do not necessarily reflect ill will but simply a different scientific history with independent development. Standards are, therefore, simply different, which can be conceptualized under the two subtypes of horizontal and vertical. The vertical dimension implies a different degree of stringency relative to the quality of products, low or high. The horizontal one only indicates that standards are different without the nuance of stringency, and they are probably the most common. With these distinctions in mind, it is time now to consider the findings about Japanese NTMs as identified by Copenhagen Economics. Out of the 215 issues found in their study, 194 were NTM related, of which 99 were in manufacturing, 62 in services, 29 in cross-cutting, and 4 in agriculture. Furthermore, a deeper analysis focused on the locus of solvability shows that issues solvable with traditional trade policy instruments such as treaties are a minority. Indeed, tariffs and taxes can relatively easily be removed as it has been done for decades in the case of Japan, but the majority of problems need a domestic reform or a combination, which complicates the situation greatly and explains why international trade and investment treaties are barely sufficient and often found inefficient. This is precisely where the locus for CPA can appear when firms must engage actions on the domestic market, sometimes with the help of their government and the pending treaties in negotiation, to have their products and services marketed. In manufacturing, the most numerous issues are found in pharmaceuticals, food, office/IT, and automobiles (82/99) with the majority (59/82) of them solvable only with a combination of domestic and international action (Fig.  5.1). Classified by nature, the most frequently

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Aerospace 11 Paper

31

Medical 1 3 Cosmetics

7

Automobile 1 6 Office/IT Food

3

14

2

Pharmaceuticals

3

19 10

0

10

Only solvable by domestic reforms

2

Solvable in combination with domestic reforms

1 20

1

20

30

Solvable with trade policy instruments 40

Fig. 5.1  NTM by industry and locus of solvability (manufacturing). Unit: number of issues. (Source: adapted from Copenhagen Economics (2009), p. 38)

mentioned issues are related to technical measures: Technical barriers to trade (65/99) and Sanitary and phytosanitary measures (12/99). The majority (65%) of these technical measures concern Conformity assessment, that is, certification, testing, quality system registration, inspection, and so on. By industry, these technical measures are concentrated similarly in pharmaceuticals, food, office/IT, and automobiles with nearly half in pharmaceuticals and food (44/99). For services, the financial sector dominates, followed by communication services and insurance. Here again, a combination of international and domestic policy is required for a solution (Fig. 5.2).

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Other transport services

109

2

Water transport 1 2 Construction

3

Business services

3 1

Air transport

4 1

Insurance

Only solvable by domestic reforms

4

5

Communication services 1

Solvable in

14

combination with domestic reforms

Financial services

13

7 0

5

10

15

1 20

Solvable with trade 25

policy instruments

Fig. 5.2  NTM by industry and locus of solvability (services). Unit: number of issues. (Source: adapted from Copenhagen Economics (2009), p. 42)

5.3   Evolution in Time and Changing Paradigm 5.3.1  A Brief History of the US–Japan Intergovernmental Economic Relations A 1991 A.T. Kearney report11 characterizes the changing patterns of US– Japan trade and investment relations every decade between 1950 and 1980 as, in historical order and respectively, benefactor, facilitator, critic up to the 1980s where Japan become a competitor. From 1990, the question is left open: partner or protagonist? With the temporal hindsight, at  AT Kearney (1991). Trade and investment in Japan: The current environment.

11

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least part of the answer is known: it could be described as a mix between the two, but the most significant crossroad for this book’s purpose seems to be from the end of the 1990s to the beginning of the 2000s, where foreign business–politics relationships will enter a new stage, driven by factors not depending solely on both countries. From around 1950, many legal and regulatory changes took place between the two countries beginning with the Foreign Exchange and Foreign Trade Control Law (1949) as well as the Foreign Investment Law (1950)12 in Japan; the major steps from the 1980s until now13 will be briefly summarized here. In 1985 the Reagan administration introduced, with Prime Minister Nakasone, the first multi-sector negotiating framework, the Market Oriented Sector-Specific (MOSS) talks with an initial coverage of four sectors with potential for US exporters: telecommunications, medical equipment, and pharmaceutical, forestry products, electronics. Auto parts were added after. Agreements were reached for each of them but with mixed results for US firms in terms of export increase. The Structural Impediments Initiative (SII) (Bush/Uno) was launched in 1989, targeting a broad range of Japanese policies, practices, and structural factors working as NTMs for US firms. The newness lay in the target of barriers cited not only by American actors but also by Japanese ones (academics, business, etc.), which reinforced the credibility and potential of acceptance. Domestic economic topics such as land policy (high prices), keiretsu, cartels, and so on, that were not included in bilateral negotiations until then, were thus

12  These two laws were naturally not designed only to govern the sole US–Japan relations; they were put in place after a shift in the US stance, judging that a reindustrialized Japan would serve better its interests in creating a barrier against the spread of communism, whereas in the immediate after-war, the Occupation authorities were rather seeking to dismantle the Japanese industry. The restrictions induced by the two laws, whose spirit intended to limit inward FDI into Japan to protect the renascent industry, were supposed to be relaxed after Japan regained its autonomy; in reality, they were used the backbone of Japanese industrial policy until the beginning of the 1980s. See Encarnation, D. J., & Mason, M. (1990). Neither MITI nor America: The political economy of capital liberalization in Japan. International organization 44(1), 25–54; Kushida, E. (2010), Inside the castle gates: How foreign companies navigate Japan’s policymaking processes. 13  See Cooper, H. W. (2014). US–Japan economic relations: Significance, prospects, and policy options. Congressional Research Service.

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approached with mixed success, the most representative one being the modification of the Large-Retail Store Law benefiting to Toys “R” Us.14 With the Clinton administration’s New Economic Partnership, sector-­ specific, as well as macro and structural issues, were addressed, with the obligation to meet twice a year for a review of progress based on objective criteria. This element was intended to measure Japan’s fulfilling of its obligation but proved to be highly controversial as the Japanese side did not agree to be quantitatively bounded, which resulted in tensions between both countries. Although agreements were reached in many areas (medical equipment procurement, intellectual property rights, financial services, and insurance, etc.), frustration heightened for US exporters and investors due to the feeling that the same obstacles, supposed to be already solved, were still in place, leading to the peak of trade frictions. The Japanese answer to this “result-oriented” strategy was that private sector practices do not obey to the same logic as government policies. After the auto agreement in 1995, this framework was closed and replaced in 1997 by the Enhanced Initiative, less formal and focused on an exchange of views without result-oriented requirements. The issues of that time were centered on telecommunications, medical devices and pharmaceuticals, financial services, and so on. As mentioned above, this period of the late 1990s is essential because representing a turning point in the relationship between the two countries where the interests shifted from economics to national security issues, due to many factors among which globalization, the rise of China, the protracted economic stagnation, and the financial crises in Japan creating an opportunity for a surge in inward FDIs. In 2001 (Bush/Koizumi), the Economic Partnership was formed around several Initiatives and Dialogues, and including subcabinet-level leaders, members of the business communities: the Regulatory Reform and Competition Policy Initiative, the Financial Dialogue, the Investment Initiative, the Trade Forum, and so on. In 2010 (Obama/Kan), the Economic Harmonization Initiative (EHI) was established as a framework similar to its predecessors to discuss the pending issues with several working and high-level meetings. However, since 2011, the TPP has replaced the preceding framework for bilateral issues. 14  The modification of the Large-Retail Store Law was included in the bilateral negotiations, thus backing its adoption and allowing Toys “R” Us to enter Japan in 1991. See Baron, D. P. (1995). Integrated strategy: Market and non-market components. California Management Review, 37(2), 47–65.

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5.3.2  The ACCJ Approaches Through Time in the Context of Intergovernmental Negotiations Attention will be now aimed at the activities of the ACCJ, that is, the American business community in Japan, and its perceptions, on the background of the above intergovernmental negotiations as witnessed by its publications or the interviews of former or active concerned persons. It would have been helpful to follow the evolution of the EBC in parallel, but this was not possible due to the lack of archives. The publication called “Making Trade Talks Work”15 can be a suitable beginning. It is a major issue of the late 1990s and published in parallel with other more traditional booklets such as “US-Japan Trade White Paper.” As mentioned above, the background consists of a high level of acrimony after a peak had been reached in trade frictions, together with the recent establishment of the WTO, and widely shared opinions that multilateral negotiations represent the future. From the ACCJ point of view, the perspective is slightly different from that of the US government because anchored in the daily Japanese business realities, leading to the launch of this publication that intends to scan all the agreements to date, to assess whether or not and to what extent they are implemented, and whether or not Japan is fulfilling its obligations, in the spirit of the above “result-oriented” strategy. Consequently, and for the first time, a comprehensive review of trade agreements since 1980 was undertaken with a qualitative and quantitative assessment. The exercise was conducted only twice, in 1997 (45 agreements) and 2000 (63 agreements), due to the burden it represents and, with the passage of time, the change of focus by the business community. The first observation that can be made is that between 1997 and 2000, the general tone has changed considerably, evolving from a hard to soft approach. In the 1997 version, the US had statements like “bottom-line objectives clearly in mind and stand firm,” “avoid vague terminology,” “include specific terms, goals, and objective measurement criteria for how agreements will be implemented and reviewed” (p. 13) because “achieving a written accord often isn’t enough; what has been agreed sometimes gets forgotten, ignored, or reinterpreted by the other side” (p.  14). According to the ACCJ, “no US Government agency has a readily 15  ACCJ (1997). Making trade talks work: lessons from recent history. Tokyo: The American Chamber of Commerce in Japan; ACCJ (2000). Making trade talks work: an onthe-ground analysis of US-Japan trade agreements by American business. Tokyo: The American Chamber of Commerce in Japan.

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a­ ccessible list of all US-Japan trade agreements or their complete texts. This may indicate that it has often been more important for the two governments to reach agreements and declare victory than to undertake the difficult task of monitoring the agreements to ensure their implementation produces results” (p. 14). “Despite many recent changes in Japan’s economic system … Japanese government interventions in the economy remain among the most extensive of any OECD country. Despite years of negotiation over market access and the expressed desire by Japanese officials for real deregulation of their economy, the breadth and depth of this study demonstrate the enormity of the access and deregulation problems that remain” (p.  16). Thus, from the ACCJ’s point of view at ground level, intergovernmental negotiations are one thing and the real world a very different dimension that needs to be more than ever firmly addressed. In the concluding section, the following recommendations can be found: “the US government should be more aggressive in finding and nurturing allies with common views and interests … (third-country parties and Japanese domestic constituents)”, “keeping the pressure on the Japanese to make good on their promises is paramount” (pp. 148–149). Compared to this, in the 2000 version, not only had the tone changed but also the landscape. First, regarding the evaluation of the trade agreements, a final score of 53% of them is found fully or mostly successful but with variation across industries: significant improvement in services and little or no change in manufacturing. Second, a new playing field and new rules are materializing, driven by three major factors: dramatic changes in Japan, trends in the world economy, and globalization strategy of firms. In Japan, the combination of the domestic economic and financial crises with the Asian crisis has revealed its structural weakness and forced changes in important policies, especially in the financial sector where, in the preceding years, a record number of mergers and acquisitions has occurred in ailing institutions with a significant amount of foreign takeover in the absence of any domestic savior. Although perceptible changes in labor flexibility, corporate structures, and governance are noticed, the 1997 remark that government intervention scores among the most extensive of any OECD country is still considered valid with “some plans devised in the name of deregulation look more like re-regulation when examined up close” (p. 18). As a result, a new strategic concept, “inside the castle” (p. 18), emerged around that time, reflecting a breakthrough in the manner foreign firms do business in Japan that is still valid today. The exact circumstances under

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which it was coined is not known, but the metaphor suggests that, whereas most US firms were basically working from outside the Japanese economy, they are now moving quickly “to take advantage of new opportunities offered by the so-called Big Bang financial reforms.” They adopt strategies “to grow their business with Japanese partners or, more notably, through wholly-owned direct investments” (p. 18). The phenomenon is, however, limited to certain industries when construction, telecommunications equipment, building products, sea transport, paper, and agricultural products report little progress. Consequently, the major lessons drawn here are that it is most effective to deal with trade barriers in Japan when the US government can align with domestic or global trends, have strong industry support, bring other leverage as Super 301,16 and receive the Congressional support of effective industry lobbying (p. 19). When leverage is weak, the industry is divided, or when the barriers protect strong local constituency, bilateral negotiations are less effective (p. 19). Finally, the concluding remarks stress that emphasizing the benefit to Japan and working closely with the media (on both sides of the Pacific) for social and political acceptance, are key elements for success. Here all the major elements for international lobbying, as highlighted in this book are at hand: nurturing domestic allies, assessing local opposition, having strong industry support, macro-level tools (Super 301, treaty negotiation, etc.), using intra-US lobbying, proposing benefits for Japan, and mobilizing the media for acceptance. These tools form the core of CPA strategies, at least for the US. The fact that they are explicitly synthesized in this 2000 version can be said to represent a landmark in the evolution of US–Japan economic relations in the sense that they reflect more variety in the commitment to the Japanese local market compared to simple pressure from outside at government level. The same change of atmosphere can be noted in the parallel publication of the US–Japan Business White Paper (2001)17 newly renamed from the previous US–Japan Trade White Papers because now, “the focus of America’s business interest in Japan has shifted significantly from trading 16  Section 301 of the US Trade Act of 1974 that authorizes the President to take various actions, including retaliation, in reaction to a deemed violation of international trade agreements. 17  ACCJ (2001). US–Japan business white paper. Tokyo: The American Chamber of Commerce in Japan.

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with Japan to doing business in Japan” (p.  13). Notably, “as more and more American firms operate inside the castle, with or without Japanese partners and employing large numbers of Japanese workers, they are increasingly participating directly in the Japanese policy process. American firms thus can become a part of the domestic naiatsu (inside pressure) process for change. In fact, the American business community in Japan has become a positive agent for change through the exercise of both external and internal forms of advocacy, or to coin a phrase, nai-gaiatsu” (internal/external pressure) (p. 16). Examples are given of this new naiatsu or nai-­gaiatsu strategy such as the common advocacy operations by American and Japanese firms following the bilateral agreement to lower NTT’s interconnection rates or the common actions for legal and tax changes to allow the broader use of stock options or the support for introducing defined contributions pension (p. 16). Further in time, the 2006 ACCJ US–Japan Business White Paper,18 significantly titled “Sôri Kyôsei” (Working together, winning together), explains in its introduction that it aims to provide an overview of the business environment in Japan, consistent with the ACCJ’s mission as “a supporter of reform … Kaikaku Oendan.” Its objective is not to make “demands” but to offer “the best proposals and constructive requests” in a dialogue with the government of Japan. This spirit is similarly epitomized in the ACCJ’s Core Advocacy Principles, stating that “policy recommendations should be constructive, solution-based, cost-effective and founded on sound analysis” with “win-win solutions.” Recently, the ACCJ stopped publishing these kinds of cross-sectoral Business Paper to focus on the specific issues of interest in the above proposal and solution-based spirit, namely in the Health Care and Finance fields. As several interviewees, having participated and experienced this evolution, witness, at the time of the first Making Trade Talks Work (1997), the focus was on monitoring, checking, and evaluating the result of gaiatsu, and the implementation of trade talks. However, confronted with the lack of effectiveness and the evolution of the environment, this work has been conducted twice only and abandoned; nowadays, no one would be thinking of doing an updated version because much progress has been made in

18  ACCJ (2006). US–Japan business white paper: working together, winning together. Tokyo: The American Chamber of Commerce in Japan.

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the castle. The Health Policy White Paper,19 for example, is a good witness to this evolution. In the 1980s, the focus would have been on tariff reduction for medical equipment, reduction of the approval period, and so on, whereas the recent versions are intended to provide broad and mutual benefit recommendations from the patient’s point of view. As one of its major authors explains, the Diet members do not want to hear about specific drugs or devices from firm A or B; they want to have the total picture of diabetes, breast cancer, and so on. To meet this demand, the White Paper, disease by disease, defines the problems, talks about the current policy, discusses the solutions plus the specific next steps that all incorporate the devices, the services, the diagnostics, the pharmaceuticals, and so on in one picture without advocating for a specific company or country. However, according to this source, the White Paper does not treat the pricing or regulatory facets that are managed by specific entities (PhRMA, AMDD,20 etc.). Nonetheless, it seems to be widely appreciated, especially by politicians belonging to parliament committees related to health, labor, or welfare and that do not have a medical background, that is, about 70% of them. And finally, even if it is not read by the majority of politicians, it can serve as a perfect access goods to meet ministers or any targeted people even with a different purpose. To conclude on the ACCJ approach and the related perceptions, a word can also be said about the external factors that contributed to this transformation, the biggest being the rise of China as an economic superpower. For the US government as well as firms, China offered many more challenges and opportunities than the stagnating Japanese market, for which the actors have begun to realize with time that resistance to reforms would last longer than thought. The investment in time, energy, and money could, therefore, not be worth in light of the expected return. As an interviewee puts it, in some way, Japan disappeared from the screen in those years where new technologies and business models had enabled corporate activities to become increasingly borderless. As the introduction of 2006 Business White Papers indicates, the priority between Japan and the US has shifted to cooperation on security matters, given the threat posed by global terrorism and the development of nuclear arms by North Korea. 19  ACCJ (2013, 2015). Health policy white paper. Tokyo: The American Chamber of Commerce in Japan. 20  PhRMA: Pharmaceutical Research and Manufacturers of America; AMDD: American Medical Devices and Diagnostics Manufacturers Association.

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5.3.3   About the Role of Gaiatsu (External Pressure) Thus, a shift occurred from US–Japan intergovernmental negotiations accompanied by gaiatsu, apparently not always efficient, to a direct interaction pattern between industry/foreign business and the Japanese government. There is abundant literature about gaiatsu that cannot be discussed in detail here, but it might be useful to make some remarks about its efficiency and the manner it was utilized by domestic actors, drawing on a selection of research by previous analysts. In a study devoted to the interplay between the domestic and the international level of bargaining, Schoppa (1993, 1997) examines why gaiatsu succeeds in Japan in some cases but not others. In his conclusion, he argues that “gaiatsu will tend to produce the most positive results when these strategies resonate with domestic politics in certain ways.” In other words, there are cases where domestic actors used external pressure to push their internal agenda. He gives the example of reforms requested by the US in the SII framework, in which success was seen in the distribution system (Large-scale Retail Stores Law) and the land policy reform (tax and regulation) because certain domestic interests were supporting it (record number of applications for the opening of large stores), despite a strong opposition. On the contrary, the issue of keiretsu went nowhere due to the lack of domestic support and the opposition of all the actors, the business community, economists, bureaucrats, and so on who defended the status quo unanimously as economically rational and not overly exclusionary. In the same vein, Encarnation and Mason (1990) examine the Japanese response to US demands for capital liberalization and argue that Japan agreed to allow selective cases of foreign investment only when domestic constituencies supported it actively. They challenge the consensus that foreign pressure was the principal cause of Japan’s capital liberalization and suggest that this was mediated by Japanese oligopolists in search of assets and skill controlled by foreign firms. These studies represent only a few examples but show that, although gaiatsu was widely used up to a point as seen above, it was not necessarily successful neither straightforward. It might have been used by domestic interests and even orchestrated by some governmental factions to advance their agenda. In this sense, the evolution of the ACCJ approach to advocacy may well also reflect a deeper understanding of this facet of Japanese society.

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5.3.4  Final Remarks: A Shift to Persuasion and Collaboration To conclude on the question of the evolution in time, reference will be made to the witness of several practitioners. First, regarding the level of gaiatsu, according to an interviewee, a real change seems to have occurred, compared to the 1980s and 1990s. In those times, there were real economic friction problems that had to be solved at the state level, but now, it seems to be only a matter of fine tuning. This implies that the USTR cannot be mobilized for every small issue. They used to do much gaiatsu in the past and do not want to be accused of doing some nowadays. Moreover, as a bureaucratic agency, the USTR seeks rationality as well as efficiency and therefore ask firms to speak with one voice and set up priorities among the hundreds of issues submitted, so that the problems it advocates are really worth taking the risk of damaging the relationship with the Japanese government. Home governments are not almighty; they have their own priorities, and one of their major functions nowadays is to open doors, although it might not be sufficient. However, some firms still want to use gaiatsu and push for it, but the only result is often the deterioration of the relationship with the Japanese authorities as in the Pay Pal case (see next chapters). Regarding the content, the focus has also changed. Earlier, trade issues were central, whereas nowadays, in globalization times, major problems occur from laws and legislations that have become obsolete in regard to the technical and economic acceleration. Many issues are therefore related to the modernization or adaptation of old regulations to new products or services. In this sense, the role of intermediate bodies such as the ACCJ or the EBC also receives a mixed appreciation. A practitioner speaks of a double structure, where the association publishes position papers and expresses the firms’ demands, but only on the basis of the lowest common denominator, whereas the real lobbying is conducted as an individual interaction that can be done only step-by-step and patiently in Japan. These collective entities serve more as communication or networking tools than as real influence vectors. Another point noted by a practitioner is the rise of transparency and professionalization of CPA. In the past, lobbying frequently used to offer special favors to officials, such as dinners, golf, or money as well as mobilizing personal networks from the same region or university. As mentioned

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above, in the 1980s or 1990s, the advisory committees never published their minutes, whereas now the information is open. Generally speaking, foreign business has become more effective and now works directly with the Japanese industry and government to achieve goals related to advocacy. Again, the same practitioner explains that this owes much to economic evolution, with the Japanese industry facing the same problems in the world as the American, which was not the case in the 1980s. As he puts it: “collaboration suddenly became possible.” The same sound can be heard at the Keidanren where there used to be a specific committee for foreign firms twenty years ago; that has disappeared now. In the life insurance industry where foreigners hold a significant market share, the person in charge of advocacy of European firms explains that the major differences are in competition and strategy rather than in terms of Japanese firms against foreign firms. To conclude, it might be worth recalling Tsujinaka (1994) as well as Katzenstein and Tsujinaka (1995) analyzing in a comparative approach the ways and means of foreign lobbies in Japan and the US. Questioning the means open to foreign lobbies in Japan, they remark that they cannot resort to the powerful and traditional constituent votes nor money, and are therefore obliged to use the home state power, local aligning interests, or the technocratic rationality consisting in convincing the bureaucracy with the power of information, idea, and analysis. This is exactly what has emerged in this study with the major findings that, now, the use of state power is becoming more limited, whereas the technocratic rationality (as opposed to politics) on the persuasion side is widely used with the help of collaborative local interests.

5.4   Conclusion This chapter was devoted to categorizing the various issues foreign firms used to and still encounter when doing business in Japan. The documents and archives provided by the two main international Chambers of Commerce, the ACCJ and the EBC, constitute the major material to refine the picture of foreign firms’ demands from the 1980s until recently. Over a long time and very roughly, firms’ top claims may be grouped as regulatory environment, standards/specifications/technical requirements, taxation systems, and customs clearance procedures. Since the 1990s, structural reforms have been undertaken, and trade/investment agreements signed or negotiated, but many issues of the same spirit

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remain. American and European claims are fairly similar in industries such as automotive, medical devices/pharmaceutical, insurance, express delivery, and food industries. The focus differs slightly in areas such as intellectual property, where the Americans concentrate on digital piracy versus luxury goods for the Europeans. With regard to trade negotiations, since tariffs on industrial goods in the manufacturing sector are already very low in Japan, their elimination is not a top priority for the US, but the variety of non-tariff measures that hinder trade is. Similarly, the EPA/FTA with the EU is definitely centered on the removal of non-tariff measures, with particular demands regarding the mutual recognition of standards, product certification, marketing authorizations, and adoption of international standards in the domains of medical equipment, environmental technology, consumer products, cars, and food. A study concludes, however, that the majority of NTMs are only solvable in combination with domestic reforms, trade instruments being insufficient, which means that lobbying within Japan is still strongly required. In the following part, the perceptions and evolution in time of the ACCJ and a number of practitioners are analyzed. There used to be gaiatsu and external pressures in the past, but due to the domestic crisis, globalization, and the rise of China, the attitudes have changed for foreign business, which is now “inside the castle,” leading to more direct interactions between business and government. Before, trade issues were central, whereas nowadays, in globalization times, the major problems occur from laws and legislations that have become obsolete in regard to the technical and economic acceleration. Many issues are therefore related to the modernization or adaptation of old regulations to new products or services. Here, major elements also reflected in the cases are echoed at the ACCJ level: nurturing domestic allies, assessing local opposition, having strong industry support, macro-level tools (Super 301, treaty negotiation, etc.), using intra-US lobbying, proposing benefits for Japan and mobilizing the media for acceptance. The use of state power is becoming more limited, whereas the technocratic rationality (as opposed to politics) on the persuasion side is widely used with the help of collaborative local interests. Moreover, CPA practices are becoming more transparent and professional in line with the increased transparency in Japanese political life.

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References ACCJ. (1997). Making Trade Talks Work: Lessons from Recent History. Tokyo: The American Chamber of Commerce in Japan. ACCJ. (2000). Making Trade Talks Work: An On-The-Ground Analysis of US-Japan Trade Agreements by American Business. Tokyo: The American Chamber of Commerce in Japan. ACCJ. (2001). US-Japan Business White Paper. Tokyo: The American Chamber of Commerce in Japan. ACCJ. (2006). US-Japan Business White Paper: Working Together, Winning Together. Tokyo: The American Chamber of Commerce in Japan. ACCJ. (2013). Health Policy White Paper. Tokyo: The American Chamber of Commerce in Japan. ACCJ. (2015). Health Policy White Paper. Tokyo: The American Chamber of Commerce in Japan. AT Kearney. (1991). Trade and Investment in Japan: The Current Environment. A Study for the American Chamber of Commerce in Japan prepared by A.T. Kearney. Cooper, H.  W. (2014). US-Japan Economic Relations: Significance, Prospects, and Policy Options. Congressional Research Service. Retrieved May 21, 2016, from https://fas.org/sgp/crs/row/RL32649.pdf. Copenhagen Economics. (2009). Assessment of Barriers to Trade and Investment between the EU and Japan. Report Commissioned by DG Trade (European Commission). Retrieved May 22, 2015, from http://trade.ec.europa.eu/ doclib/docs/2010/february/tradoc_145772.pdf. EBC. (2000). The EBC Report on the Business Environment. Tokyo: The European Business Community in Japan. EBC. (2001). The EBC Report on the Business Environment. Tokyo: The European Business Community in Japan. EBC. (2015). The EBC Report on the Business Environment. Tokyo: The European Business Council in Japan. Encarnation, D.  J., & Mason, M. (1990). Neither MITI Nor America: The Political Economy of Capital Liberalization in Japan. International Organization, 44(1), 25–54. Ishikawa, K. (2013). Buppin bôeki no shôheki no genjô to mondaiten. In Nihon Keizai no Seichô ni mukete: TPP e no Sanka to Kôzô Kaikaku. Tokyo: The 21st Century Public Policy Institute. Retrieved February 24, 2015, from http:// www.21ppi.org/pdf/thesis/130515_02.pdf. Katzenstein, P. J., & Tsujinaka, Y. (1995). “Bullying,” “Buying,” and “Binding”: US-Japanese Transnational Relations and Domestic Structures. In T.  Risse-­ Kappen (Ed.), Bringing Transnational Actors Back in. Cambridge: Cambridge University Press.

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Kushida, E. (2010). Inside the Castle Gates: How Foreign Companies Navigate Japan’s Policymaking Processes. (Doctoral dissertation, University of California Berkeley). Retrieved March 27, 2014, from http://escholarship.org/uc/ item/3q9796r6. Schoppa, L. J. (1993). Two-Level Games and Bargaining Outcomes: Why Gaiatsu Succeeds in Japan in Some Cases but Not Others. International Organization, 47(3), 353–386. Schoppa, L. J. (1997). Bargaining with Japan, What American Pressure Can and Cannot Do. New York: Columbia University Press. Sone, Y. (1987). Nihon ni okeru gaikoku robî. Keiô Gijuku Daigaku Hôgakubu, Sone Yasunori Kenkyûkai. Tsujinaka, Y. (1994). Kokunai seiji kôzô to gaikoku robî: Nihon ni okeru tai aitekoku robî no hikaku bunseki. Leviathan 14. Tokyo: Bokutakusha. UNCTAD. (2019). International Classification of Non-tariff Measures. Retrieved April 8, 2020, from https://unctad.org/en/PublicationsLibrary/ ditctab2019d5_en.pdf. US Trade Representative. (2015). National Trade Estimate Report on Foreign Trade Barriers, Japan (pp. 211–226). Retrieved May 16, 2016, from https:// ustr.gov/about-us/policy-of fices/press-of fice/ reports-and-publications/2015/2015-national-trade-estimate. US-Japan Business Council. (2016). Re-centering Abenomics: New Structural and Regulatory, Reforms Remain Vital for Economic Growth. Policy Statement. Retrieved May 13, 2016, from http://www.usjbc.org/wp-content/ uploads/2012/07/Policy-Statement-USJBC-FINAL-3-28-16-1.pdf. Vogel, S.  K. (2006). Japan Remodeled: How Government and Industry are Reforming Japanese Capitalism. Ithaca, NY: Cornell University Press.

CHAPTER 6

Case Study

6.1   Introduction After having given a general description of lobbying in Japan and explored the topics and specificities for foreign firms, it is time now to illustrate and apply the framework to real cases at a business level. A number of foreign firms working in Japan were researched on the basis of the following criteria: Analytically representative

Avoiding extreme case With firms of different and representative nationalities With a historical perspective Possible to document Effectiveness of CPA, lobbying in Home Country

Offer a typical, various, contrasted strategy   •  Individual, collective, home government support, etc.   •  Various issues and resources   •  Successes and failures Linked to specific political context, generalization difficult Focus on biggest countries (US-EU) with a balance between nationalities Possibility of long-term vision (up to the 1980s) People available, confidentiality provisions lifted, political decisions already adopted Firms known for their interest and activity

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Furthermore, due to the varying importance of CPA according to industries, the following sectors were distinguished for their degree of regulation, relations with governments, and propensity to lobbying: Sectors/industries

Point for CPA research

Pharmaceutical/Healthcare Finance Energy Utilities and assimilated Automotive Airlines/logistics

Highly regulated Highly regulated Highly regulated Governments as clients Key issue of an international trade negotiation Depending on bilateral negotiation and/or structural issues

Against this background, various interviews were conducted with managers, lobbyists, public officials, politicians, experts, industry associations, and so on, to finally retain twenty cases. Out of these twenty, eighteen fall under individual or individual + collective lobbying, and two are instances of collective action through trade associations. This was a deliberate choice given that strategic management decisions, the focus of this book, are individual. Taking into account the difficulty of access and the variability of information, efforts were made to ensure a satisfactory level of material to fit the analytic tools with the triangulation of documentary sources. However, two cases could not meet this requirement and, therefore, are not analyzed to the same degree as the others, though they are summarized in the annexes. The investigation follows the framework’s components, that is, issues/ institutions/interests/political resources/arguments, summarizes the highlights for the set of cases, and, sometimes, provides a table specifying the points for each case. For better readability, some details are described only in the annexes. Then, a synthetic review of the cases is proposed under the two conceptual dimensions of Coalition and Influence. For better visualization of the complicated relationships between actors, the two examples of VW and ABB are presented in the form of a chart. Finally, and maybe the most important from a strategic management point of view, the outcomes in terms of business and policy/regulation are summed up in a table. Hence, this chapter goes to a deep level of detail with an abundance of tables that may seem tedious. In this sense, the reader may skip it and go directly to the following chapter for implications and general lessons for business and lobbying in Japan. Those interested in the “how” should go through in parallel with the cases’ stories and tables of the annexes.

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6.2   Issues Table 6.1 shows the selection of the eighteen cases constituting the backbone of this book’s analysis. They were chosen because of their representativeness (sectoral, etc.) and their importance from a theoretical sampling point of view, as reflected by various publications from business bodies in Japan and/or related to trade negotiations. Moreover, due to the specificity of the subject and the limitation of information, these cases can be considered the best documented with enough potential to fit the details of the analytical framework. Other cases were also encountered where, for various reasons (full availability of information, confidentiality provision, etc.), it was not possible to ensure the same level of analysis. Among them, two significant cases are added and described in the annexes, but without the coverage extent of other instances (Utility firm A, O157). Coming back to the cases universe, the firm-specific vs. industry-wide criterion will be examined first. This factor, well attested in the literature and universal, appears to be one of the most important in deciding whether a firm will act alone or in a coalition, with groups such as trade associations. By construction, cases centered on individual firm’s actions have been chosen to capture the causality better and because strategic management is about individual decisions. Therefore, sixteen cases are structurally individual, but it was also intended to observe how wide coalitions, including trade associations, conduct their CPA. To this end, two collective cases (Car repair shops, NACCS) were included as a matter of comparison. A first remark that can be made is that eight out of the sixteen cases are merely firm-specific and, therefore, consistent with the prediction of individual action rather than collective. The underpinning logic would be that if the issue is related to sensitive information (commercial, technology), the firm will act alone, whereas, in the case of regulations relevant to a whole sector, collective action will be the most appropriate answer. A second important point, particularly in international business issues, is whether it concerns an approval, a certification, or a conformity assessment. In the precedent chapter, these kinds of issues (technical measures) have been identified as amounting to most of the NTMs found in Japan. Structurally, these issues, especially approval, tend to be individual even though negotiations for acceptance of new standards can and are also conducted collectively. The fact that the cases universe counts ten out of eighteen cases related to approval/certification reinforces the firm-specific and individual facet of the issues.

Introduction of bus shelters with advertising

New airbags technology using hydrogen on imported cars

Access to Centrair Airport

MC Decaux

VW Airbags

UPS

ABB

Impossibility to directly import ANSI standards meters from the US Promotion of 1000 V as low voltage standard in photovoltaic

GE Smart meters

Issue

Firm-­ specific

Industry-­ wide but with first mover advantage

Industry-­ wide but with first mover advantage Firm-­ specific

Firm-­ specific

Firm-­ specific vs. industry wide

Table 6.1  Issue criteria of analysis Newness

New concept

New concept/ standard

Salience

Regulatory, local authority

Limited Low

Technical and Limited Low regulatory with a legislative side Technical Medium Low and regulatory

Level of Scope policymaking

Standards and New Regulatory Limited Low certification technology and technical issue at the beginning but politicized at the end (bilateral) Approval – Bilateral, Limited Low regulatory

Approval

Standards issue

Standards and New certification product issue

Approval, certification, conformity assessment

Low

Low

Low

Low

Low

Extension of service

JV and action to overcome opposition from the Police Multilayer approach for a technical issue

Creation of JV to overcome standard and regulatory hurdles Indirect influence via strong influencers

Level of Other and conflict, remarks competition

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Firm-­ specific up to a point and industry-­ wide beyond Industry-­ wide but benefits to a limited number of firms.

Firm-­ specific

Bilateral, regulatory

Legislative

–

Broad

Political Broad (budget etc.) and regulatory

Broad

High

High

High

Limited Low

Medium High

New product

Regulatory

Investment Regulatory in a new system

–

Standards and – conformity assessment

–

–

Industry-­ Approval wide but (partly) benefits to a limited number of firms. Nicorette Campaign to Industry-­ – promote smoking wide but ban and boost benefits to drug sales a limited number of firms.

Increase of the level of fluoride in toothpaste/ mouthwash and alignment on international standards Hepatitis Campaign to promote awareness about Hepatitis C and boost drug sales

Proposal for a new system to streamline the customs clearance process

DHL Scanner

Fluoride

Slot allocation at Haneda

Delta

High

Low

High

Low

High

(continued)

Legislative change

Public advocacy

Modification of the legislation

Attempt to block slot allocation for competitors Example of coopetition and solution proposing

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Industry-­ wide but with a strong impact on the lobbying firm

Compliance with a new law (Payment Services Act)

Compliance and contribution to a new law (Payment Services Act)

Paypal

Western Union

Firm-­ specific

Firm-­ specific

Industry-­ wide but with first mover advantage Firm-­ specific

Introduction of a new animal vaccine Acquisition of a license to produce vaccines

Hartford Liberalization of bank sales of insurance (variable annuity)

Rhone Merieux

Animal Vaccine

Table 6.1 (continued)

–

New product

–

–

–

New business model

Approval – (deregulation)

Approval

Approval

Legislative

Legislative, regulatory

Regulatory

Regulatory

Regulatory

Broad

Broad

Broad

Broad

Broad

Low

Low

Medium Low

Medium High

Medium Low

Low

Low

Attempt of blocking a law, getting an exemption from the regulation Contribution to the design of the law

Insider strategy by the acquisition of a license holder Not new but recent product: extension of channels

Unlock an issue

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GE lands New environment law (Soil Contamination Countermeasures Act) harming the bad loans/ collateral lands repurchase business Car Release the repair restrictions linked shops to land utilization to create a network of service shops not limited to showrooms. NACCS Opposition to an system unfavorable price hike of the customs clearance system Legislative, local authority

Regulatory

–

–

Industry-­ – wide but with strong impact for the lobbying firms Industry-­ – wide but with a strong impact on the CPA promoting firms

Legislative

–

–

Industry-­ wide but with a strong impact on the lobbying firm

Low

Limited Low

Limited Low

Broad

Low

Low

High

Collective action centered on the ACCJ

Collective action conducted by JAIA

Attempt to block and/or change a law

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However, the most interesting observation, beyond this confirmation of the link individual/firm-specific issue/approval, may be that things are not black and white. Even in cases in which the issue is classified as industry-­wide, and, therefore, the final policy outcome stemming from the CPA action could theoretically benefit to all the industry actors, in reality, only a handful of actors and firms having a meaningful stake in the issue or a substantial market share will fully get an advantage. Consequently, even if these cases cannot be accounted for as firm-specific, they are very close. Furthermore, there is also the case of firms acting together up to a certain point to gain access and representativeness, and individually beyond, to avoid sharing sensitive information with competitors (DHL Scanner). Regarding the criterion of newness, it can be noticed that an important part (eight out of eighteen) of the universe includes this dimension. This is in line with the literature where the logic is that it is easier to defend an existing regulation or advocate a new one, rather than challenging existing policies because, in the first case, the current framework often has well-established groups with investments and organized constituencies, whereas the second generally means a different political market often without entrenched interest and giving the newness advantage to the agenda-setter (Bonardi et  al. 2005). This is a well-known fact for business as the idea is close to that of the blue ocean strategies. Moreover, the newness of the issue is also quoted as a major factor of success in the sense that it accompanies reforms conducted by a government and fits its strategy (Tiedemann 2009). As a matter of fact, these tendencies are observed in the cases with examples from the deregulation of the energy sector and reforms of the health sector in Japan in recent years. Turning to the level of decision making, the distinction usually done is between regulatory (bureaucracy/agency level) or legislative (the necessity of a law), but in this analysis, a third inter-governmental level for issues not solved only by domestic means must be added. In this dimension, there are clearly Japanese and IB specificities, but they are detailed in the “Institutions” section. The cases universe reflects this institutional feature with a clear weight on the bureaucratic/regulatory level. Finally, in the lobbying literature, scope, salience, and level of conflict are considered as major characteristics of issues leading to different strategies. Scope implies a large part of the society impacted by the

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issue, while saliency refers to its media exposure and importance for public opinion. Generically speaking, large scope issues imply a broad mobilization of actors, large coalitions, outside tactics (media, etc.), and are therefore preferably used by civil society. By contrast, business lobbying tends to avoid this kind of strategy and stay behind the scenes, especially MNCs in a foreign country where the support of public opinion is generally far from being acquired. Accordingly, the literature suggests that success for foreign firms is linked to the avoidance of election or salient issues in the host country (Bonardi et al. 2005; Tiedemann 2009). Besides the difficulty of influencing public opinion, the logic is that the more technical/focused and the less salient the issue is, the narrower the range of mobilized interests and the greater the chances of success. In a Japanese context, the cases suggest conformity to this pattern with a majority of technical/limited scope, non-salient, regulatory issues with a low level of conflict, implying inside lobbying, that is direct contacts and provision of information to the relevant authorities. Albeit avoidance of saliency by business CPA seems rather universal than Japanese-specific, there is also a clear Japanese characteristic to conduct lobbying behind the scenes and to cover this kind of interactions. This explains why it is very difficult to find CPA-related information in the press, contrary to the US or the EU, where mediatization is common. However, the level of saliency and mediatization in any part of the world also strongly depends on the degree of public interest and opinion, Japan being no exception on this point. This is the reason why it is possible to find in Japan, as some cases show, the usage of media for issues such as public health. Concerning the level of conflict, the universe indicates that a high level is frequently associated with failure or very partial success. Further research should be necessary to confirm this trend, but many elements advocate for the well-known fact that antagonization in Japan is seldom a winning strategy in a country favoring harmony. 6.2.1  Categorization of Issues by Strategic Feature Building on the above analysis, literature, and interviews, a categorization of the cases based on their degree of strategic level (Table 6.2) can now be proposed. A first distinction can be made between firms whose growth is structurally depending on CPA, such as in heavily regulated industries, that

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Table 6.2  Categorization of issues by strategic feature Stance

Type of action

ADJUSTMENT Active Operational Risk management Complaint Reactive

STRATEGIC Policy-driven growth Creating environment Proposing

Descriptors of issues and CPA actions

Cases

Approval, certification, deregulation for extension/new business

VW Airbags GE Smart meters UPS MC Decaux Car repair shops

Adaptation to changing regulatory environment, threat to business (attempts to modify or block) Proactive Promotion of change, proposition, attempt to contribute/establish a new favorable environment, rule/ standard setting

Fluoride Animal vaccine Rhone Merieux Hartford ABB UPS

Pay Pal NACCS Pricing GE lands Delta ABB DHL Scanner GE Smart meters MC Decaux

Car repair shops Nicorette Hartford Western Union Hepatitis

is, policy-driven and/or proactively trying to shape and modify their environment, and firms only adjusting to their environment, conducting CPA at an operational level as opposed to strategic, in a risk-management perspective. The former would tend to constructively propose win-win deals, whereas the latter would only complain about regulatory issues. In addition, the latter case could be further subdivided into active and reactive as opposed to proactive in the strategic stance. Compared to the proactive attitude that would anticipate issues in a long-term foresight vision, the active attitude would only manage planned operations such as approval to enter a new market, while the reactive position would consist, as the name indicates, in a passive reaction to events occurring without any initiative from the firm. This classification is naturally theoretical but seems to reflect well the reality of the cases encountered. However, as cases are not firms, adaptations must be made. The same firm, even with a higher propensity to CPA than others due to its means, its culture, and its industry structure, can act

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and react differently depending on the issue. For example, GE, which is widely recognized as the archetype of the policy-driven firm, is being found in the three categories: the GE lands case is a reaction to a non-­ anticipated law heavily harming its interests, whereas in the Smart meters case, part of the issue is related to the approval of a specific new product, and part to the proactive contribution to the creation of a new energy market in Japan. Thus, the two kinds of stances and the three kinds of actions can include respectively a certain number of cases, some seeking operational approval in the Japanese market, whereas others (sometimes the same) offer a more strategic and environment-shaping perspective. Attempts to reactively modify or block laws or regulatory initiatives are also present, hence allowing the whole range of possible CPA stances to be covered.

6.3   Institutions and Interests In this section, it seemed more appropriate to shift the corresponding analytic tables to the annexes for readability reasons to avoid being overwhelmed by details. The reader will then find the major institutions participating in the decisions and the interests (supporting and opposing) in each case’s synoptic table. As already explained in the previous chapters, it is a truism that in Japan, bureaucracy is in charge of a larger part of policymaking than in other OECD countries and that an issue that would be treated at a legislative level in the EU or the US must be addressed at Kasumigaseki rather than at Nagatacho.1 This is a major factor explaining the choice of targets and the timing of action well before the draft is submitted to the Diet, where it is too late to change or amend the content, all the debates having taken place within the party in power. In the majority of the cases, the Diet is not implied, but it should be noticed that, despite the above institutional specificity of Japan in the background, most of the cases’ issues can be said to be more related to a regulatory level (approval, etc.) than legislative. At the legislative level, the GE lands case illustrates well the Japanese policymaking process because, in this case, the company discovers the problems implied by the law only 1  Kasumigaseki, a Tokyo district, metonym for the bureaucracy as opposed to Nagatacho, seat of the elected government.

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at a very late stage when the bill drafting is over and about to be submitted to the Diet for adoption without leeway for modification. All the lobbying work will be focused on trying to obtain a modification of the bill, but, since it would imply a complete and therefore unrealistic review, the solution will come in the form of a decree separated from the law, with less binding power but seen as a second best option. The other cases where the Diet is implied are those related to public health, which by nature are broad in scope, concerning everyone, less technical, and easier for the Diet members to make their own. Participation in shingikai, study groups, and so on (GE Smart Meters, Hepatitis C) should also be stressed here as a feature of Japanese policymaking, even though specialized committees also exist in the EU or the US.  Naturally, this participation implies a strong commitment from the firms with a cost in terms of time and energy spent, which supposes large enterprises with important issues and stakes as well as a rather constructive approach, as opposed to adversarial. Finally, the strong influence of EPA/FTA talks, or other international/bilateral negotiations, should be emphasized as temporary institutional instruments based on state power resources. In the airline cases, the bilateral level is always required as no real and full open skies agreement exists yet. This means that CPA must be conducted at a double level within Japan and within the US (for example), and there is no guarantee that the home government will fully support the petitioner as it has to take into account the interests of its fellow competitors. In every CPA situation, the configuration of interests is essential to the success of the action, and this universal principle is also confirmed with this book’s cases. In most of them, the opposition seems to have been not that strong, which helped to advocate the issues and led to satisfaction. However, there is also a common feature to most of them, that is, the variety and strength of supports. To find allies is a universal law in CPA, and this may be particularly true in an international business situation when a foreign firm needs local partners to be involved more than ever so that, as constituents, they are able to mobilize their influence on local politicians. In the cases where opposition was strong with deeply entrenched interests such as Fluoride, Nicorette,, or Delta, the outcome was, at best, a step towards a compromise or a failure.

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6.4   Political Resources Among the major resources identified (Table 6.3), it can be first observed that, on the internal side, the Informational/Expertise resource is the most mobilized. This seems natural because this resource is linked to the raison d’être of the firm and represents its strength, its selling point to the outside world. Concretely, it consists of technology, service, or concept supported by the communication about it. In some limited cases, however, this resource is not implied because Economic and Organizational resources are at stake (UPS, Delta). The Organizational resources are implied in fourteen out of eighteen cases. They are second in quantitative importance and essential in the sense that they constitute the workforce, the tools conducting the action. It should be noticed that in this number are included the two cases of collective action. Most of the time, they consist of dedicated government relations teams with specific budget and organization, based in Japan, but hierarchically organized with strong control and reporting to the Government Relations Department in the home country. The centralization of the government relations/public affairs functions in US or EU firms, confirmed by the cases, can be considered a key characteristic and an important difference with their Japanese counterparts. In the cases where the Organizational resources are not mentioned, the CEO themselves or close persons were in charge of the issue, often due to a problem of size and means. The Symbolic resources have been judged important in five cases out of eighteen, which is not much in quantity but in each case can be considered qualitatively as very powerful and decisive. The reputation of the firm (GE Smart Meters, ABB), the image conveyed (MC Decaux), and particularly the promise of reputation/name perennity (Rhone Merieux) have substantially contributed to the positive outcomes of the issues. Regarding the Relational resources, one could have thought that they constitute a significant driver, for in Japan, informal networks play a great role, but it was not that much the case. Personal links were sometimes used (MC Decaux) but, at best, they only served to open doors and were intrinsically insufficient to advocate and convince. In other cases, relationships, networking, memberships in committees were rather constructed or reinforced during the case than preexisting to it. As expected, the Economic resources did not represent strong leverage because the weight of foreign firms in Japan is still limited in terms of jobs.

GE Smart meters  • INFORMATIONAL/EXPERTISE: new technology; creation of a debate and knowledge base, academic and media articles  • SYMBOLIC: reputation management, access to influential persons  • ORGANIZATIONAL: dedicated government relations team, hiring of connected people, lobbying culture, use of local people with direct report to the US headquarters, flying reluctant persons to the US to convince, use of intelligence tool  • FINANCIAL: budget for CPA, flying influential persons in the US, etc.  •  RELATIONAL: membership in advisory groups ABB  • INFORMATIONAL/EXPERTISE: new standard promotion; creation of a debate and knowledge base, technical comments for modification of standards, trade shows, research  •  SYMBOLIC: reputation abroad in the 1000 V field  • ORGANIZATIONAL: no government relations staff but a transversal team of connected people  •  RELATIONAL: personal relation with SB Energy MC Decaux  • INFORMATIONAL/EXPERTISE: new concept and know-how  • SYMBOLIC: build on the experience of city beautification, French image  • RELATIONAL: personal links with local influential persons (Okayama etc.)

Internal

Political resources

Table 6.3  Cases analyzed by political resources

 • STAKEHOLDERS: Local bus company and business group (Ryobi)

 • LEGITIMACY: creating conditions for debate such that the government cannot ignore it  • MEDIA: TV (Gaia no yoake), specialized magazines, press  • STAKEHOLDERS: direct clients and influencers (SB Energy, EURUS, shôsha, banks, etc.)

 • LEGITIMACY: providing input, fit to JP government strategy, participation to advisory groups, proposals to politicians  •  MEDIA: academic and specialized media  • STAKEHOLDERS: clients (Tepco etc.), local partner (Fuji Electric)

External

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Fluoride (J&J)

DHL Scanner

Delta

UPS

VW Airbags

 • INFORMATIONAL/EXPERTISE: technical safety data for a new technology  • ECONOMIC: success of the EPA/FTA negotiation (favorable for JP auto industry) in balance  • ORGANIZATIONAL: strong and centralized government relation team managed from Berlin and Brussels  • ORGANIZATIONAL: government relations in JP and close coordination with the government relations team in the US  • ECONOMIC: new flows of business for Centrair Airport  • ORGANIZATIONAL: Strong and aggressive lobbying capacities personalized by a famous Special Counsel  • ECONOMIC: Threat to cut flight to US cities linked with JP/Asia only with Delta, threat on jobs/tax revenues at Narita  • RELATIONAL: Network of supporting politicians in the US  • INFORMATIONAL/EXPERTISE: global know-how in efficient customs clearance systems  • INFORMATIONAL/EXPERTISE: technical data from the US, EU, production of a Viewpoint (ACCJ)  • ORGANIZATIONAL: in-house government relations capabilities

(continued)

 • STAKEHOLDERS: express firms (FedEx, UPS, TNT)  • STAKEHOLDERS: P&G, ACCJ, EBC, Cosmetic Europe, Japan Dentifrice Manufacturers Association  • LEGITIMACY: bringing world-leading dentist researchers to JP to educate members of parliament, MHLW, doctors, the Dental Association, etc  • STATE POWER: on the EPA/FTA agenda with the EU and Healthcare negotiations with the US

 • STAKEHOLDERS: politicians with constituents in Narita, politicians from US cities threaten by a stop of flights, etc.  • MEDIA: massive press campaign, especially in the concerned cities media to appeal for the risk of line closure

 • STAKEHOLDERS: Centrair Airport, Toyota, Chubu Economic Federation, etc.  • STATE POWER: bilateral issue needing the agreement of each party

 • STATE POWER: German government, EU Commission  • STAKEHOLDERS: ACEA, JAIA, and other manufacturers, EBC

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Hepatitis C (J&J)

External

 • INFORMATIONAL/EXPERTISE: new product;  • MEDIA: 90 media articles (local/national commissioning an opinion survey and an economic newspapers) for the opinion survey, more than 65 study, press releases, press conferences, hearings at newspaper and magazine articles nationwide for the the Diet, face-to-face meetings with Diet members, economic study, TV input for various events, education and laying the   • PUBLIC OPINION: touched by the national groundwork, White Paper, etc. survey (15,000 persons), the media impact, the   • SYMBOLIC: building on reputation, access to events with a Guinness World Record (6500 persons influential persons in JP); patient groups, etc.   • ORGANIZATIONAL: in-house government   • LEGITIMACY: broad-based opinion survey, events relations capabilities and budget; hiring of a formal featuring specialists and medical society leaders White House official in charge of Obamacare (Hospitals, Hiroshima University, etc.), partnership   • RELATIONAL: Minister of Health, Mrs. with Japan’s Health & Global Policy Institute, Komiyama, etc. bringing policy experts from the US and Europe,   • FINANCIALS: budgets for the survey and study leveraging on the World Hepatitis Day/Alliance and etc. a Guinness World Record with famous persons (Charles Gore, Mrs. Komiyama, a famous soccer player, etc.), touching the Ministry of Health and members of its Hepatitis Policy Advisory Council, conducting a Health Economic Study (Deloitte) showing the potential cost savings, touching a large number of Diet members and policymakers and changing their perception of the situation, background policy in the US supporting the screening of Hepatitis,   • STAKEHOLDERS: ACCJ, other pharmaceutical companies (Abbott, etc.),

Internal

Political resources

Table 6.3 (continued)

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Western Union

Paypal

Hartford

Rhone Merieux

Animal Vaccine

Nicorette (J&J)

 • INFORMATIONAL/EXPERTISE: commissioning an opinion survey, press release, press conference, hearings at the Diet, White Paper, Viewpoint, etc.   • ORGANIZATIONAL: in-house government relations capabilities and budget   • RELATIONAL: Minister of Health, Mrs. Komiyama  • INFORMATIONAL/EXPERTISE: provision of technical data by the embassy’s veterinary showing the interest and the safety of the product abroad  • SYMBOLIC: promise of durability for the laboratory’s founder  • INFORMATIONAL/EXPERTISE: new product and know-how in a fast-growing market; informational input (Viewpoint etc.), educating the FSA by frequent visits and presentations   • ORGANIZATIONAL: government advocacy team; chief actuary  • INFORMATIONAL/EXPERTISE: new business model   • ORGANIZATIONAL: frequent use and change of lobbyists, consultants, lawyers, etc. (internal + external) to exert pressure  • INFORMATIONAL/EXPERTISE: informational input through the provision of papers, public comment, education of the FSA   • ORGANIZATIONAL: hiring of a government relations consulting firm (continued)

 • LEGITIMACY: bringing of experts to explain how it should be regulated by the new law (Payment Services Act),

 • STAKEHOLDERS: the local laboratory (Phylaxin) that accepted to be bought and transmit its license  • STAKEHOLDERS: Japanese banks interested in the high level of revenues generated by the commissions on annuity products sales; ACCJ   • MEDIA: many general media seminars to explain deregulation and best practices in the US, specialized industry media about sales volume  •  STATE POWER: attempt to use the US embassy

 •  MEDIA: newspaper, TV (NHK, Kobe cable TV)   • PUBLIC OPINION: 8000 persons surveyed, media impact   • LEGITIMACY: broad-based opinion survey; bringing experts of smoking ban from England with case studies and touring the Diet to counter JP Tobacco and hotel/restaurant lobbying  • STAKEHOLDER: ACCJ   • STAKEHOLDERS: ZENOAQ   •  STATE POWER: embassy’s veterinary support

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NACCS system

Car repair shops

GE lands

 • INFORMATIONAL/EXPERTISE: informational input based on the US precedent (articles, studies, expert opinions, etc.) and centered on economic arguments despite the environmental character of the bill, meetings with Diet members,   • ORGANIZATIONAL: dedicated government relations team  • INFORMATIONAL/EXPERTISE: informational (technical, economic) input   • ORGANIZATIONAL: leveraging on collective action and trade association capabilities  • INFORMATIONAL/EXPERTISE: informational (Viewpoint, technical, economic) input   • ORGANIZATIONAL: leveraging on collective action and trade association capabilities

Internal

Political resources

Table 6.3 (continued)

 • STAKEHOLDERS: support of trade associations (ACCJ, EBC, etc.) and individual coalition firms (express firms, local freight forwarders)   • STATE POWER: support of the US government (embassy, DOT, etc.)

 • STAKEHOLDERS: support of trade associations (JAIA, JAMA, EBC)

 • LEGITIMACY: bringing of experts, law firms, use of media reports on the reality of loan rejection (Shiga Bank)   • STAKEHOLDERS: ACCJ, Banks, Keidanren, Japan Chamber of Commerce and Industry

External

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They were found in three cases only, among which in the form of threat for two of them (Delta, VW). On the contrary, in the UPS case, it took the form of an incentive, the success of the petition bringing an indispensable flow of business into Centrair airport. Finally, concerning the Financial resources, they are mentioned only when they are obviously at work in firms such as GE or J&J when special budgets are dedicated to specific CPA actions. In other cases, at least in individual situations, they can rather be seen as underlying without having their effect isolated. Turning to the external resources, the most generally used is the leverage of Stakeholders. The Stakeholders resources may seem to overlap somewhat with the category of Interests, but a nuance should be introduced. Stakeholders are intended here as actors having a direct interest in the issue, and as such, actively supporting it and mobibilized by the lobbying firm as a resource. In this sense, they are included in the Supporting Interests category but are limited to those effectively participating and do not include the Interests only showing understanding without action, not to mention the opposing ones. In this book’s universe, only two cases did not mobilize the Stakeholders to the author’s knowledge (Pay Pal, Western Union). Quantitatively following the Stakeholders, the Legitimacy resources lie at the core of CPA in many situations worldwide. When pressure and money are not available, Legitimacy is one of the most effective leverages for many reasons: anti-corruption legislation, transparency requirements, genuine attractiveness to citizens, and so on. It can be conveyed by various channels, but the point is that it should be conferred by a third party, independent from the CPA conducting actor, and could serve as a justification for politicians or bureaucrats in case their accountability is at stake. The biggest problems occur when different, but equally estimable legitimacies compete. In these cases, an array of utilization can be observed, ranging from the creation of a debate to prepare the future market and education (GE Smart Meters, ABB) to the mobilization of external and independent experts (Fluoride: Hepatitis C, Nicorette, Western Union, GE lands). As noticed above, the extensive use of Public Media and Public Opinion is limited to cases with broad issues such as public health (Hepatitis C, Nicorette), whereas advocacy in more specialized media can be found in cases where education is a prerequisite for the introduction of a new concept/product (GE Smart Meters, ABB, Hartford). In the Delta case, media were also heavily mobilized but outside Japan, where it is more common.

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As for State Power, a specific resource of international business situations, its use is also relatively limited and, moreover, very differently across cases. In the airline cases, the intervention of states is structural due to the bilateral nature of the issues and is not necessarily adversarial as the home country government has to deal with all its domestic airlines to present a unified front with a clear priority list when dealing with the foreign government on access rights. In some cases, a country’s embassy in Japan only opens some doors, but without pressure (Animal Vaccine), whereas in another case, the embassy is urged to intervene but without success (Pay Pal). Finally, states can put pressure by threatening the smooth development of an international negotiation (VW, Fluoride).

6.5   Tactical Building Blocks In this section some elements of the tactical building blocks described in the Framework chapter will be reviewed without detailing each of them as it might be either too technical or overlapping with results already appearing in other sections. 6.5.1  Arguments The arguments used in a selection of cases may be considered the most interesting tactical features and are presented in Table 6.4. Even though it could seem somewhat artificial and arbitrary to classify the arguments because of the richness and broadness of the argumentation, it gives an idea and shows patterns of how communication is conducted. Commonly shared goals, technical and economic arguments can be said to form the majority, whereas discriminatory/fairness was rare. This may be naturally linked to the limited number of cases but is also corroborated by many publications (ACCJ, EBC, etc.), surveys, and interviews where it appears that explicit discriminatory treatments have massively decreased in Japan, with many issues related to a playing field between public and private interests, including Japanese, rather than Japanese vs. foreign firms. Furthermore, as many cases concern technical measures type of NTMs, it is frequently difficult to determine whether the norms serve public interests or protectionism, and especially hard to prove. Consequently, this kind of argumentation is likely to lack convincing power.

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Table 6.4  Selection of arguments from cases Commonly shared goals, social contribution

GE Smart meters: contribute to the government strategy of liberalization of the energy market (bring flexibility on the power grid) MC Decaux: beautification of the city benefits to everyone Hepatitis C: improvement in diagnostic and treatment with less secondary effects, macro effect on health care costs Nicorette: benefits for workers’ health (hotels, restaurants) Technical argument VW airbags: provision of data, sending of engineers to convince regarding safety Fluoride: technical data from the US and the EU regarding safety Animal vaccine: provision of technical data proving safety Cost or economic ABB: emphasize on a higher IRR for investors, better export impact competitiveness in case of adoption of this new global standard UPS: benefit of new connectivity for central Japan Delta: threat on unique links with Asia and impact on local business, threat on jobs at Narita GE lands: risks for financial institutions (credit crunch etc.) in case of non-revision of the bill Hartford: fast growing and profitable new product in a difficult period for financial institutions MC Decaux: reduction of the fiscal burden for local finance, improvement of bus companies’ finances Feasibility Pay Pal: arguing that the new Payment Services Act is not adapted to their new business model and therefore irrelevant Discriminatory or Express delivery: difference of treatment for parking between Japan fairness Post and private firms Constituency, Hepatitis C: building of broad public support to gain a budget public opinion allowance Nicorette: building a consensus for acceptance of a more stringent law on smoking ban Impact on bilateral VW: threat of blocking the EPE/FTA negotiations relations Delta: attempt to block the US/JP aviation negotiations

6.5.2  Technics Regarding technics, each of them will not be detailed for the above reasons, but it can be noticed that for inside lobbying, the whole array is being used with face-to-face meetings, position papers (View Points, etc.), testimonies before Diet members, public comments, events/conferences/ breakfasts, outsourced research, expert mobilization, and so on. The flying to the US of influential and opposing person is also seen in the GE Smart Meter case. Except for the drafting of language for bills that cannot

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be used in Japan for institutional reasons, almost all the elements of technics are present, and in this sense, not very different from the US or the EU.  Concerning outside/external lobbying, grassroots mobilization is not very common and is not attested in the studied cases, but in limited instances, the use of public media occurred.

6.6   Balance of Coalition: What Allies, with Whom? 6.6.1  Routes and Strategies: Vectors for Conveying Voice The next step consists of examining how the cases are positioned in the first transversal dimension of coalition, which is also one of the most traditional lenses for investigating CPA. The key question here is: with which allies do firm convey their voice? Figure 6.1 summarizes the routes open to foreign firms in Japan. The picture is fairly rough and centered on three pillars: individual, collective, and state. In reality, firms evolve in a flexible combination of the three, as will be seen. Firms can act individually or in coalition with a local stakeholder; their home governments, through embassies and other bodies, are their natural allies/supports as they are not constituents to local politicians and therefore have difficulties to be politically represented. On the collective side, three types of support are available: the foreign chambers of commerce such as the ACCJ and the EBC, the local Japanese industry associations, and the specific industry associations foreign firms have created. Historically, the Japanese industry associations were not very open to foreign firms for competitive reasons, and even if things have changed, many practitioners stress that it is not always worth the investment in man-­time to follow association’s activities in Japanese, especially if the interests are rather diverging with the Japanese counterparts. Consequently, some industries set up their own trade associations to deal with the authorities as shown in Fig. 6.1, but this phenomenon remain concentrated to industries where foreign business hold strong positions globally and in Japan (insurance, finance, pharmaceuticals, medical devices) or, for which it has global strategic implications (automotive).

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Fig. 6.1  Major vectors for CPA coalitions available in Japan

6.6.2  Criteria of Positioning in the Balance of Coalition Table 6.5 details the general criteria used to position the cases in Fig. 6.2 representing the Balance of Coalition. Table 6.5 consists of a matrix combining the two dimensions of representativeness and credibility. As explained in Chap. 2, credibility must be understood as individual credibility, a qualitative attribute opposed to the quantitative/collective pole. The notion of credibility refers to global firms with leading technology that can, by this mere quality, gain access to the highest political level, if not necessarily success. A limited credibility does not necessarily mean a bad argument, simply a less strong one with less impact or a lowest common denominator. Moreover, in the matrix, the use of resources is not necessarily linked to one quadrant or another even if there are certain propensities such as firms relying more on their internal resources in case of individual action. For example, the use of state power can be very different, individual or collective, depending on cases. Resources are rather neutral, and what matters is how they are used. 6.6.3  Synthesis of the Analysis of the Balance of Coalition Figure 6.2 synopsizes the Credibility/Representativeness dimension of the cases studied here. The detailed positioning criteria can be found in the table attached to each case in the annexes.

CREDIBILITY: qualitative facet  •  Firm-specific issue or with strong impact on a limited number of firms  • Global firms with leading reputation who can by this mere quality be credible with the quality of the information they offer, and gain access  • Strong argument, original project with high social contribution, commonly shared goals, economic rationality, correspondence with politicians/government interest and strategy   • Newness, innovation  • Relying substantially on firm’s internal resources such as expertise, symbolic, organizational  • Limited number of stakeholders but strong support and interest, important constituent at local level LIMITED STRONG REPRESENTATIVENESS: HIGH  • Concern a whole industry but with  • Combination of individual credibility quantitative facet limited interest from an outsider with the support of numerous actors  • Industry-wide or broad vantage point  • Issues with broad scope (health, financial issue  • Traditional collective action, system, etc.)  • Argument/project/social lobbying by industry or peak  • Frequent use of public opinion, media, contribution less standing associations various social groups as external resources out as original than  •  Great number of actors  • Transversal lobbying/coalition with consensus, subsuming  • Consensus and unified voice various actors of different chessboards under one voice providing rationality and legitimacy (NGOs, civil society, etc.) having common  • Strength of numbers, for the government, bureaucratic aligned interests on a specific issue constituents, members of logic associations, etc. LOW  • Individual firm in limited scope  • Individual firm, strategic issue, related to  • Sometimes, strong issue firm-specific business/competition mandate but limited to the  • Limited legitimacy and social   • Joint ventures lowest common contribution  • Coalition with stakeholders, local interests denominator  •  Limited support from stakeholders and constituents in limited number  • Rely extensively on   • Failures  • Strong arguments, project, asset, external resources or concept, technology based on specific economic power firm’s internal resources

Table 6.5  Matrix for criteria of positioning in the balance of coalition

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Fig. 6.2  Balance of coalition with cases

A first remark is that the figure is not representative of general CPA in Japan because individual cases were deliberately privileged for a better understanding of action causality. It shows the possible array of theoretical possibilities but in the case of Japan and to a certain extent, the EU, most actions are taking place in the northwest quadrant with collective actions. It must also be added that cases are evolving with time and that a choice had to be made about the moment that would be frozen in this representation. For example, VW and Fluoride began as individual actions but matured toward collective support in front of the difficulties encountered. Therefore, it has been decided here to show the final stage, which is the closest to the outcome. The most important observation that can be made is that, despite the priority given to firms as individuals, pure individual CPA is rare or limited to certain issues. This fact, corroborated by many analysts and

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practitioners, is true not only for Japan but also for the US and the EU, where coalitions, even informal and fluid, are dominant. This is also in line with a general feature of CPA, that is, being extremely local in its implementation, not easily transferable or globally manageable, although the general process can be understood as universal. Pure individual action may be possible for firms having a first-class global power such as Toyota or Google, but even for them, changing regulation is something essentially difficult. Real pure individual actions could well be only the judicial ones.2 However, again, this also depends on the issue and the attitude of the firm. If the issue is new and without too many entrenched interests, it should be easier to contribute in a constructive manner. This is illustrated with the cases of Western Union and Pay Pal, where, facing the preparation of a bill regulating their activities in a new and rapidly changing environment, Western Union chose to educate and bring its expertise to shape the new law whereas Pay Pal adopted an adversarial posture arguing that the proposed regulation was not adapted to its peculiar business model. Thus, allies or support by an actor (state, etc.) are all but necessary, and this is illustrated by the squares enclosing the cases. The majority of cases shows the use of local interests/stakeholders and is spread over three quadrants. The necessity of a local partner is reinforced by the liability of foreignness mentioned above: to gain interest from a local politician, a local constituent must be implied, and this is often done by the Japanese clients of foreign firms who will benefit from the CPA actions and are the best lobbyists. This can also be done in the form of a JV such as in the GE Smart Meters case or by buying a local company (Rhone Merieux, utility firm A). In collective cases such as the Car repair shop and NACCS, local automobile manufacturers and importers both have a strong interest in getting the issue resolved. Next, there is a group combining high representativeness and strong credibility (northeast quadrant), that is, the support of numerous actors with a high social contribution (Nicorette, Hepatitis C) or a strong argument (Delta). The support of the numerous actors, including some from civil society, is reinforced by the use of public media, which also qualitatively gives more weight to the content of the argument. Moreover, these cases also include local support. Theoretically, this configuration seems powerful and makes much noise but, in reality, does not guarantee success 2  Judicial actions are used chiefly where common or administrative law governs, to enforce rights, address unfair competitive practices, protect intellectual property and so on.

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as the Delta case shows, chiefly due to even more powerful opposing interests and an unfavorable competitive position. Regarding the use of the state as a supporting actor, it can be can observed that, as mentioned above, it is widely spread in the figure between individual and collective use. The southeastern quadrant displays the greatest number of cases due to the structural weight given to individual CPA. Many of them have a strong argument while lacking the backing of number (often intentionally); yet they still act with a handful of allies. The cases of DHL scanner and Western Union are also positioned in this quadrant but without help from a local partner (foreign allies for DHL, none for Western Union to the author’s knowledge). Consequently, to summarize, the following hypotheses regarding the most significant and differentiating drivers in the Balance of Coalition could be proposed: . The issue (firm-specific/whole industry, newness) 1 2. The degree of credibility as an individual firm in the issue and the social contribution 3. The degree of support from local interests

6.7   Balance of Influence: How, What Stance, with What Resources Wield Influence? 6.7.1  Criteria of Positioning in the Balance of Influence The second transversal dimension was called Balance of Influence because it is intended to show “How” influence is exerted, why actors are influenced, through which stances and attitudes, more precisely and following Dahl’s terminology, through which forms and which resources. Table 6.6 proposes a matrix of the forms retained and adapted from Dahl’s works, combining the two dimensions of Pressure and Persuasion that constitute the fabric of all CPA actions. On the pressure side are found threats, expressions of power, judicial actions, adversarial attitudes, gaiatsu while persuasion relies on communication and conviction, chiefly by rational arguments (technocratic rationality), constructive and proposing attitude, the shaping of debate and sometimes manipulation.

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Table 6.6  Matrix for criteria of positioning in the Balance of Influence PERSUASION  • Inducement  – Economic  – Technological  • Persuasion   – Information provision (technical, economic, legal) based on rational arguments (technocratic rationality)   –  Communication, education, advocacy   –  Shaping of debate  – Manipulation   •  Constructive proposal, solutions   •  Cooperative view, win-win bargaining  • Soft power PRESSURE  • Threat  – Of sanctions (diplomatic, economic, military, etc.)  – Economic: job destructions, relocation, loss of tax revenues, etc.  – On trade, international negotiations  –  Diplomatic pressure/ gaiatsu  • Constituent pressure for elected local politicians  • Judicial action  •  Adversarial attitude, bargaining power view, zero-sum bargaining based on resource dependencies  •  Hard power and pressure with direct, immediate and material threat

LIMITED  • Threat by state power, gaiatsu   – Sanctions   • Trade, pending treaty negotiations  •  Threat through economic power   –  Jobs, taxes, etc.   • Strong pressure from constituents/media/ public opinion  –  Hard opposition, risks for reelection and financing  •  Non-cooperative attitude   • Threat of judicial actions   • Direct and immediate threat LIMITED  •  Limited pressure and limited persuasion   • Pending issues (not solved yet), failures (not limited to this quadrant)   • Initial stage of certain issues before deciding to change strategy (ex: going public and strengthen pressure)  •  Theoretically existing but, due to their low salience, difficult to identify by construction

STRONG

STRONG  • Combination of persuasive arguments with some soft, but effective and strong pressure   • Diffused/soft pressure from constituents/media/public opinion   – No immediate risk for reelection and financing, but willingness to accommodate for the sake of one’s political capital   • Support from diplomatic bodies (embassies opening doors)   • Influence from civil society (Think tanks, NGOs, etc.)   • Advocating, educating with rational/emotional argumentation with broad scope, social contribution  • Economic inducements  •  Communication and advocacy   – Provision of convincing information (economic, technical)  – Technocratic rationality   • Offering specific, constructive, cooperative, win-win solution in line with the local interests   • Solid and rational argumentation with more limited scope, social contribution   • Shaping, creating the debate by direct interaction with policymakers, or indirect action through selected stakeholders   • Limited use of public media, focus on specialized or academic media

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The northeast quadrant consists of a combination of persuasive arguments with some soft, but effective pressure, in which can be included economic inducements that seem halfway between the two as suggested by Nye (2004). The southwest quadrant (limited persuasion, limited pressure) deserves a theoretical existence in that it could refer to pending issues not yet solved or failures (albeit not limited to this quadrant), the initial stage of certain issues before deciding to change strategy, and so on. However, by construction and due to their low salience, no cases were identified in this study to fill this quadrant. The northwest and southeast quadrant correspond respectively to strong pressure/limited persuasion and the opposite, strong persuasion/limited pressure. 6.7.2  Synthesis of the Analysis of the Balance of Influence Figure 6.3 is the synthesis of the Pressure/Persuasion applied analysis. Here again, it must be remembered that cases are evolving with time, and that only the final stage has been chosen for showing. The detailed positioning criteria can be found in the table attached to each case in the annexes.

Fig. 6.3  Balance of influence with cases

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The most significant observation that can be made is that most of the cases are situated on the persuasion side. A widely shared phantasm and prejudice in many cultures are that CPA and lobbying are about pressure and money. When asked about the phenomenon, many people tend to imagine bribery and almighty multinational companies leading the world from under the surface in a perfect illustration of conspiracy theory. There used to be and still might be such cases, but they are presumably far from the majority. It must be reminded that lobbying, in the American sense, is first about information provision and communication, on the persuasion side. This topic will be covered in a following section, but the fact is that practices have changed, transparency has increased, in Japan as well as in the EU and the US, and above all, foreign firms are now part of the landscape in a manner inexistent twenty years ago, not to mention the legal impossibility of financial contributions. Cases with a relevant persuasion dimension can be found in two sectors, the southeast quadrant (strong persuasion, limited pressure) where half of the cases are found, and the northeast quadrant (strong persuasion, strong pressure). Beginning with the former, a first distinction can be made between the individual or individual + local stakeholder cases and the collective cases (NACCS, Car repair shops), which differ in the organization of their coalition but not in their mode of influence. The other cases represent strategies aiming at influencing directly or indirectly by an effective communication and a convincing business project, often benefitting many actors within Japan and not limited to the CPA-promoting firms. This implies win-win strategies where firms’ interests can be seen as sublimated into public interest, generally linked to new products/concepts or constructive proposals. In this configuration, internal resources such as Informational/Expertise and Symbolic, as well as the external Legitimacy, are essential. The northeast quadrant (strong persuasion, strong pressure) includes six cases classified here for varying reasons, but the common feature is that, in addition to the qualitative interest of their issue in terms of scope and social contribution, a variety of pressures, that may be viewed as soft, helped to convince the policymakers to adopt a favorable outcome (or to do a clarification for Fluoride). The nature of this soft pressure is different between Nicorette/Hepatitis C (pressure from the media and the public opinion) and UPS/Animal vaccine (where the respective home governments coordinated and opened doors towards the resolution of the issues). Fluoride and GE lands are the results of a heavy lobby in terms of contact

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quantity and broadness of targets in search of support, but without threat, and with a focus on Legitimacy. Besides the Informational/Expertise resources, external resources such as Public Media, State Power (in a soft sense), and Legitimacy can typically be mobilized with the Stakeholders. Finally, in the northwest quadrant (limited persuasion, strong pressure), where the lobbying cases resulting from gaiatsu or other threats is usually expected, few cases are recorded. Combined with other elements and although not statistically significant, this contributes to suggest that gaiatsu is no longer very frequent nor efficient if it ever really was. The VW case is interesting because it begun as an individual case but evolved toward another form of coalition and influence when confronted with the failure of its action. It sought the support of its industry association and finally obtained satisfaction because of the implication of a very high political level and the threat to the smooth development of an international negotiation having an impact on the strategic automotive industry. In the Delta case, the threat and pressure were political (within the US) and economic with a thunderous press campaign. Regarding Pay Pal, the classification in this quadrant is rather due to its adversarial and non-constructive attitude than pressure. In a Pressure-dominant strategy, State Power and Economic resources are powerful resources. Nonetheless, it must be kept in mind that this classification is only a representation and that, in reality, CPA frequently contains both elements, persuasion and pressure, that are not mutually exclusive. As a result of the analysis, the most significant and differentiating drivers in the Balance of Influence could be the following: . The issue (newness, broadness) 1 2. The degree of social contribution 3. The degree of benefit for local interests This is close to the provisional conclusion drawn from the Balance of Coalition. Therefore, it is proposed to merge the two sets of propositions into the following: 1. The issue

a. Firm-specific/whole industry b. Newness c. Broadness of scope

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2. The degree of credibility as an individual firm and the social contribution 3. The degree of benefit and support from local interests

6.7.3  Examples of Influence: VW and ABB, Pressure and Persuasion In this section are presented two charts reflecting the contrasting patterns of the influence of Volkswagen and ABB. They are just intended to show the complexity of the interactions developed between the actors and the major channels of influence. For a better understanding, they should be studied with their textual description (see annexes). Volkswagen represents an example of a multilayer approach that can be classified as a strong pressure/low persuasion case in the Balance of Influence because it was decided to describe it at its last stage, where political intervention at the highest level was necessary, though it began as a simple technical issue (Fig. 6.4). EU in JP

JAIA

EU Delegation

Mercedes BMW etc

EU

Mr Barroso

EBC

ACEA Brussel

ACEA Delegate

ACEA

Mr De Gucht

Trade team EPA Negociator

Direct influence Strong direct influence

Technical homologation

Autoliv

VW

HPG Issue

METI High Pressure Gas Safety Office

DE Gvt

JP Gvt MLIT

Mrs Merkel

Mr Abe

Fig. 6.4  Influence channels of the Volkswagen airbags case

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DIRECT CLIENTS

INFLUENCERS

(Combiner boxes, PCS, components, etc.) •

EPC (Engineering/ Procurement/ Construction) • Manufacturers • General constructors (TMEIC, Panasonic, Fuji Electric)

Industry association Japan Photovoltaic Energy Association

Research National Institute of Advanced Industrial Science and Technology

“KUROBUNE”

SB Energy

Mr Son

Collaboration to setting of safety guideline for PV plants

Other developers/ Project owners/ Investors • • •

Direct influence

PV Expo

Media

EURUS Energy Shosha Banks

ABB

Contribution to modification of technical standards (Dengi) through public comments

Trade show

155

Strong direct influence

Advocacy

METI

Magazines TV: Gaia no yoake Press

COMPETITORS (600 V) • • •

Mitsubishi Denki Fuji Denki SMA

Fig. 6.5  Influence channels of the ABB case

ABB, by contrast, can be seen as epitomizing an indirect approach through influencers to persuade the stakeholders, including the regulators, to adopt a new standard favorable to their business. It is, therefore, classified as strong persuasion/limited pressure (Fig. 6.5).

6.8   The Outcomes More detail will be given in the annexes, but the major results for each case can be briefly presented here (Table 6.7), broken down into policy and business outcomes. All issues have not given birth to a new law or a substantial modification, and some outcomes may not look very spectacular, many of them consisting of regulatory/bureaucratic decisions. However, from a business point of view, they all had their own meaning, implying new sales or approval of a product. Many actions are the result of a patient step-by-step process, some of them taking years before materializing, or not; some are only partial successes. For example, in the car repair shops case, a bypass of the law was introduced in the form of a guideline from the MLIT that did not want to modify the law, but the final approval decision has just been transferred to the local authorities that will grant, or not, the approval for opening a new car shop.

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Table 6.7  Outcomes by cases in terms of business and policy Policy outcome GE Smart  • Contribution to policymaking meters (new energy strategy) by knowledge input ABB  • Ambiguity of technical standard lifted MC Decaux VW Airbags UPS Delta

DHL Scanner Fluoride (J&J)

Hepatitis C (J&J)

Nicorette (J&J) Animal Vaccine Rhone Merieux Hartford

 • Changes in a number of related laws  •  Exemption from law application   • Slot allocation –

–  • Increase of fluoride amount finally approved but under strict conditions and with the obligation of further testing during three years  • Increase of national budget for screening and treatment  • Launch of a national program to promote public awareness, free screening, etc.

 •  Law on smoking control – –  • Deregulation of variable annuity insurance products sold by banks

Business outcome   • Product authorized  • New sales  • Opening of a new segment for ABB products   •  Establishment of ABB brand   • Product authorized  • New market   • Product authorized  • New sales  •  Opening of a new line  • Failure to block negotiations or to obtain enough slots at Haneda  • Approval for the introduction of a more efficient scanner  • Clarity obtained for the firm deciding not to invest in the requested testing process with regard to the expected return  • Acceleration of the process of approval qualifying Janssen’s new medicine for government subsidies   • Stronger than expected 2014 sales of hepatitis C drug (Simeprevir)   • Rise of screening income for Ortho Clinical Diagnostics due to an increase in screening rates  •  Support of Nicorette’s sales   • Product authorized  • New sales  • Obtention of a license to produce vaccine  • Substantial growth in variable annuity contract sales (continued)

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Table 6.7 (continued) Policy outcome Paypal

Business outcome

–

 • Failure to bypass or be exempted from the application of the new law, obligation to comply Western  • Contribution to the drafting of a  • Favorable business conditions Union new law in a new regulatory environment GE lands  • Decree parallel to the main law  • Possibility to undertake the (land contamination) new business of buying discounted lands Car repair  • Issue of a guideline parallel to the  • Possibility to open new car shops main law (construction) repair shops NACCS –  • Changes in the implantation system (more gradual) in the new fee system

Another interesting outcome is the Fluoride case when after years of advocacy and reinforcement of the campaign, the MHLV finally decided to authorize an increased amount of fluoride partially but with new conditions of testing, which allowed the firm to decide rationally that further investments were not worth. One must remember that in such conditions, it is difficult to evaluate precisely and link CPA to a tangible business outcome. The modification of a law is often the result of a subtle mix in an array of factors in such a manner that it might be difficult to establish a straightforward causality. This situation is also described by practitioners who sometimes complain about the lack of recognition they may encounter, and the vision of their action as a support function only, easily disposable in case of a slowdown, as opposed, for example, to marketing with its more direct and short-term measurable results. Nonetheless, in the studied cases, many successes can be counted, especially in terms of approvals and launch of new products or services.

6.9   Conclusion The cases studied in this chapter were selected and analyzed in application of the framework and concepts developed in Chaps. 2 and 3, but they were also a source of inspiration and refinement for their theoretical contribution in a back and forth movement.

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Each component and tool of the framework, issues, resources, arguments, and so on are reviewed in light of the cases, but it would be too tedious to summarize them here. Yet, it can be mentioned that issues may be categorized over the cases in two stances (adjustment, strategic) and three types of action (active, reactive, proactive), some seeking operational approval in the Japanese market, whereas others (sometimes the same) offer more strategic and environment-shaping perspective. Attempts to reactively modify or block laws or regulatory initiatives are also present, hence allowing the whole range of possible CPA stances to be covered. From the perspective of the Balance of Coalition tool, the most important observation that can be made is that, despite the priority given to firms as individual, pure individual CPA is rare or limited to certain issues. This is also in line with a general feature of CPA, that is, being extremely local in its implementation, not easily transferable or globally manageable, although the general process can be understood as universal. Pure individual action may be possible for firms having a first-class global power such as Toyota or Google, but even for them, changing regulation is something essentially difficult. In other cases, some kinds of allies are necessary. The necessity of a local partner is reinforced by the liability of foreignness: to gain interest from a local politician, a local constituent must be implied, and this is often done by the Japanese clients of foreign firms who will benefit from the CPA actions and are the best lobbyists. The next synthetic tool, the Balance of Influence indicates that most of the cases are situated on the persuasion rather than pressure side. Widely shared phantasms and prejudices in many cultures are that CPA and lobbying are about pressure and money. When asked about the phenomenon, many people tend to imagine bribery and almighty multinational companies leading the world from under the surface in a perfect illustration of conspiracy theory. It must be reminded that lobbying, in the American sense, is first about information provision and communication, on the persuasion side. As a result of the thorough overview of every factor appearing in the cases, the following elements can be considered the most significant and differentiating drivers in choosing a CPA strategy within the Coalition and Influence dimensions:

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1. The issue

a. Firm-specific/whole industry b. Newness c. Broadness of scope 2. The degree of credibility as an individual firm and the social contribution. 3. The degree of benefit and support from local interests.

References Bonardi, J.  P., Hillman, A., & Keim, G. (2005). The Attractiveness of Political Markets: Implications for Firm Strategy. Academy of Management Review, 30(2), 397–413. Dahl, R. A. (1957). The Concept of Power. Behavioral Science, 2(3), 201–215. Dahl, R. A. (1963). Modern Political Analysis. Englewood Cliff, NJ: Prentice Hall. Dahl, R.  A., & Stinebrickner, B. (2003). Modern Political Analysis (6th ed.). Upper Saddle River, NJ: Prentice Hall. Nye, J. S. (2004). Soft Power. New York: Public Affairs. Tiedemann, A. (2009). EU Market Access Team: New Instruments to Tackle Non-­ tariff Barriers to Trade. EU Diplomacy Paper. College of Europe.

CHAPTER 7

Implications for Business Strategy and Lessons from Japan in a Global Business Perspective

7.1   Introduction This penultimate chapter wraps up the findings of the case study by deriving the implications of the various CPA instances and offering a categorization by business objectives. The specificities of CPA for foreign firms emerging from the case study are highlighted with the view of drawing lessons for success in Japan. The leading insight is that, even though a balance of both pressure and persuasion is always at work, the persuasion facet can be said to be dominant for various reasons detailed in the chapter. Furthermore, a brief theoretical assessment is conducted focusing on the question of whether CPA in the cases led to a competitive advantage. In the final section, the attempt is made to link resources, forms of influence (pressure/persuasion), and business objectives in order to derive patterns in resources’ mobilization and generic strategies. In the same manner as the previous chapter, details of the stories for the cases are given in the annexes that are organized following the same categorization of business objectives. Parallel reading is recommended.

© The Author(s) 2020 E. Romann, Nonmarket Strategy in Japan, https://doi.org/10.1007/978-981-15-7325-5_7

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7.2   Meaning of Japan in Firms’ Global Strategy and Role of CPA as a Strategic Tool: Lessons from the Case Study In this section, the different lessons that can be drawn from the cases from a strategic management perspective will be reviewed, and more generally the impact on the business as the strategic degree may differ. The focus will be on firms’ general strategy in Japan in light of their global activities, and the role CPA plays. Sometimes it will be imperative to step back in order to consider the meaning of Japan from a global strategic point of view to understand, besides the CPA question, why some firms strive to do business in Japan despite the frequent issues of technical barriers and limited growth perspectives. There may be overlaps as, for the same case, different strategic facets may be emphasized; the subdivision adopted here should, therefore, be seen as analytical only, keeping in mind that in reality, the same issue may offer several meanings. 7.2.1  Creating a New Business Framework: Conditions of Market Existence/Entry As the title indicates, the common theme of this category is related to the creation of new markets linked to the introduction in Japan of new products or services with new sales at stake. In this group, the following cases are included: • GE Smart meters • ABB • Hartford • MC Decaux • Animal vaccine • Rhone Merieux • Utility firm A • Western Union 7.2.2  Boosting Sales/Enhancing Business This broad category refers to the various actions that can take place after the market has been entered. It encompasses situations aiming at boosting sales, extending business, improving business conditions (costs,

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productivity, etc.), where traditional marketing or other operations are insufficient. CPA can take different forms, but the objectives are the same: support the market-only tools (as opposed to nonmarket) in order to improve firms’ business performances, generally for a specific product. • Nicorette • Hepatitis C • UPS • DHL Scanner • O157 • Car repair shops (collective case) 7.2.3  Reducing or Neutralizing Threats for Business At a very general and aggregated level, this type of stance is a frequently observed objective for CPA. For example, Mahoney (2008), when trying to assess the differences in lobbying style between the US and the EU, proposes to determine them through the great categories of lobbying positions, that is, promoting, modifying, and blocking. Her data indicate that lobbyists in the US are more likely to promote (52%) or block (17%) a proposal than their counterparts in Europe with respectively 38% and 13%, whereas in the EU attempts to modify represent the majority (46%) against 31% in the US. Her principal contention is that this is due to institutional differences rather than cultural as many stereotypes suggest. All in all, the sum of modifying and blocking represents more or less 50% of the lobbying positions, depending on the polity. Consequently, though these cases’ universe is not statistically significant, it could have been expected to find more cases close to this category and leading to attempts at reducing or neutralizing threats for business, but this assumption did not materialize. Presumably, this is largely related to the specific institutional feature of Japan and the limited amount of public information in the press due to the behind-the-scenes and confidentiality preference of CPA in the country. Nevertheless, the cases found are interesting by the variety of situations illustrated: • GE lands • Delta • Pay Pal • NACCS system (collective case)

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7.2.4  Support for Investment Decision-Making The decision to invest, or not, in a country for a specific product, is an important component of firms’ global strategy. In this sense, this case is illustrative because, as an interviewee stresses, the result of CPA was to obtain clarity, allowing a decision to be made in terms of investments (in this case judged not worth). • Fluoride 7.2.5  Norms and Rule Setting Setting the rules and norms, deciding the agenda has recently become a core part of the competition and nonmarket strategies. An extensive literature exists with various examples in global markets. As Fujii (2012) explains, what used to become de facto standards through market competition and selection, is nowadays increasingly replaced by ex-ante de jure standards. In this universe, it could be said that this facet is illustrated by the following case: • ABB 7.2.6  Global Strategy, Meaning of Japan, and Other Considerations This section will step back from the observation of CPA and their direct effect on firms in Japan to examine a number of issues in relation to firms’ global strategy and the positioning of Japan in this perspective. First, the VW case can be considered with the requisite degree of adaptation to the Japanese market and the ensuing CPA. At a very general level, and despite a number of exceptions (such as Aflac in the insurance industry, for example1), for the majority of foreign firms, Japan is a relatively limited market for their activity despite requiring a higher-than-average level of local adaptation. Firms must, therefore, be ready to adapt intensely for a minor part of their sales and profits. These are the basic terms of the equation and the biggest difficulty of doing business in Japan, leading to different responses. In the ABB case, the investment was judged  More than three-fourths of Aflac’s pretax operating earnings is generated in Japan.

1

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worth on a particular segment, nonetheless with the broader objective of reinforcing the company name’s value on other products in mind. In the Fluoride case, it was the contrary. In the pharmaceutical industry, things are slightly different due to the pricing system linked to each country’s institutions and the dominance of Western firms on the global market. To summarize, in the EU and Japan, drug prices are set in concertation with a governmental agency (for reimbursement by social security systems), whereas in the US, they are negotiated with insurers, giving more freedom to establish them. This is why it is being said that the Americans are financing research for the rest of the world with high prices. From the industry point of view, this is the way innovation can be promoted and financed. This is not the place to discuss the delicate equilibrium between R&D and healthcare public expenses, but the reality is that in this industry, actors tend to optimize prices on a global scale to amortize the considerable development costs. In this configuration, to simplify, the consequence is that the best prices can be obtained in the US, the worst in Japan, with the EU in the middle. Indeed, in Japan, the price is based on an average, taking into account the foreign markets, the EU, and the US chiefly. This leads to a low price when compared to other advanced countries, which pushes firms, even Japanese, to establish their research facilities outside of Japan, and above all, dissuade them from coming first to Japan to launch a new drug. They usually come to Japan last, after the US and the EU to benefit from a better foreign average as a basis for negotiation. Things have recently begun to change with gradually more drugs originating from Japan, but the general global pricing system still holds. Consequently, in this industry, Japan is generally the last link in a global chain (for advanced countries) unless innovation originates from it and with CPA issues frequently focused on approval and pricing. Finally, it could be interesting to mention, following the remark of an interviewee, firms for which Japan is an important market in which they have patiently and heavily invested for years, intending to be real insiders and perceived as such by their stakeholders and clients. These kinds of firms have developed strong know-how and competences regarding the way to manage differences with home markets, deal with the Japanese authorities, and build bypass strategies. They have succeeded in Japan; their expertise is a barrier to foreign competition and they aim above all to maintain or extend their positions without facilitating others’ entry. Consequently, they are not keen on promoting more opening of the

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Japanese market as can the EU or the US government through various voices such as calls for liberalization or free trade agreements, neither do they participate in collective actions conducted by the EBC or the ACCJ. To them, their expertise in CPA within Japan is a strength and a weapon against the competition to the same extent that their Japanese counterparts.

7.3   Specificities of CPA in Japan for Foreign Firms, Conditions of Success, Lessons for Firms in Japan and Globally 7.3.1  Specificities of CPA in Japan for Foreign Firms The first thing to be (re)emphasized is that the major drivers of CPA, the “whys,” remain the economic rationality, that is, the allocation of resources and the strategic meaning of Japan for firms as reflected in investment effort decisions. In this sense, the distinction between foreign and Japanese firms is much less relevant than it used to be, for example, twenty years ago. As many interviewees stress, the individually differentiated strategy is becoming more important, particularly in heavily regulated industries where strict egalitarianism and homogeneity used to be the rule. Rather than a foreign/domestic duality, the demand for a level playing field between private and public is a more pressing concern, regardless the firm’s nationality, at least in the insurance sector, for example. In another example, the chairman of the logistics and freight committee at the EBC states that his priorities are (1) discriminations toward European companies in Japan, (2) discriminations against foreign companies, (3) inefficient and unfair business practices of all companies including the Japanese; the third category is by far the most numerous whereas the first two are very limited in his industry. That said, it has been decided in this chapter to focus on the “how,” and in this field, specificities for foreign firms do exist. They can be summarized as follows: • No naturally supporting politicians, or constituencies • Less reliance on internal resources than Japanese domestic firms because their economic and financial resources are limited by their economic weight and by law; the relational, organizational, and sym-

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bolic resources can be built, but this can take time for a limited efficiency compared to their domestic counterparts. Finally, their major internal resources consist of the informational/expertise resource. • The external resources are widely used, chiefly the support of stakeholders such as domestic clients and partners who can intermediate toward local politicians. State power is a natural and specific option, but not as broadly mobilized as expected. Media and public opinion are also rarely used except for themes with societal facets. • Legitimacy is a key dimension, and the liability of foreignness a reality, even though things have changed with globalization. However, it depends greatly on the industry and is more subtle than simple national champion preference; it is frequently taken into account when societal norms and not only economic rationality are involved, as in the case where aftersales service or long-term commitments (with employment, for example) are at stake. 7.3.2  Conditions of Success and Lessons for Foreign Firms in Japan At this point, the following recapitulation of the conditions and specificities to succeed in CPA in Japan can be proposed: • Good understanding of institutions without underestimating the legislative side • Good analysis of local interests and alliance with them; correspondence with the government strategy and needs • Carefully using and pondering home government intervention; attention to fairness and reciprocity • Rationality based on data, factuality, capacity of delivery • Patience, establishment of dialogue; the main targets are not necessarily the final decision makers • Convincing and avoiding confrontation; limited bargaining type (zero-sum game) of negotiation • Proposing a mutually beneficial and innovative solution, based on a high level of social contribution, rather than claiming for one’s business sake • Educating, influencing, and creating the market; managing legitimacy not to be seen as willing to interfere in internal affairs

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• Very early preparation and influence in the process: shingikai, kentôkai, etc. • Japanese mindset in human dealing, meaning a localization of the public affairs/government relations function, that is, a Japanese lobbyist rather than a foreign lawyer, as often seen. 7.3.3  Persuasive Facet for Global Business and Lobbying as an Extension of Marketing by Other Means In other words, the constructive and persuasive facet can be pointed out as a major finding, as already noticed in the analysis of the Balance of Influence. It must not be forgotten that CPA is always, as the literature and the practitioners suggest in any part of the world, a subtle mix of pressure and persuasion, even though in many cultures such as Japan and France, it still sounds taboo and irremediably connected to corruption and money. Despite many prejudices, CPA is becoming increasingly a matter of information and management of legitimacy involving, for example, independent think tanks and NGOs in a world where transparency and speed of information have surged, like it or not. This is a worldwide trend, and this is how many global companies proceed, whatever their nationality and the location of their activity. This is also naturally linked to the institutional facet, a strong determinant, and to the fact that global companies do not necessarily have local constituent or economic power, but not only. In Japan, the same factors (institutions, constituency, economic power) play an obvious role in conducting firms to favor the persuasion side but, in addition, a cultural and societal background stronger than other countries advocates for this choice if one wants success. Pressure is often necessary but must be subtle and soft. Going further along this line, it might be worth suggesting parallels with marketing, as some authors already did. Andrews (1996) notes that: “it is argued here that, for business, lobbying can sometimes be seen as a specialist form of marketing communications, often engaged with similar concerns, measurements, and promotional campaigns, contributing directly to business performance. Knowledge of the political market, understanding the relevance of one’s product or service, determining how to promote the product or service as meeting the

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needs of government or helping to meet its needs, demonstrating value for money and ability to meet targets for availability (product, promotion, pricing, and place) are directly relevant skills.” Particularly, three of the cases on the persuasion side of the Balance of Influence, GE Smart meters, ABB, and Hartford, are very close to, or are explicitly part of, marketing activities. They are about understanding or creating needs for potential clients, selecting targets, and promoting their products directly or through influencers. The major difference with usual B2B marketing could be that the clients belong to heavily regulated industries requiring administrative or political action; otherwise, the boundaries seem truly blurred to the extent that it could be suggested, paraphrasing Clausewitz’s famous aphorism, that (in some cases) lobbying is the extension of marketing by other means, at least when the business strategy supposes two types of targets instead of one traditionally: the final clients and the political sphere. It can also be noticed that these cases correspond, in the classification by strategic features, to the two dimensions of what was called adjustment/active and strategic/proactive, with one operational side and one market-creation facet. Other cases classified here also present both facets but do not offer to the same extent this strong entanglement of CPA and marketing (see Table 6.2). Now, it should be time to suggest an extension of these lessons drawn from the Japanese case to a general international business setting for a global company. Some caricatural bargaining-view situations of government–business relations may have existed or still exist in some countries. However, they are presumably becoming rare in advanced countries where the necessity to convince for something one does not necessarily need, to create the demand, seems more prominent. Thus, it is contended here that many of the above features of successful Japanese CPA may be valid on the global scene with naturally local adaptations, as the literature, practitioners, and interviews point out. • Good understanding of institutions and policymaking process • Good analysis of aligned local interests and alliance with them; correspondence with the government strategy and needs • Carefully using and pondering home government intervention; attention to fairness and reciprocity • Rationality based on data, factuality, capacity of delivery

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• Proposing a mutually beneficial and innovative solution, based on social contribution, rather than claiming for one’s business sake • Educating, influencing, and creating the market; managing legitimacy not to be seen as willing to interfere in internal affairs In this, institutions and interests are key, whereas, for the issue, the degree of social contribution is determinant as the framework intends to show. As practitioners and the literature explain, the essence of CPA and lobbying is to demonstrate that interests are aligned, as the phrase goes. This is particularly true in a global business situation when one has to rely on domestic leverages it does not have. In this case, it means that one has frequently to shape interests, that is, to provide new lenses and theories to appreciate facts that do not necessarily speak for themselves to convince and find allies, in other words, framing. Regarding the social contribution, it should be the Aufhebung2 of the firm’s peculiar interest with the public interest. This approach, focused on persuasion, is not exclusive of pressure, of course, and is valid also for reactive situations when one wants to modify or block a regulation threatening business. Simply, it seems that, except for maybe very specific situations where only power relations can win, a large majority of business situations imply an adequate combination of the two, with an emphasis on the persuasion side, even if mere window-­ dressing, because either politicians or bureaucrats are somewhat accountable to somebody, constituency or supervisor, indicating a need for legitimation. In this sense, CPA in Japan is assumably not at all exotic, shares a number of characteristics with some principles that seem universal, and similarities (with Western counterparts) outweigh differences. An interviewee managing a government relations agency in Japan confirms this diagnostic, stating “that people with political experience from elsewhere just need a little bit of culture guidance, a language interpreter, and they manage perfectly well.” This judgment could undoubtedly be extended to other countries and areas, provided that local specificities are mastered. 2  In English: sublation, that is, “abolish”, “preserve”, and “transcend”, that is, keeping the good of the thesis at a higher level. In philosophy, aufheben is used by Hegel to explain what happens when a thesis and antithesis interact, and in this sense is translated mainly as “sublate”.

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7.4   Assessment and Theoretical Considerations After having examined the impact of CPA over firms in economic and strategic terms as well as the conditions of success in Japan, it might be worthwhile to make a few theoretical comments about the framework before wrapping up the findings. 7.4.1  About the RBV/VRIO, Extension to Political Science and Bases of Influence The assessment might begin by coming back to the strategic management field and the resource-based view (RBV). Since this chapter’s perspective is focused on resources, the RBV could have been an interesting framework for the purpose with an assessment mechanism, such as the Value Rarity Imitability Organization (VRIO). However, the limitations were so numerous that it was necessary to extend the framework to political science. A number of authors (Dahan 2005a, b; Bonardi 2011, etc.) have already pointed out these issues. A first and decisive difference between pure economic markets and the political arena is the reliance on external resources, collective, shared, or simply mobilized with various degrees of control. From a domestic perspective and at a very coarse level of analysis, firms can provide policymakers with financial support, information, and vote through its stakeholders. The stakeholders clearly belong to the external or semiexternal resources on which the degree of control can vary widely. Many of the external resources cannot be bought or build to be integrated as the core competencies of the firm. Another important point is the question of exclusivity. The result of CPA, a favorable public policy, generally provides benefits not only to the firm promoting the new regulation, but also to all its competitors, having public good characteristics and leading to free ride issues as Olson (1965) analyzed. Moreover, financial support can hardly be regarded as a resource difficult to imitate and differentiate, as well as hiring lobbyists when trying to build organizational resources. Considering these restrictions, it may be deemed, following Dahan (2005b), that the VRIO assessment framework does not suit this chapter’s needs adequately. If most of the cases may be viewed as creating value (criterion V) by increasing revenues/reducing costs and maintaining value (reducing threats for business), the criterion R, rareness, is difficult to assess when dealing, as indicated above, with generic resources such as money or, volatile but far from rare, external resources such as stakeholders, legitimacy,

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media, or public opinion. The same can be said with the criterion I, inimitability. The criterion O, organization, could be working, leading to focus on how firms efficiently mobilize these resources, but that would not be very helpful since this is precisely what it is tried to be done. Reflections should, therefore, be extended by again considering the basic building bricks of influence as derived from Dahl’s works in a more holistic view (Dahl 1957, 1963; Dahl and Stinebrickner 2003): 1. The bases of power/influence: that is, any kind of resource, internal or external, intended as anything that can be turned into an instrument toward an end. Resources are rather passive and neutral by themselves, and it is the manner they are mobilized that gives them their strategic meaning. 12 types of resources have been distinguished as relevant for this book’s purpose, but they are, in theory, infinite. 2. The means: that is, the forms of influence, the way by which the above resources are exploited and mobilized in a specific combination, a strategy. A combination of dimensions, pressure, and ­persuasion, has been identified, giving birth to four possible types of strategy; however, in the cases studied, only three combinations were used for analysis. These two categories can be thought of as properties linked to the promoting actor of influence, that is, the firm, implying a certain degree of control or at least a consistent view to reach an end, a strategy. The study of the combination of these two elements constitutes the core of this research. To this, other elements can be added to describe influence better, the distribution, the gradation, and so on. Dahl and Stinebrickner (2003), drawing on Lasswell and Kaplan (1950), suggest that the concepts of domain and scope are necessary and useful, although not sufficient to solve all issues related to weighting and quantification of influence. Domain refers to the persons over whom an actor has influence and the scope, the matter, the “what.” Thus, to simplify very roughly, there could be as a basic equation: Influence = scope  influencing actor ( bases + means ) × influenced side ( domain ) 



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This is another way of writing the core of this book’s framework in a more condensed form. The reason why it is presented here in this way is to make clear that, when trying to determine the relative influence of specific actors in specific circumstances, it would mean that, at least, (1) the differences in the bases of influence, (2) the differences in means, (3) the differences in domains, (4) the differences in scope, and so on, should be compared. This simple exercise is only intended to stress the arising complexity and the fact that it is not possible to precisely and mathematically measure in a rigorous manner individual actor’s influence in a specific situation. 7.4.2  Does CPA Lead to a Sustainable Competitive Advantage, and are There Preferable Strategies? After these preliminary remarks, it is time to come to the cases and try to see how it could be possible to assess, particularly in a cross-field resource perspective, how firms possess or mobilize specific political resources, with unique manners and skills, to shape policy decisions, serve their strategy and enhance their business performances. In other words, is there a best strategy? How can resources be sorted out in light of the way they are used? Can patterns, relationships between the bases (resources), and the forms of influence (pressure/persuasion) be found despite the complexity of the equation and the difficulty to model? A review of the cases’ strategic meaning could be a starting point. The judgment will depend on whether a strategy is broadly defined as a plan of action designed to achieve a particular goal with resources efficiently mobilized, or whether it is to be understood in the narrower sense of gaining/maintaining a sustainable competitive advantage as frequently observed in the strategic management field. In the latter perspective, it presumably cannot be said that any of the CPA cases conduced to a sustainable competitive advantage at a global level for the major reason that markets are still fragmented by the legal systems constituted by countries despite important variation across industries. This is the reason why CPA is chiefly local even if its principles are rather universal and if its management can be centralized by headquarters in home countries, as shown in many of the cases. A truly global CPA is, however, possible and existing in the subfield of norm-setting in international organizations such as the IEC, the Codex Alimentarius, or regarding global issues such as environment and pollution. In this book’s cases

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and more generally in the case of Japan, global norms emanating from Japan are still rare, though Japanese firms abroad begin to be active in the promotion of their standards as global or regional (for example, the EU) ones. Daikin is an example with the ErP (Energy Related Products) Directive3 and the setting of a high level of energy efficiency on its products, forcing the non-­complying competitors to leave the market. The only norm-related case in this book is ABB, but it worked the other way round, mobilizing the international IEC standard to establish its position in Japan where the competition was quasi-nonexistent. Nonetheless, at the local level of Japan, besides the above ABB, several cases correspond to an improvement of their competitive position, if not a sustainable competitive advantage: Hartford, GE Smart meters, animal vaccine, MC Decaux. If one relies on the broader definition of strategy, many cases presumably meet it by mobilizing resources to meet a goal, creating or maintaining value through the creation of markets, investment decisions, boosting sales, and so on. The principal nuance could be a difference between grand strategy, epitomized by the pursuit of competitive advantage at a global level, and a more operational strategy, closer to the ground and the functional levels, such as marketing and market entry.

7.5   Linking Resources, Forms of Influence, and Business Strategies This point being made, the resources used in light of the forms of influence deployed in the cases can now be examined in detail. For this purpose, the visualization of this relationship is proposed in Figs. 7.1 and 7.2. The principal resources mobilized for each individual case as plotted in the Balance of Influence were gathered and classified according to the different forms and strategies used: pressure strong/persuasion limited, pressure strong/persuasion strong, pressure limited/persuasion strong. The resources retained do not represent all those identified for each case, but only those that have been judged the most important and determinant. It must be kept in mind that this representation is not intended to be statistically correct, but to stimulate the emergence of patterns. The 3  Directive relative to products using or having an impact on energy consumption (washing machines, refrigerators etc.) and subject to energy efficiency requirements. Introduced in 2009.

Fig. 7.1  Major resources by form of influence. The numbers refer to the individual cases where the resource is chiefly used according to this analysis. Only the individual cases have been plotted because strategy is related to firm-specific and individual decision. Cases not analytically detailed have not been included either due to limited information

Fig. 7.2  Correspondence between cases, forms of influence, and firms’ strategies. Only the individual cases have been plotted because strategy is related to firm-specific and individual decision. Cases not analytically detailed have not been included either due to limited information

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numbers of resources should not be taken in absolute terms but interpreted relatively to each other to suggest trends and propensities that must be explained. The interpretation is not straightforward, and in a number of cases, the leaning on one side does not exclude the theoretical possibility of the opposite explanation. Only the context and the intimate knowledge of the case can determine the real meaning of each resource combination. Whenever possible, an alternative theoretical interpretation is provided. Thus, Fig. 7.1, showing the major resources used in each form of influence, must be read in parallel to Fig. 7.2, where firms’ concrete business and CPA strategies are positioned versus modes of influence. How can this confrontation be read? Some observations in the section devoted to the Balance of Influence were already made, but the first remark that stands out is the difference of mobilization between the internal and external resources. In the forms of influence where pressure is strong, external resources are more widely used than when persuasion is stronger. This is not really surprising and rather consistent with the intuition that the multiplication of pressure channels toward the same target improves the probability of success. The composition of external resources is also different. Although it was already indicated that resources are rather inert and neutral, being able to be mobilized in one direction or the other, there seem to be some propensities to lean on one side or the other. State power is the most obvious example and fully exploited in strong pressure situations because it forms an important part of leverage for foreign firms without internal constituents, but there are also cases where states are more in a promoting position for their national firms than in a sovereignty stance. Public opinion, a volatile and difficult resource to manage, is also used in pressure cases. Among the external resources, the stakeholders are the most widely used, and this covers various forms, from JV partners to industry associations. As already noticed, it is assumably an essential feature of CPA in global business situations. Finding allies is already a basic rule for domestic CPA, but in international markets, having domestic interests working with and for one’s company may be the best strategy as the majority of interviewees acknowledge. In a persuasion mode, the indirect actions through clients and influencers can be very effective, thus conceivably explaining the number of cases mobilizing the stakeholders in this form of influence. Legitimacy is equally present in strong persuasion situations, being an

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important element in terms of political capital, particularly in global business circumstances. Media, conveying factor of legitimacy rank next. Coming to the internal resources, it must be noted first that no specific mentions of the financial or the relational resources are made. Indeed, the former does not seem very differentiating since a certain level of money is necessary to undertake CPA, and the companies interviewed have significant size. Moreover, it was extremely difficult to obtain information about the budgets allowed. The minor role of the relational resources is more surprising, particularly in a country such as Japan, but as many observers indicate, it actually may be important for access, that is, the very first step, but do not absolutely guarantee final and effective influence. These resources may, therefore, be considered as something such as commodities, important but not necessarily determinant. The major internal resource consists of the information/expertise, which, not surprisingly, is at the core of the firms’ intrinsic value-added. It could be considered that CPA without information/expertise to sell would be difficult, but it is theoretically neither impossible nor rare in case of mere opposition, defense of entrenched interests. However, this would rather apply to domestic firms trying to protect themselves than foreign firms entering a new market with new or competing products/services. It could, therefore, be said that, with the organizational resources, it forms the infrastructure of a CPA strategy. Depending on its degree of quality, it should be a highly differentiating factor, and this should be the reason why it is efficiently mobilized in most of the cases. The economic resources are found chiefly in cases with pressure and not on the pressure limited/persuasion strong quadrant, but one could imagine in theory more direct inducements, conducing the whole combination to lean more toward the persuasion side. On the contrary, the symbolic resources were thought to be decisive in the persuasion cases and not in pressure circumstances, but, similarly, a symbolic attack conveying a very negative image could be conceived and actually exists as a strong pressure tool. Next, observing the strategic objectives/business impact of CPA for firms in light of the forms of influence (Fig. 7.2), one can see that Threat for business and Global strategy rely at different degrees on a strong pressure mode whereas Creation of a business framework and Norm-setting are rather on the persuasion side, Investment decision and Boosting sales/ enhancing business being in-between. Presumably, this is an important finding and lesson of this research.

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However, this should be taken as an empirical result, suggesting correlations and trends but not absolute causality. There is also a strong correlation with a first generic classification of strategies evoked above (Table 6.2): firms facing an operational risk must adjust and tend to be reactive with a pressure-oriented strategy (due to isolation, emergency, need for efficiency) whereas companies whose growth is policy-driven incline to create their environment strategically, being proactive and exploiting the power of ideas with persuasion in a longer-term perspective or with the view not to alienate future markets and customers. Several strategic/business impact categories straddle on two quadrants because, facing the same challenge, they may use different methods and forms of influence to achieve their objectives, depending on their resource endowment, their skills, the degree of emergency, the gravity of the issue, the image they want to cultivate, and so on. Thus, an array of modes of influence, ranging from pressure to persuasion, would be available with certain propensities to be associated with specific objectives. On the one end, educating, advocating, creating, and shaping the debate would be a sophisticated means of laying the ground and penetrating, allowing the introduction of new norms and the creation of a business framework. In this configuration, the preferred mode of influence would be based on the subtle setting of the agenda, communication, and technocratic rationality for convincing. On the other end, threats of different nature (diplomatic, economic, judicial, reelection, etc.) could be mobilized in response to threats to business or blockade. In between, a variety of cases would use a suitable and efficient balance of both pressure and persuasion to achieve their strategic and business objectives. Again, this does not mean that the correspondences found here cover all the theoretical possibilities and stand as universal rules. To achieve goals, other combinations of influence can be conceivable. For example, norm-setting could be imposed through international negotiations with a strong pressure component, whereas threats to business could be addressed with a persuasive and cooperative stance. This exploration is only meant to suggest that substantial correlations in terms of efficiency can be observed, that would deserve a statistical confirmation in further research if information can be made available. Dahan (2005a), synthesizing its predecessors’ works, proposes what he calls a pressure and an interaction strategy, suggesting “that the type of relationship chosen by the firm has a fundamental bearing on the kind of resources which are going to be mobilized.” Then he offers a classification

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of most frequent combinations of resources for each strategy where, in an interaction strategy (this book’s persuasion mode of influence), the main resources are constituted by expertise and financial resources, whereas in the pressure configuration the main resources consist of public image, political reputation, and stakeholder support. This will not be challenged here directly since Dahan is not theorizing about a global business situation but a domestic one (in the EU) with different types of actors, firms, and NGOs. Contrary to firms that have expertise and means, NGOs frequently rely on public image and political reputation, what, in this book, is called symbolic and legitimacy resources. The point here is on the differences with this book’s findings where stakeholders play a major role, as well as state power. It may also be worth remarking that, rather than a conception of firms choosing a type of relationship in a straightforward and direct manner (interaction or pressure), it might presumably be more realistic to think that set their business and CPA strategic objective such as approval or improving sales, assess their resources in light of these objectives, set the first orientation by generally beginning on the persuasion side because avoiding conflicts and staying discreet behind the scenes is preferable in business, particularly in Japan. Then, they may adjust afterward, increasing the level of pressure if their objectives are not attained by mobilizing new resources such as state power, stakeholders or public opinion. In sum, this research finds that, following Dahan and others, some resources tend to be associated with some forms of influence and strategies, but one of the principal points is that resources are incredibly rich in variety and that they can be used in very different, sometimes, opposite manner. The distinction between internal and external resources was also followed because there is a clear difference between the expertise, the core competencies fully controlled by the firms, and the legitimacy which reveals itself only as third-party perception, however robust its foundations are. The degree of control is therefore clearly different, but the boundary is not always clear between internal and external, when resources can be shared and collective (industry associations), or outsourced and hired (research, lobbyist, consultant). Some resources have their own interests or dynamics (stakeholders, legitimacy, public opinion) on which the firm has only a limited influence. Therefore, the criterion of the degree of control seems adequate to distinguish between internal and external but is far from perfect since legitimacy, public opinion, or media cannot really be said to be controlled.

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Finally, it assumably can be said that the skillful management of those internal and external resources is central to the success of CPA. As Dahl and Stinebrickner (2003) already suggested, differences in endowment or acquisition of new political resources are not sufficient to explain the differences in influence. Sometimes, the management of these resources is centralized and handily orchestrated by a conductor, sometimes the action is built in iteration with several feedback loops and strategic adjustments. Sometimes issues are dealt with in emergency. In general, the entire process is not always fully planned and controlled, but the concept of subtle orchestration of resources at a granular level seems to be relevant and workable, despite or thanks to its qualitative facet. 7.5.1  Recapitulation Thus, a relationship was established between business objectives, forms of influence, and resources deployed. Albeit the interplay between resources, internal and external, remains subtle, in the implementation phase, when strategic and tactical elements begin to elicit a bundle of resources mobilized as means for a particular form of influence, patterns can be acknowledged: 1. Resources

a. Common to every form of influence i. Internal: informational/expertise, organizational ii. External: stakeholders, legitimacy b. Rather specific i. Symbolic for persuasion ii. Economic, state power, public opinion for pressure

Recombined, this could give four major generic strategies with objectives ranging between Threat for business and Norm-setting/Creation of a business framework: 2. Strategies with their main resources

a. Hard pressure: state power, economic power b. Soft pressure: public opinion, legitimacy

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c. Direct persuasion: informational/expertise, legitimacy d. Indirect persuasion: stakeholders/influencers

7.6   Conclusions Finalizing the case study analysis, this chapter highlights the six categories of business objectives/strategies found across CPA instances: • Creating a new business framework • Boosting sales/enhancing business • Reducing or neutralizing threats for business • Support for investment decision-making • Norms and rule setting • Global strategy, meaning of Japan Next, the specificities of CPA for foreign firms in Japan and the conditions of success were assessed and could be summarized as follows: • Good understanding of institutions without underestimating the legislative side • Good analysis of local interests and alliance with them; correspondence with the government strategy and needs • Carefully using and pondering home government intervention; attention to fairness and reciprocity • Rationality based on data, factuality, capacity of delivery • Patience, establishment of dialogue; the main targets are not necessarily the final decision makers • Convincing and avoiding confrontation; limited bargaining type (zero-sum game) of negotiation • Proposing a mutually beneficial and innovative solution, based on a high level of social contribution, rather than claiming for one’s business sake • Educating, influencing, and creating the market; managing legitimacy not to be seen as willing to interfere in internal affairs • Very early preparation and influence in the process: shingikai, kentôkai, etc. • Japanese mindset in human dealing meaning a localization of the public affairs/government relations function

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Incidentally, many of these points, especially the persuasive facet as opposed to pressure, were found to be translatable to other countries for global business situations. After briefly evaluating the framework theoretically, the strategic meanings of the cases were explored to deduce that they do not bring a competitive advantage at a global level, but that, by contributing to create or maintain value, they can be understood as strategically significant at a more operational level. Next, the relationship between business objectives, forms of influence and resources deployed were investigated. External resources are more widely used where pressure is strong. The stakeholders’ resource (external) is the most extensively used in both pressure and persuasion configuration. As for internal resources, information/expertise, as well as organizational resources, form the core of CPA strategies. With regard to business objectives, Threat for business and Global strategy rely at different degrees on a strong pressure mode, whereas Creation of a business framework and Norm setting are rather on the persuasion side, Investment decision and Boosting sales/enhancing business being in-between. Finally, four generic strategies and their respective major resources are proposed with objectives ranging between the two poles of Threat for business and Norm setting/Creation of a business framework: a. Hard pressure: state power, economic power b. Soft pressure: public opinion, legitimacy c. Direct persuasion: informational/expertise, legitimacy d. Indirect persuasion: stakeholders/influencers

References Andrews, L. (1996). The Relationship of Political Marketing to Political Lobbying: An Examination of the Devonport Campaign for the Trident Refitting Contract. European Journal of Marketing, 30(10/11), 76–99. Bonardi, J. P. (2011). Corporate Political Resources and the Resource-based View of the Firm. Strategic Organization, 9(3), 247–255. Dahan, N. (2005a). A Contribution to the Conceptualization of Political Resources Utilized in Corporate Political Action. Journal of Public Affairs, 5(1), 43–54.

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Dahan, N. (2005b). Can There be a Resource-based View of Politics? International Studies of Management and Organizations, 35(2), 8–27. Dahl, R. A. (1957). The concept of power. Behavioral Science, 2(3), 201–215. Dahl, R. A. (1963). Modern Political Analysis. Englewood Cliff, NJ: Prentice Hall. Dahl, R.  A., & Stinebrickner, B. (2003). Modern Political Analysis (6th ed.). Upper Saddle River, NJ: Prentice Hall. Fujii, T. (2012). Kyôsô Senryaku Toshite no Gurôbaru Rûru. Tokyo: Tôyô Keizai Shinpôsha. Lasswell, H. D., & Kaplan, A. (1950). Power and Society, a Framework for Political Inquiry. New Haven, CT: Yale University Press. Mahoney, C. (2008). Brussels versus the Beltway: Advocacy in the United States and the European Union. Washington, DC: Georgetown University Press. Olson, M. (1965). The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge MA: Harvard University Press.

CHAPTER 8

General Conclusion

8.1   Addressing the Research Question: Informational Value Filling a Gap This research was undertaken after having observed that few studies are available regarding nonmarket strategies centered on lobbying in Japan, compared to the impressive literature devoted to the subject in the West as well as the large press coverage. The perspective was that of a foreign firm, MNC or more modest company, doing business in this part of the world, far from its home country. Despite the globalization and the fact that Japan is a liberal democracy, the political and institutional wall still counts, not to mention the cultural one. The first question was then about the “how” rather than why firms do lobby or for what performances as many studies do. How firms engage in lobbying/CPA in Japan, what tactics/ strategies, channels, resources do they mobilize, for what outcomes, to what extent they adapt and “Japanize” their practices: all these questions derived from the first interrogation and led to this research in the form of an exploration. To overcome this task, a set of tools had to be figured out, as well as information gathered through interviews and secondary documentation. A number of cases were identified, which allowed the construction of a workable framework through iteration between the field and the theoretical literature available. The story and the details of the cases made possible an in-depth understanding of the “how” barely attainable by other methods.

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The major problem with the topic of lobbying is access to information, especially in Japan, where it is close to taboo as in many countries. This explains the scarcity of studies about the country, and this is why a major point of this study could be that: • In itself, and by its mere existence, its informational value, this research, despite all its imperfections and limitations, fills a gap and may constitute an original building brick to a better knowledge of nonmarket strategy CPA in Japan.

8.2   General Impression: Low Key Compared to what can be seen in the West, whether Washington or Brussels, as measured, for example, by the degree of media treatment, the general impression regarding CPA or lobbying is that of “low-key.” This may naturally be due to the fact that, in Japan, behind-the-scenes activities prevail, but also to the generally limited level of CPA by foreign and Japanese firms, at least in terms of direct individual lobbying. According to many observers, CPA by foreign firms in Japan is rather a very nuanced activity with few dramatic developments or struggles for money and power. There used to and still may be strong foreign pressure (gaiatsu) and issues implying money, but an important observation emerging from the research is that: • The power of gaiatsu is more limited than generally thought. However, on specific and sporadic matters, trade negotiations still have a strong influence. On the firms’ side, many companies simply lack the organizational resources and capabilities to develop effective CPA. The support of home countries is also fairly variable, particularly for EU firms that cannot be backed by one unique and powerful organization such as the US embassy. One of the initial research questions was whether differences in firms’ nationality (home country) lead to different CPA strategies; the issue was deemed irrelevant by many observers, at least in cultural terms, but suggestions were made that means and degrees of support were not the same

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across countries in the EU. For several reasons, particularly of access, this facet could not be developed and remains an interesting subject for further research. Furthermore, some firms having chosen to be an insider in Japan, strove to be well established, and do not want that their CPA efforts may benefit other foreign newcomers and potential competitors, which reduce their activities at least for the issues beyond individual scope.

8.3   Similarities Outweigh Differences, with Specificities Beyond this low-key perception, another general feature is that, as a power game, Japan is not so different from other parts of the world, but nevertheless, presents some institutional, organizational, and cultural specificities. In Japan, the traditional channels for influence are collective (industry or peak associations) or pecuniary via contributions to parties. Direct individual CPA is less developed and often takes the form of solicitations to the authorities rather than proactive propositions of alternatives. From an organizational point of view, rare are the firms having a specific public affairs section despite the close but more ambiguous and dispersed concept of shôgai. With the globalization and the shift of the battlefield to the de jure rather than the de facto standards, some firms are organizing themselves in a more proactive manner on the global stage, while the Japanese government shows more support abroad than it used to do. For foreign firms in Japan, the accurate apprehension of the behind-the-scenes processes is a real challenge that requires investment not always judged worth in terms of business return. Moreover, grassroots or public advocacy strategies are limited, while foreign firms are not allowed to activate financial leverages. In this context, the specificities of foreign firms and their conditions of success can be summarized as follows:

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8.3.1  Specificities of Foreign Firms • No naturally supporting politicians or constituencies • Less reliance on internal resources than Japanese domestic firms because their economic and financial resources are limited by their economic weight and by law; relational, organizational, and symbolic resources can be built, but this can take time for a limited efficiency compared to their domestic counterparts. Finally, their major internal resources consist of the informational/expertise resources. • External resources are widely used, chiefly the support of stakeholders such as domestic clients and partners who can intermediate toward local politicians. State power is a natural and specific option but not as broadly mobilized as expected. Media and public opinion are also rarely used except for themes with societal facets. • Legitimacy is a key dimension, and the liability of foreignness a reality even though things have changed with globalization. However, it depends greatly on the industry and is more subtle than simple national champion preference; it is frequently taken into account when societal norms and not only economic rationality are involved, as in the case where aftersales service or long-term commitments (with employment for example) are at stake.

8.4   Topics for Foreign Firms at Macro and Industry Level Over the long time and very roughly, firms’ top claims may be categorized as: regulatory environment, standards/specifications/technical requirements, taxation systems, and customs clearance procedures. Since the 1990s, structural reforms have been undertaken, and trade/ investment agreements signed or negotiated, but many issues of the same nature remain. American and European claims are fairly similar in industries such as automotive, medical devices/pharmaceutical, insurance, express delivery, and food industries. The focus differs slightly in

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areas such as intellectual property where the Americans concentrate on digital piracy versus luxury goods for the Europeans. With regard to trade negotiations, since tariffs on industrial goods in the manufacturing sector are already very low in Japan, their elimination is not a top priority for the US, but the variety of non-tariff measures that hinder trade is. Similarly, the EPA/FTA with the EU is definitely centered on the removal of non-tariff measures, with particular demands regarding the mutual recognition of standards, product certification, marketing authorizations, and adoption of international standards in the domains of medical equipment, environmental technology, consumer products, cars, and food. A study concludes, however, that the majority of NTMs are only solvable in combination with domestic reforms, trade instruments being insufficient, which means that lobbying within Japan is still strongly required. After the domestic crises of the 1990s, globalization, and the rise of China, the attitudes have changed for foreign business, which is now “inside the castle,” leading to more direct interactions between business and government. Before, trade issues were central, whereas nowadays, in globalization times, the major problems occur from laws and legislations that have become obsolete in respect of the technical and economic acceleration. Many issues are therefore related to the modernization or adaptation of old regulations to new products or services.

8.5   Conditions of Success in Japan Building on the analysis of the various sources encountered in this study, the following elements could be a good summary of the conditions for successful lobbying in Japan: • Good understanding of institutions without underestimating the legislative side (bureaucracy being supposed to be the center of power) • Good analysis of local interests and alliance with them; correspondence with the government strategy and needs • Carefully using and pondering home government intervention; attention to fairness and reciprocity (continued)

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(continued) • Rationality based on data, factuality, capacity of delivery • Patience, establishment of dialogue; the main targets are not necessarily the final decision makers • Convincing and avoiding confrontation; limited bargaining type (zero-sum game) of negotiation • Proposing a mutually beneficial and innovative solution, based on a high level of social contribution, rather than claiming for one’s business sake • Educating, influencing and creating the market; managing legitimacy not to be seen as willing to interfere in internal affairs • Very early preparation and influence in the process: shingikai, kentôkai, etc. • Japanese mindset in human dealing, meaning a localization of the public affairs/government relation function, that is, a Japanese lobbyist rather than a foreign lawyer as often seen.

8.6   Lessons and Theoretical Contributions 8.6.1  A Framework: Comprehensive and Workable, for Analysis and Practice • A toolbox-type, wide-ranging and workable framework to go beyond one-off CPA case analysis, and link to firms’ strategy Considering the absence of a general and overarching theory of CPA, it was necessary to review and adapt the existing ideas in the literature to build a framework while testing it in the reality of the interviews with practitioners. This has led to a transdisciplinary scrutiny across major geographic zones and the gathering of many building blocks and analytic tools in one set. Thus, the framework developed in this book owes to diverse authors and theories centered on strategic management and political science. In this sense, one of the major contributions of this book could be to have made coexist approaches, powerful but insufficient if taken alone, to deal with concrete CPA on the ground in a country such as Japan.

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The general idea was rather that of a toolbox to choose from according to the necessity, rather than that of a rigid and mechanical model with a unilateral input/output causality, too simplistic to address the complexity of CPA in its particular forms. For example, within the three main drivers, the three Is, Institution is extremely powerful to explain the differences between countries, but not between firms’ strategies within the same zone, which are best rendered with the Issue and Interest drivers. Similarly, the explanative power of the Industry-specific factor is, by definition, operating at the semi-macro and not at the firm level. This is the reason why, while keeping these factors in mind as a background, it was decided to chiefly focus in this study on the drivers of Issues, Interests, and Resources to differentiate the individual firm’s strategies. Consequently, it is believed that the analytic tools proposed in this book for the case of Japan could be fruitfully extended and exploited in other situations as well as serve lobbying practitioners on the ground. With regard to the key concept of resources, one significant interest of this book’s approach is to consider them in terms of orchestration rather than control as in the traditional RBV-derived perspectives. In an oversimplified view, the major resource of a firm consists of its expertise, but however technocratically and rationally attractive, it is the external factors/actors that confer the necessary recognition for a successful CPA.  Therefore, a skillful orchestration of both types of resources, internal and external, reinforcing each other to create a dynamic, is central to the understanding of CPA.  In this view, the search for organizational principles for resource orchestration seemed indispensable. In Dahl’s and political science terms, the bases of power (resources) must be exploited, mediated through instruments or forms of influence to be actualized. This function was provided by the two transversal dimensions, which can be said to serve as a catalyst to create resource constellations and strategic configurations. Again, this is not the first time that these dimensions are pointed out in one form or another, but this research could be considered to have brought an additional degree of clarification, adaptation, and workability for strategic business situations. First, the Balance of Coalition can be seen as offering a unifying framework to deal with the issue of what Hillman and Hitt (1999) named “level of participation.” It is a major issue in CPA to decide with whom initiate an action, with, on the positive side, augmented resources to be expected, and, on the negative side, various ensuing problems such as collective action, free ride, lowest common denominator, and sharing of sensitive information. This book’s perspective was rather that of proactive firms with globally valuable assets and seeking effectiveness

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in issues of individual nature. Therefore, an array of options ranging between the concepts of individual Credibility and collective Representativeness, encompassing various forms of associations and actors, seemed the best suited to render the whole spectrum of possibilities, while allowing “transversal lobbying” and “ad hoc coalition” as can be seen in the US and the EU, compared to the traditional CPA through trade associations. Thus, the Balance of Coalition answers to the question of “what bunch of resources relative to which actors” can be made available in the first stage, assuming that some resources such as legitimacy still have to be built over time. The second structuring dimension, the Balance of Influence, concerns a more qualitative aspect, that is, “how” resources are exploited and applied to obtain a change. An array of modes of influence was identified, ranging from pressure to persuasion with certain propensities to be associated with specific objectives. On the one end, educating, advocating, creating, and shaping the debate would be a sophisticated means of laying the ground and penetrating, allowing the introduction of new norms and the creation of a business framework. In this configuration, the preferred mode of influence would be based on the subtle setting of the agenda, communication, and technocratic rationality for convincing. On the other end, threats of different nature (diplomatic, economic, judicial, reelection, etc.) could be mobilized in response to threats to business or blockade. In between, a variety of cases would use a suitable and efficient balance of both pressure and persuasion to achieve their strategic and business objectives. 8.6.2  Drivers of CPA • Differentiating drivers: issue, credibility, local support Confronting the framework and cases, the following elements are deemed to be the most differentiating drivers of CPA in Japan. Nonetheless, they are also thought to entail a certain degree of universality to be further tested in other countries and situations. 1. The issue

a. Firm-specific/whole industry b. Newness c. Broadness of scope

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2. The degree of credibility as an individual firm and the social contribution 3. The degree of benefit and support from local interests

8.6.3  Relationship between Resources, Forms of Influence, and Business Objectives Turning to firms’ strategic/business objectives and the relationship with resources and forms of influence, the findings could be condensed as follows. Albeit the interplay between resources, internal and external, remains subtle, in the implementation phase, when strategic and tactical elements begin to elicit a bundle of resources mobilized as means for a particular form of influence, patterns can be acknowledged: • Resources’ patterns 1. Common to every form of influence

a. Internal: informational/expertise, organizational b. External: stakeholders, legitimacy 2. Rather specific



a. Symbolic for persuasion b. Economic, state power, public opinion for pressure

Recombined, this could give the following four major generic strategies with their corresponding main resources and objectives ranging between Threat for business and Norm-setting/Creation of a business framework: • Four major generic strategies a. Hard pressure: state power, economic power b. Soft pressure: public opinion, legitimacy c. Direct persuasion: informational/expertise, legitimacy d. Indirect persuasion: stakeholders/influencers

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• A variety of business objectives for CPA The appending purposes have been identified from the cases. The list is certainly not exhaustive with possible sub- or other categories, depending on the issue. The generic strategies are plotted in relation to their relevant resources and form of influence. The business objectives listed very roughly reflect the correspondence with them, although the real positioning is more nuanced (Fig. 8.1). 8.6.4  For Successful Influence in a Global Business Situation Finally and in all likelihood, these elements could be valid not only for Japan but also in other global business situations with similar conditions, that is, a highly developed and sophisticated market with democratic institutions (accountable politicians and free media), the limited possibility of using money and foreign pressure, the limited weight of domestic constituents or economic power. Or simply, it might be applicable to countries where lobbying is not transparently regulated or negatively perceived.

• Lobbying based on secrecy, favors, pressure used to and still exists, but tends to be less and less well accepted, not to mention legality or efficiency. • Instead, communication strategies based on persuasion and collaboration are becoming central in terms of acceptance and effectiveness. The power of ideas, knowledge building, and technocratic rationality (job creation, tax revenue, technological input, etc.) can be considered stronger than money and foreign pressure in a majority of cases, even if the temporal prospect may be longer. • In addition, lobbying may be considered close to marketing with the notion of persuasion.1

 As Harris and McGrath (2012) emphasize, “one very striking component of both marketing and lobbying lies in the fact that at the heart of each activity is the notion of persuasion … A lobbyist will attempt to demonstrate some clear rationale to support their preferred policy outcome and thus provide a policymaker with a motivation to take the ‘correct’ decision.” 1

8  GENERAL CONCLUSION 

Fig. 8.1  Strategies, forms of influence, and resources

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In this collaborative and constructive context, the social contributions of the firms are a crucial element that will lead to acceptance, that is, legitimacy, the condition of support from politicians, and citizens. Hence, the sublimation of the firm’s own interests in social issues is essential. • Consequently, in essence, the formula for successful influence could be written: 1. Getting access 2. Sublimation into social issues 3. Demonstration that interests are aligned 4. Legitimation It is important to note that rational information/expert knowledge input is a necessary but insufficient condition, for it has to be embedded in legitimacy/recognition to be powerful. Rationality is on the economic side, but the political realm is governed by recognition. In the mere strategic management field, the competitive vs. cooperative paradigm is still a work in progress with incessant discoveries of unsuspected and subtle patterns. Technological acceleration with open-­ innovation or social expectations with the success of companies with purpose are good examples. Going further in interdisciplinarity, in evolutionist anthropology too, the puzzle of basic Darwinian selfishness vs. altruism is undergoing a deepening of interpretation. Without entering too many technical details, selective benefits brought by the intergroup selection, social selection through reputation, free-riding reduction, and so on, selection mechanisms combining genetic and social facets with feedback loop effects are in reality much more developed and effective than thought until recently and are still poorly understood and documented (Boehm 2012). The question is then: is the cooperative facet in human activities, including firms, of growing importance, or has it been underestimated until recently because of the subtility of mechanisms involved, or both? This is an exceptionally large question for future research, but one point of this book is that it seems to be useful to some international business situations. This an empirical temporary conclusion, for one can never be sure that informants surveyed tell the full story. However, the cue seems worth a try on the ground.

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References Boehm, C. (2012). Moral Origins: The Evolution of Virtue, Altruism, and Shame. New York: Basic Books. Dahl, R. A. (1957). The Concept of Power. Behavioral Science, 2(3), 201–215. Dahl, R. A. (1963). Modern Political Analysis. Englewood Cliff, NJ: Prentice Hall. Dahl, R.  A., & Stinebrickner, B. (2003). Modern Political Analysis (6th ed.). Upper Saddle River, NJ: Prentice Hall. Harris, P., & McGrath, C. (2012). Political Marketing and Lobbying: A Neglected Perspective and Research Agenda. Journal of Political Marketing, 11(1/2), 75–94. Hillman, A. J., & Hitt, M. (1999). Corporate Political Strategy Formulation: A Model of Approach, Participation, and Strategy Decisions. Academy of Management Review, 24(4), 825–842.

CHAPTER 9

Annexes

© The Author(s) 2020 E. Romann, Nonmarket Strategy in Japan, https://doi.org/10.1007/978-981-15-7325-5_9

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Firm-­ specific vs. industry-­ wide Firm-­ specific New product

Scope

Salience

Technical and Limited Low regulatory with a legislative side

Newness Level of policymaking

Low

Level of conflict, competition

Creation of JV to overcome standard and regulatory hurdles

Other/remarks

EXTERNAL LEGITIMACY: providing input, fit to JP government strategy, participation to an advisory group, proposal to politicians MEDIA: academic and specialized media STAKEHOLDERS: clients (Tepco etc.), local partner (Fuji Electric)

INTERESTS SUPPORTING OPPOSING METI Major incumbent JP manufacturers Foreign manufacturers JP manufacturers seeking new products, including Fuji Electric Politicians (LDP/DPJ) looking for new themes

Approval, certification, conformity assessment Standards and certification issue

METI Certification agency (JEMIC) Advisory Study Group (Smart Meter seido kentôkai) Diet POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: new technology; creation of debate and knowledge base, academic and media articles SYMBOLIC: reputation management, access to influential persons ORGANIZATIONAL: dedicated government relations team, hiring of connected people, lobbying culture, use of local people with direct report to the US headquarters, flying reluctant persons to the US to convince, use of intelligence tool FINANCIAL: budget for CPA, flying influential persons in the US, etc. RELATIONAL: membership in an advisory group

Impossibility to directly import ANSI standards meters from the US INSTITUTIONS

ISSUE

9.1.1.1 GE Smart Meters

9.1.1  Creating a New Business Framework: Conditions of Market Existence/Entry

9.1   Summary of Cases Classified by Implication for Business Strategies

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OUTCOMES POLICY OUTCOMES Contribution to policymaking (new energy strategy) by knowledge input

BUSINESS OUTCOMES Product authorized New sales

New technology fitting the government energy strategy (commonly shared goal) Firm-specific Individual and Joint-Venture Local interest with clients in a limited number CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, limited pressure Use of INFORMATIONAL/EXPERTISE resources for the promotion of a new technology fitting the government energy strategy (commonly shared goal), the creation of a knowledge base, persuasion by STAKEHOLDERS, local partner (Fuji Electric), clients (Tepco, etc.), a win-win solution in line with local interests Use of ORGANIZATIONAL resources for direct interactions with policymakers, proposals, flying reluctant persons to convince to the US Limited use of public MEDIA, focus on specialized media Use of LEGITIMACY by the input of knowledge (politician, clients, specialized media, etc.)

Strong credibility/low representativeness

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state power local opinion/civil interest society Yes No No

Contribute to the government strategy of liberalization of the energy market (bring flexibility on the power grid)

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

ARGUMENTS COMMONLY SHARED GOALS, SOCIAL CONTRIBUTION

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In the GE Smart meters case, the firm initially wanted to import its products directly from the US without modifying them substantially for cost and efficiency reasons but had to pursue a long process of CPA to finally create a JV with a local partner with local facilities for certification. This opened for the new entity a one trillion yen market (over ten years). The process was facilitated by the fact that Japan was late in the adoption of smart grids and the related technologies, which created a window of opportunity to introduce them. However, GE had to deploy a long campaign of direct and indirect education directed to a wide range of targets, politicians, bureaucrats, and above all, the clients: power companies such as Tepco. To this extent, it could be said that the strategy was a combination of wide CPA (technical, regulatory, political) and B to B marketing. In the context of liberalization and unbundling of the energy market as well as the aftermath of Fukushima leading to a shift in the energy mix, the first half of the 2010s was full of opportunities in this industry. A FIT (Feed-In Tariff)1 system inspired by the case of Germany was introduced in Japan in 2012, giving incentives to the development of renewable energy in the country with even a boom in certain segments such as solar electricity. Similarly, smart grids and their multiple components, such as smart meters and appliances, allowing an enhanced efficiency of production and distribution of electricity, were parallel themes gaining momentum. As a major player in the energy industry in Japan, GE had been active in various segments with more or less success and even failure, such as the wind turbines business that it had to abandon in 2007 to come back later. According to the company, the sudden eviction from the wind turbines market due to an unanticipated legal change in a non-related domain (building construction) triggered its top management to enhance the government relations and intelligence function to be able to monitor the future regulatory evolutions beforehand. Before the year 2000, GE was selling products not manufactured in Japan and, therefore, the need for proactive CPA actions was limited since they sold easily. However, with the rise of competition in several traditional markets (energy, healthcare), the support of government relations function in sales became increasingly important. The politicians were approached with a list of propositions regarding the theme of energy and the future strategy of the country. The shift of power in favor of the DPJ in 2009 gave the opportunity to GE to propose ideas to the LDP (at their demand) with the objective of regaining power. The relations with the government can be described as relational and 1  Feed-In Tariff: system of subsidization to support the development of renewable energy, consisting, inter alia, in buying the power produced at predetermined prices.

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transactional, according to the definition elaborated by Hillman and Hitt (1999); relational because of the frequent visits to the bureaucracy, which is the natural and technical interlocutor of firms and transactional/occasional for specific opportunities as above mentioned. Besides politicians, GE was working in various dimensions and with diverse leverages to promote the concept of smart grids based on what had been done in the US in light of the possible benefits for Japan. Since in Japan, many reforms and innovations are heralded by the shingikai or ad-­ hoc committees, themselves led by university professors, knowledge emission toward the academic world is unavoidable. Thus, seminars were organized, information was disseminated, articles were published to this end to create a technical base. In 2010, a smart meters kentôkai (study committee) was established by the METI to examine the introduction of the new system, resulting in a plan of adoption ranging between 2014 and 2024 for the whole territory, with a market estimated at 1000 billion yen. GE managed to participate in this committee from the beginning, which is an important landmark for a foreign company and despite a status limited to that of an observer. Altogether, GE contributed, although indirectly, to the policymaking of the 2010s in the energy field. Looking at the competitive landscape, the market was dominated by the incumbent manufacturers, Osaki, Fuji Electric, Toshiba,, and Mitsubishi Electric, in a somewhat cartel-like pattern with Osaki in a powerful position. In Japan, the interest toward smart meters was low because, among others, contrary to Europe, meters are set outside buildings, thus reducing the problems of misreporting by the consumers. With the traditional analog devices changing every ten years, revenues were assured, especially with the special and durable links the manufacturers had to develop with their clients, the electric utilities, with whom no open tender was necessary to gain a market. Thus, there were limited incentives for a shift toward smart meters. However, with the new government strategy following Fukushima, the government intended to organize a diversification of the energy mix and a price decrease through various means, from better use of the renewable to the liberalization of the regional monopolies, to the modulation and optimization of the network leading to energy savings thanks to, among others, smart meters. GE, therefore, was in a good position to benefit from these new orientations aiming at enhancing the competition, including through the entry of foreign actors. However, at the preparation stage, that is, before Fukushima and the improvement of the prospects in the early 2010s, GE had to overcome a number of hurdles for its smart meters in parallel to its general advocating activities.

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The major problem for GE was that meters are subject to a specific and stringent regulation because they are supposed to measure the electric flows in an accurate and even manner. The business rationality was advocating to directly import meters manufactured in the US rather than having a factory in Japan to make specific products only for the Japanese market. However, with the US products being made under the American National Standards Institute (ANSI) standards, a first hurdle was to have the meters homologated because they were judged as not conforming to Japanese standards (in a round rather than square frame, etc.). The process consists of two steps, model approval and individual certification. The latter can be done individually meter by meter, which is costly and time-consuming as well as not suitable for huge quantities, or in bulk, through the use of a recognized and authorized factory within Japan. Thus, at the beginning, GE strove to directly sell ANSI-type round meters and succeeded in the specific segment of devices for buildings that could be processed individually due to their limited number. However, for the individual houses segment, whose scale amounted to millions, the process of homologation took three years with a broad advocacy and B to B marketing campaign. GE had to adapt its meters to a certain extent to the Japanese standards and find a partner with an authorized factory for the final certification, namely Fuji Electric. The search of partners began in 2008 and concluded in 2010 with the announcement of the JV to be set up in 2011. However, the new entity had still to be recognized as having inherited the status of authorized factory, and above all, had to actually sell its product to the semi-public entities that are the electric utilities. All of this required a mix of CPA and marketing toward various actors: the utilities, the METI, and so on. Finally, GE Fuji succeeded in the first open tender organized by Tepco in 2013, alongside Mitsubishi Electric and Toshiba. Among the various resources mobilized, the organizational ones, especially the use of a tool called CAP (Change Acceleration Program), may be worth noticing. The model is famous and designed to help change and apply strategic thinking to influence others. Here, it was extensively used to map the important people having an influence, at Tepco or other key organizations, evaluate their degree of influence, classify them into favorable, opposing or neutral, and initiate action to move them from one category to another. The efforts were naturally concentrated on the most influent in the opposing and neutral categories. They were systematically approached with frequent contacts and, for example, flown to the US for seminars at GE headquarters where advocacy and persuasion could be fully deployed.

INTERESTS SUPPORTING Banks ACCJ

–

Approval (deregulation)

ARGUMENTS COST OR ECONOMIC IMPACT

Level of conflict, competition

OPPOSING –

Broad Medium Low

Scope Salience

Not new but recent product: extension of channels

Other/ remarks

(continued)

Fast growing and profitable new product in a difficult period for financial institutions

EXTERNAL STAKEHOLDERS: Japanese banks interested in the high level of revenues generated by the commissions on annuity products sales; ACCJ MEDIA: many general media seminars to explain deregulation and best practices in the US, specialized industry media about sales volume

Regulatory

Newness Level of policymaking

Approval, certification, conformity assessment

POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: new product and know-how in a fast-growing market; informational input (Viewpoint etc.), educating the FSA by frequent visits and presentations ORGANIZATIONAL: government advocacy team; chief actuary

FSA

INSTITUTIONS

Firm-­ specific vs. industry-­ wide Liberalization of Industry-­ bank sales of wide but insurance (variable with first annuity) mover advantage

ISSUE

9.1.1.2 Hartford

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OUTCOMES POLICY OUTCOMES Deregulation of variable annuity insurance product sold by banks

BUSINESS OUTCOMES Substantial growth in variable annuity contract sales

MAJOR TYPE OF COALITION SUPPORT Use of Use of Use of state local public power interest opinion/ civil society Strong credibility/low New product and know-how in a fast growing and profitable Yes No No representativeness market (economic impact) Industry-wide but building on firm-specific competitive advantage Individual Direct action to the FSA and indirect action through the banks, the most interested and strong local stakeholders CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, limited Use of INFORMATIONAL/EXPERTISE resources for the promotion of a new product offering a pressure high level of commission in a difficult time for banks (economic impact), creation of a debate and a knowledge base based on success stories in the US and sales volume by securities companies in Japan, proposal of a win-win solution: fee income for banks, better preparation for retirement, stimulation of the economy Influence through STAKEHOLDERS, the banks who understood the interest of the product and advocated the FSA for approval Use of specialized industry MEDIA followed by banks and other actors of the industry, as well as public media for seminars and presentation of best practices

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

(continued)

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Hartford Life adopted a CPA strategy chiefly centered on education and knowledge creation through influencers and potential clients, the banks. Initially, Hartford, a leader in the US variable annuity market, entered Japan at the end of 2000 with a unique strategy consisting of focusing on these products sold through stockbrokers instead of distributing them through the traditional insurance sales channels. The logic behind was that, contrary to traditional insurance products dealing with death or health, variable annuity schemes are investment products close to mutual funds and often intended to prepare retirement. In Japan, banks, before the reforms of the 2000s, were not allowed to sell insurance products in general, and especially investment products which are very specific and require a particular know-how related to stock markets. Thus, Hartford, at the beginning, faced skepticism but managed to enter into a partnership with Nikkô Cordial, the number 3 of Japanese stockbrokers, who accepted to sell the products designed by Hartford in its distribution network. Moreover, Hartford chose a specific sales strategy consisting in offering only investment funds managed by Nikkô Asset Management, in sharp contrast with one of its major competitors of the time, the Dutch ING, which was also attempting to develop variable annuities in Japan, but which was proposing various funds from different asset-management firms (Daiwa, Nomura, Tokyo-Mitsubishi, etc.). There may be pros and cons about this strategy, but according to an interviewee, the unity of asset management and the resulting track record and trust capital created a strong argument for clients for whom it was easier to switch from a Nikkô fund to another, thus increasing sales per customer ratio. As a result, Hartford sales with Nikkô skyrocketed, reaching almost 600 million dollars the first year, more than a billion the second. The scale of this success was unexpected and pioneered the way for further important developments. Besides the focused sales strategy, it was backed by other external and institutional factors such as the low level of interest rates inviting the savers to seek better returns, the guarantee attached to the capital (in various degrees), and the tax breaks offered. The next step came with the widening of the distribution capacity, namely the opening to banks that were allowed to sell variable annuities from October 2002. The important point here is that Hartford can be considered to have contributed considerably to this deregulation by its market-creating and educating action. According to an interviewee, thanks to Hartford’s strategy, the liberalization of bank sales happened much earlier than it would have. This was done not by lobbying the parliament or

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telling people their narrative is true, but by bringing a market and real-life examples that could be shown for convincing. To get to this result, Hartford first worked with the securities industry media to ensure that, twice a year, articles appeared with information about sales volumes for the top companies. Banks could then observe this phenomenon and were at the same time approached by Hartford, which explained that securities companies were getting a commission of about 5% on variable annuity sales. Hartford offered the banks to distribute its products similarly but was told that it was not liberalized; it was too early. However, at a time where their traditional business model based on lending margin was endangered, a commission of 5% going immediately in their earnings was a very strong argument. Moreover, as with securities firms that were not losing assets because they just moved from money market funds to other investment schemes, banks would not be hurt by this problem if money is just moved from deposits to investment trusts managed by the asset-management companies owned by them. In addition, many media seminars were organized to advocate how variable annuities were successfully sold in the US and how banks made fee income from this. Updates were done twice a year, telling the story of how deregulation occurred in the US to allow banks to sell insurance. Japanese banks saw these best practices and success stories and found the fee income attractive, allowing them to sell insurance to risk-averse wealthy customers. Finally, Hartford frequently visited the FSA with its chief actuary to explain that it would be a win-win for everyone: banks would make more money through fee income, individuals would be better prepared for retirement, and the economy would be stimulated by the shift from deposits to investments. The more they learned, the more they were comfortable. Altogether, the combined effort of Hartford and, above all, the banks themselves, bore fruits leading to the deregulation in 2002 and an exponential sales growth. Assets under management grew at a three-digit rate from less than a billion dollars in 2000 to over 50 in 2005. Even if one takes into account the novelty and the stock market appreciation effect during the period, a considerable amount of new flows was directed to the product. The three top players, Hartford, MS Metlife, and ING, were all foreigners occupying more than 50% of the market by 2005, with about 30% for Hartford only. Their success was due to their experience in the US and Europe, the opening of existing sales channels without having to invest in a new network, and a more aggressive stance allowing higher commission than domestic companies.

MLIT, Road Management Bureau National Police Agency Local authority (mayors) Local police POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: new concept and know-how SYMBOLIC: build on the experience of city beautification, French image RELATIONAL: personal links with local influential persons (Okayama etc.) ARGUMENTS COST OR ECONOMIC IMPACT COMMONLY SHARED GOALS, SOCIAL CONTRIBUTION

INTERESTS SUPPORTING Local governments Bus companies Nihon Bus Association JETRO/METI

INSTITUTIONS

Low

Level of conflict, competition

JV and action to overcome opposition from the police

Other/remarks

(continued)

Reduction of fiscal burden for local finance, improvement of bus companies’ finances Beautification of the city benefits to everyone

EXTERNAL STAKEHOLDERS: Local bus company and business group (Ryobi)

OPPOSING Police Shintaro Ishihara/Tokyo Metropolis

Limited Low

Regulatory, local authority

New concept

Salience

Scope

Newness Level of policymaking

Approval, certification, conformity assessment Approval

Firm-­ specific vs. industry-­ wide Introduction of Firm-­ bus shelters with specific advertising

ISSUE

9.1.1.3 MC Decaux

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MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state local opinion/civil power interest society Yes No No

OUTCOMES POLICY OUTCOMES Changes in laws

BUSINESS OUTCOMES Products authorized New market

New concept of city beautification (commonly shared goal) Firm-specific Individual and Joint-Venture Support of limited number but strong constituent CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, limited Use of INFORMATIONAL/EXPERTISE for the promotion of a new concept, of rational arguments pressure to convince the police (major opponent) Use of SYMBOLIC resources to advocate city beautification (commonly shared goal) Use of local STAKEHOLDERS’ support to convince of the local interest for the community implying no negative consequences

Strong credibility/low representativeness

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

(continued)

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The concept developed by JC Decaux, the parent company of the Japanese Joint-Venture with Mitsubishi Corporation, MC Decaux, is fairly unique in that it offers street furniture (bus shelter, etc.) and infrastructure, that is, advertising spaces, financed by advertising revenues, implying a diminution of fiscal and maintenance burden for local authorities and city beautification for citizens. Globally, there is only one competitor, Clear Channel, with the same level of integrated offer. The key variable in the business model consists of long-term concessions necessary to amortize the heavy initial investments. The major hurdles in Japan were the MLIT for the road occupation rules and the National Police Agency that feared the distraction that this new urban furniture could provide for drivers with the associated risks of accident. The choice was made to proceed step-by-step with representative local towns. At the central level, the work of persuasion was undertaken patiently with the MLIT’s bureaucrats who rather showed understanding in the intrinsic quality of the project that was designed to improve public comfort without hindering the use of roads. The strongest concerns came from the National Police Agency. Okayama was chosen as a test town with the strong backing of a prominent local company, Ryobi Holdings, running various transport-related activities, including buses. For them, the support of self-subsidizing infrastructures, as well as some additional advertising revenues in a municipal transport activity in deficit, was welcome. The backing of this essential constituent, combined with the project’s attractiveness bringing convenience for citizens with the image of beautiful European cities (in this book’s concept: the symbolic resource), was a key element for authorization by the major. Regarding the police, a key person in a central position and a flexible judgment was identified, and efforts concentrated on convincing him to offer his support, which he did by helping to modify the perceptions of his colleagues regarding the security concerns. After this first success in Okayama, other cities were approached with success. Entering Japan took time as many regulations had to be adapted with complicated procedures to be overcome, but thanks to the help of some pioneering local authorities and stakeholders, the business is regularly expanding with about 40 cities providing bus shelters. In this case, the most interesting elements for this study’s purpose are the use of symbolic resources combined with an intrinsically good project, that is, with a high degree of social contribution as well as economic interest. More interestingly, the relational resources that are often considered as essential in CPA did play a role in opening some doors but were not as determinant as the argument as well as the stakeholders.

Firm-­ specific vs. industry-­ wide Firm-­ specific INTERESTS SUPPORTING ZENOAQ French Embassy

Approval, certification, conformity assessment Approval New product

Regulatory

Newness Level of policymaking

Broad Low

Scope Salience

Low

Level of conflict, competition

Unlock an issue

Other/ remarks

OPPOSING MAFF – MOE POLITICAL RESOURCES INTERNAL EXTERNAL INFORMATIONAL/EXPERTISE: provision of technical data by the STAKEHOLDERS: ZENOAQ embassy’s veterinary showing the interest and the safety of the product STATE POWER: embassy’s veterinary support abroad ARGUMENTS TECHNICAL ARGUMENT Provision of technical data proving safety CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of local opinion/civil state interest society power Strong credibility/low Issue with limited scope and social contribution Yes No Yes representativeness Firm-specific approval Individual Strong support from local stakeholders (client and local politician) State power used to open doors and get technical support

INSTITUTIONS

Introduction of a new animal vaccine

ISSUE

9.1.1.4 Animal Vaccine

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OUTCOMES POLICY OUTCOMES – BUSINESS OUTCOMES Product authorized New sales

CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, strong pressure Initial use of INFORMATIONAL/EXPERTISE resources (technical safety data) to convince, but insufficient Use of STATE POWER via the support of the embassy’s veterinary Use STAKEHOLDERS support exerting soft pressure as constituent over a local Diet member who reinitiated the process by contacting the MAFF

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213

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In this case, the use of a local stakeholder for the CPA strategy was judged the best suited for several reasons, among which the limited size of the company and its Japanese sales did not justify the cost of hiring a professional lobbyist. Another reason is the high degree of dependency on bureaucracy discretion, implying that a too-adversarial approach could lead to negative consequences in the future. It illustrates the interests of mobilizing domestic interests to have things done rather than gaiatsu, far from being always effective. The story began with the attempt to introduce an innovative vaccine with few secondary effects, not existing yet in Japan, but already having good track records in the US and the EU. The product was waiting for its authorization by the MAFF, but the major problem was that the Ministry for Environment was equally involved, which led to compounding of the complexity of the bureaucratic decision chain. Confronted with a long waiting period without a seeable prospect of a solution, the company decided to require the embassy’s veterinary to intervene, which he did by speaking on behalf of the company and showing evidence and data from the EU to support the safety of the vaccine. Then, as things were not showing improvement, they asked one of their major stakeholders, a wholesaler with whom they had strong business relationships and who would be interested in selling the new product, to intercede. The wholesaler approached the local member of parliament as an important local economic constituent; the MAFF was contacted, and the problem was solved. Finally, the product being highly innovative in the Japanese market, rapidly became a leader in its category.

Firm-­ specific vs. industry-­ wide Firm-­ specific

INTERESTS SUPPORTING –

Approval, certification, conformity assessment Approval –

Regulatory

Newness Level of policymaking

OPPOSING –

Broad Low

Scope Salience

Low

Insider strategy by acquisition of a license holder

Level of conflict, Other/remarks competition

(continued)

POLITICAL RESOURCES INTERNAL EXTERNAL SYMBOLIC: promise of durability for the laboratory’s STAKEHOLDERS: the local laboratory (Phylaxin) that accepted to be founder bought and transmit its license ARGUMENTS COMMONLY SHARED GOAL, SOCIAL The social contribution, raison d’être of the laboratory will not cease CONTRIBUTION CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA MAJOR TYPE OF COALITION SUPPORT Use of local Use of public Use of state interest opinion/civil power society Strong credibility/low Issue with limited scope and social contribution Yes No No representativeness Firm-­specific approval Individual Support from local stakeholders (license holder/seller)

MAFF

Acquisition of a license to produce vaccines INSTITUTIONS

ISSUE

9.1.1.5 Rhone Merieux

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Firm-­ specific vs. industry-­ wide

Approval, certification, conformity assessment

Newness Level of policymaking

Scope Salience

Level of conflict, Other/remarks competition

OUTCOMES POLICY OUTCOMES – BUSINESS OUTCOMES Obtention of a license to produce vaccines

CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, limited Use of SYMBOLIC resources to convince: reputation of the firm taking over the laboratory and the pressure license as well as the promise of durability of reputation for the founder

ISSUE

(continued)

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In the Rhone Merieux, as well as the following utility firm A cases, the common point is what can be called an “insider strategy” consisting of buying a local entity entitled to specific rights, difficult to access for foreign companies due to their limitation. The term “insider” may be understood in different manners. For example, Kushida (2010) posits the two political strategy categories of “disruptive” (exogenous) and “insider” (endogenous) according to the specific clock speed implied by the industry (private equity moving faster than pharmaceutical, for example). In this context, an insider strategy signifies a low profile, a fusion in the local institutional setting such as altering the balance of power within industry associations, acting as a player in informal consensus building, using interpersonal networks to engage in informal negotiations, and so on. In a more usual economic sense, “insider” can designate a company with a significant degree of FDI, local employees, and tax contributions. Moreover, a high level of social contributions such as health, commitment to local communities, environment, sport, and so on can and are increasingly counted as local integration factors, that is, “insiderization.” These trends are naturally remarkable by essence in food and pharmaceutical industries, because they are close to the average citizen’s concerns. In the Rhone Merieux case, the firm, a leader in animal health, wanted to enter the Japanese market at the beginning of the 1990s, the number two in value after the US with high selling price and comfortable margins. However, at the time, only vaccines produced in Japan were accepted, meaning that the company had to obtain a production license, and the products controlled and certified locally. Obtaining a new license was theoretically possible, but in reality, had never been done since World War II, forcing the company to find a Japanese partner for its local production. However, no Japanese firm was interested in a partnership with an unknown foreign firm even though the company was relatively notorious in the US and the EU. After having systematically seen the 10–15 potential partners and being refused, the manager finally found, by chance, a company so small that its name was not recorded anywhere, but that held a genuine license. Its president, aged more than 90 years old, was still in activity, though reduced, and producing a limited amount of vaccines yearly. The major problems of the aged president that kept him on the board were that of pride, of social existence and recognition, having no heir interested in taking over the company, and fearing that his name would disappear if the firm were bought. The Rhone Merieux manager, then, recognizing the

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importance of symbolic resources and motivations, had the idea to propose to keep the name attached to that of his company for a new entity in partnership. The old man’s motivation was not money, nor the quantity or quality of its production but the durability of his patronymic. The deal was concluded for a few symbolic yens. An unexpected problem occurred when the headquarters learned the terms of the deal, as they strongly doubted that the seller’s motivations were genuine, fearing some hidden trap. It then took a certain amount of time for the negotiating manager in Japan to convince them of the reality and feasibility of the deal. However, this was finally done, the production license acquired, and a brand new laboratory was set up for production in Tsukuba. This case is noteworthy for the symbolic dimensions it had mobilized, showing that in CPA, confidence building may be a more important driver than economic motivation, thus enhancing the mere political facet of the process in its essential relationship with the category of trust.

INTERESTS SUPPORTING

Firm-specific vs. Approval, industry-wide certification, conformity assessment Firm specific Approval

OUTCOMES POLICY OUTCOMES

CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA

Low

Level of conflict, competition

“Insider strategy”

Other/remarks

BUSINESS OUTCOMES

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state local opinion/civil power interest society

OPPOSING

Broad Low

Level of Scope Salience policymaking

Regulatory Legislative

Newness

POLITICAL RESOURCES INTERNAL EXTERNAL ARGUMENTS CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

Difficulties for participating in public procurement in the field of local water treatment INSTITUTIONS

ISSUE

This case lacks the analytic material coverage of other instances, explaining the blanks in the table.

9.1.1.6 Utility Firm A

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E. ROMANN

A utility firm wanting to participate in public procurement in the field of local water treatment was facing difficulties in that it had to become local and buy Japanese small firms with the related rights and capabilities in order to serve the local water treatment market. Indeed, in this field, there are no integrated actors but rather myriads of local players, private or public, having the obligation of local reference and headquarter (problematic for foreign firms operating from Tokyo), specific staff with specific Japanese diplomas, time-consuming and costly system of pre-registration, and so on. Therefore, the solutions consisted of buying those local firms and merging them into a national network while keeping their local registration and staff, a strategy of small steps, and direct negotiation with local authorities. The major arguments are economic (cost-efficiency) and convincing for the mayors, but the opposition came from the civil servants employed in the water services. For this global company, Japan was identified as a strategic market, among others, because it offers many business opportunities despite a limited growth; consequently, the company decided to enter the country with a step-by-step policy, frequently hiding behind its Japanese partners when negotiating with its major clients, the local authorities, and contrary to other global companies entering the market directly through extensive PPP, for example. Regarding the water treatment market, the company has a significant competitive advantage due to the inefficiency of local authorities in the field and the need to renew the aging infrastructures, thus offering an excellent market potential. The case shares with Rhone Merieux the common feature of “insider strategy” (see above).

INTERESTS SUPPORTING –

Broad

–

Low

Level of conflict, competition

OPPOSING Banks

Medium

Salience

Contribution to the design of the law

Other/remarks

(continued)

Technical input, provision of information and regulation examples

EXTERNAL LEGITIMACY: bringing of an expert to explain how it should be regulated by the new law (Payment Services Act),

Legislative

Scope

Newness Level of policymaking

FSA POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: informational input through provision of papers, public comment, education of the FSA ORGANIZATIONAL: hiring of a government relations consulting firm ARGUMENTS TECHNICAL ARGUMENT

INSTITUTIONS

Firm-specific vs. industry-wide

Approval, certification, conformity assessment Compliance and Industry-wide – contribution to a but with new law strong impact (Payment on the CPA Services Act) promoting firm

ISSUE

9.1.1.7 Western Union

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MAJOR TYPE OF COALITION SUPPORT Use of Use of Use of state local public power interest opinion/ civil society No No No

OUTCOMES POLICY OUTCOMES Contribution to the drafting of a new law

BUSINESS OUTCOMES Favorable business conditions in a new regulatory environment

Input and contribution to the elaboration of a new law that has been taken into account Industry-wide but the contribution to policymaking allowed a better consideration of firm-specific business Individual No local support CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, limited Use of INFORMATIONAL/EXPERTISE and LEGITIMACY from external expert to provide pressure information and knowledge to the FSA regarding the preparation of a new bill regulating its activities

Strong credibility/low representativeness

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

(continued)

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Western Union encountered an issue similar to PayPal when the debate concerning the Payment Service Act (2010) became topical. They are specialized in international money transfer, usually of a limited amount, such as remittances by a population of global workers, which is specifically targeted. This kind of operation required a banking license in Japan until the new law was passed; this is why Western Unions had an agreement with the Suruga Bank, which terminated at the beginning of 2009 without really taking off. The company saw in the elaboration process of the law an opportunity to enhance its presence in Japan with the prospect of a growing migrant population in the country. They were particularly interested in advocating and defending a status adapted to their business that should not, in their view, be regulated in the same manner as banks. One of the major issues consisted of the risk of money laundering for which banks have to deploy a heavy control system. They decided to advocate and educate the FSA so that the provision of sufficient and global knowledge (technical and regulatory) would help to create a balanced and win-win framework. A consulting firm specialized in public affairs was hired to organize the access and the provision of relevant information to the FSA.  Experts were sent to explain the issue and the consulting firm worked substantially in arranging meetings, providing papers and discussion points, dealing with attacks and sorting out arguments so that the messages and the targets were perfectly calibrated in a context of information profusion. The principal opposition came from banks chiefly because of money laundering problems, but also because they were not in favor of opening up, fearing this first step could undermine other more strategic areas, and despite the fact that Western Union-type business was not profitable for them with the costly handling procedure of small amounts. Nevertheless, Western Union succeeded in having its voice heard, by shaping and influencing the new law in a favorable manner to its activities. They received a money transfer license as soon as the law was passed and began to scale up their business in Japan through the agreement they had prepared with Seven Bank during the preparatory phase. Later, networks of Family Mart and other chains were included to extend the coverage of the territory.

INTERESTS SUPPORTING Minister of health Mrs. Komiyama ACCJ

INSTITUTIONS

Broad

–

High

Salience

High

Level of conflict, competition

Legislative change

Other/ remarks

OPPOSING MHLW Hotels, restaurants Diet Japan Tobacco POLITICAL RESOURCES INTERNAL EXTERNAL INFORMATIONAL/EXPERTISE: commissioning an MEDIA: newspaper, TV (NHK, Kobe cable TV) opinion survey, press release, press conference, hearings at the PUBLIC OPINION: 8000 persons surveyed, media impact Diet, White Paper, Viewpoint, etc. LEGITIMACY: broad-based opinion survey; bringing expert of ORGANIZATIONAL: in-house government relations smoking ban from England with a case study and touring the Diet to capabilities and budget counter JP Tobacco and hotel/restaurant lobbying RELATIONAL: Minister of Health, Mrs. Komiyama STAKEHOLDERS: ACCJ ARGUMENTS COMMONLY SHARED GOALS, SOCIAL CONTRIBUTION Benefits for workers’ health (hotels, CONSTITUENCY, PUBLIC OPINION restaurants) Building a consensus for acceptance of a more stringent law on smoking ban

Legislative

Scope

Newness Level of policymaking

Approval, certification, conformity assessment –

Firm-specific vs. industry-­ wide Campaign to Industry-­ promote wide but smoking ban and benefits to a boost drug sales limited number of firms.

ISSUE

9.1.2.1 Nicorette

9.1.2   Boosting Sales/Enhancing Business

224  E. ROMANN

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of local opinion/civil state interest society power Yes Yes No

OUTCOMES POLICY OUTCOMES Law on smoking control

BUSINESS OUTCOMES Support of Nicorette’s sales

Broad scope of public health: contribution to smoking ban regulation Industry-country wide but benefits to a limited number of firms providing the specific product Strong individual feature but also collective support (ACCJ) Substantial use of external resources such as civil society, experts, public opinion, media, etc. reaching numerous actors and persons Support of local stakeholders (person interesting in quitting, Diet members, medical associations, and organizations, etc.) CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, strong Use INFORMATIONAL/EXPERTISE resources to produce information material (survey, press pressure release, White Paper, etc.). Rational and emotional argumentation on a broad scope issue Use of LEGITIMACY, public MEDIA, PUBLIC OPINION with experts, politicians, representatives of civil society, creating strong influence and leverage

Strong credibility/high representativeness

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

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Nicorette is a substitute to nicotine for people wanting to quit smoking. The biggest factors supporting and increasing its sales are (1) higher tobacco taxes, (2) smoking control (public spaces, indoors). Educating people about health risks is important, but it will not cause sales to grow up: a sudden change is required. In Japan, despite several tax hikes, indoor smoking is still widely allowed as compared to the US and EU, particularly in hotels and restaurants, but a sizable proportion of the population is interested in quitting. The strategy for the company was, therefore, to educate and contribute to shape change in legislation by focusing on a smoking ban in workplaces. A national public opinion survey was conducted to show and materialize the fact that people are worried about their health and would support a smoking ban. The important and differentiating point was that, contrary to the many general customer surveys existing, almost nothing was available about indoor workers and their concerns. Thanks to this focus, the survey obtained a favorable media impact, including the NHK and local channels. The LDP parliamentarian league of smoking control was also visited. The strongest opposition came naturally from Japan Tobacco, which is actively extending its activities worldwide, and the hotels and restaurants with their powerful associations, including their passive smoker employees who feared for their business. Experts were therefore brought from the UK, which is a pioneer in this field and one of the most successful countries in the world in promoting indoor smoking ban. The UK case proved clearly that it was possible to improve health outcomes without hurting the business and the revenue of hotels and restaurants. The case was presented to more than 30 members of parliament in search of good arguments and material to counter the pro-tobacco lobby. Thus, it was used in a budget committee session to pose relevant questions to the Minister of Health. A law protecting workers was elaborated with several options and versions differing in the degree of sanctions and penalties that would be imposed. The final version that was adopted and went into effect in spring 2014 was a compromise, due to the strong counter-pressures, in that no penalties were included, but, beginning with large enterprises, it created a framework where it would be more difficult for firms to ignore that their employees are more and more worried about their health, and therefore should take it seriously. Consequently, general conditions for the support of Nicorette’s sales were established by this long-term CPA action; it was, however, difficult to measure in terms of direct impact on performances.

POLITICAL RESOURCES INTERNAL

MHLW Diet Local authorities Hepatitis Policy Advisory Council

INTERESTS SUPPORTING MHLW Abbott, Bristol-Meyer-Squibb, etc. ACCJ

INSTITUTIONS

EXTERNAL

Public advocacy

(continued)

OPPOSING National and local politicians for budget reasons Some patient groups for confidentiality reasons

Low

Broad High

New product

Political (budget etc.) and regulatory

Scope Salience Level of Other/ conflict, remarks competition

Newness Level of policymaking

Approval, certification, conformity assessment Approval (partly)

Firm-­ specific vs. industry-­ wide Campaign to Industry-­ promote wide but awareness about benefits to Hepatitis C and a limited boost drug sales number of firms.

ISSUE

9.1.2.2 Hepatitis C

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227

MEDIA: 90 media articles (local/national newspapers) for the opinion survey, more than 65 newspaper and magazine articles nationwide for the economic study, TV PUBLIC OPINION: touched by the national survey (15,000 persons), the media impact, the events with a Guinness World Record (6500 persons in JP); patient groups, etc. LEGITIMACY: broad-based opinion survey, events featuring specialists and medical society leaders (Hospitals, Hiroshima University, etc.), partnership with Japan’s Health & Global Policy Institute, bringing policy experts from the US and Europe, leveraging on the World Hepatitis Day/Alliance and a Guinness World Record with famous persons (Charles Gore, Mrs. Komiyama, a famous soccer player, etc.), touching the Ministry of Health and members of its Hepatitis Policy Advisory Council, conducting a Health Economic Study (Deloitte) showing the potential cost savings, touching a large number of Diet members and policymakers and changing their perception of the situation, background policy in the US supporting the screening of Hepatitis, STAKEHOLDERS: ACCJ, other pharmaceutical companies (Abbott, etc.),

ARGUMENTS COMMONLY SHARED GOALS, SOCIAL Improvement in diagnostic and treatment with less secondary effects, macro CONTRIBUTION effect on health care costs CONSTITUENCY, PUBLIC OPINION Building of broad public support to gain a budget allowance CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA MAJOR TYPE OF COALITION SUPPORT Use of Use of Use of local public state interest opinion/ power civil society

INFORMATIONAL/EXPERTISE: new product; commissioning an opinion survey and an economic study, press releases, press conferences, hearings at the Diet, face-to-face meetings with Diet members, input for various events, education and laying the groundwork, White Paper, etc. SYMBOLIC: building on reputation, access to influential persons ORGANIZATIONAL: in-house government relations capabilities and budget; hiring of a formal White House official in charge of Obamacare RELATIONAL: Minister of Health, Mrs. Komiyama, etc. FINANCIALS: budgets for the survey and study etc.

(continued)

228  E. ROMANN

OUTCOMES POLICY OUTCOMES Increase of national budget for screening and treatment Launch of a national program to promote public awareness, free screening, etc.

BUSINESS OUTCOMES Acceleration of the process of allowing qualifying Janssen’s new medicine for government subsidies Stronger than expected 2014 sales of hepatitis C drug (Simeprevir) Rise of screening income for Ortho Clinical Diagnostics due to an increase in screening rates

Broad scope of public health: contribution to diagnostic and cure of Yes Yes No hepatitis C Industry-wide but benefits to a limited number of firms, with firm-specific approvals and implications Strong individual feature but also collective support (ACCJ) Substantial use of external resources such as civil society, experts, public opinion, media, etc. reaching numerous actors and persons Support of local stakeholders (patient groups, medical societies, university, Diet members, etc.) CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, strong Use INFORMATIONAL/EXPERTISE resources to produce information material (survey, press pressure release, White Paper, etc.). Rational and emotional argumentation on a broad scope issue Use of LEGITIMACY, public MEDIA, PUBLIC OPINION with experts, politicians, representatives of civil society, creating strong influence and leverage through events Use of STAKEHOLDERS (patient groups, medical societies, hospital, etc.) to increase LEGITIMACY and demonstrate local interest

Strong credibility/high representativeness

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The Hepatitis C case is about how CPA, consisting chiefly in a wide awareness campaign, was able to support and complete traditional marketing to boost J&J’s sales in Japan. More precisely, the campaign was set up to create a momentum for two products of the J&J’s universe related to Hepatitis C: one diagnostic and one treatment. The diagnostic belongs to J&J’s Ortho Clinical Diagnostics product’s portfolio representing over 50%2 of the Hepatitis C screening market in Japan and contributing to half of its revenue, implying that the Hepatitis screening was a priority for this company. They were doing traditional marketing by focusing on their usual clients, doctors, and screening companies but were not working on the government. In addition to this issue, the launch of a new treatment, the Simeprevir, was planned by another group company, Janssen Pharmaceuticals. The new treatment was designed to replace an old one (the Telaprevir) and would increase the cure rate from 60% to 89% with shorter treatment time and fewer side effects. Therefore, the launch of a collaborative campaign on Hepatitis C policy was seen as an adequate solution to boost sales for both J&J companies in Japan, by contributing to accelerate the policy changes and shift the priorities. The campaign itself deployed various facets in several strategic chapters. In a first part, a parliament briefing session and a policy symposium were organized (2012) in partnership with Japan’s Health & Global Policy Institute with the result that representatives of the LDP, the Kômeitô, and the DPJ made commitments to increase the priority for Hepatitis B and C. Events featuring leading specialists and medical society leaders (Kansai-­ Rôsai Hospital, Hiroshima University, etc.) also took place; officials from the MHLW attended. In another set of actions, policy experts from the US and Europe were brought to Japan to present screening and treatment best practices to the media, parliament, patient groups, and the MHLW; face-to-face meetings were arranged with members of parliament about the importance of hepatitis policy; the World Hepatitis Day and the World Hepatitis Alliance were leveraged to build high-level support. Thanks to these actions, a  The rest done by Abott.

2

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public–private partnership between the MHLW, an NGO, and leading companies to promote awareness was established, and the Minister of Health of the time (Mrs. Komiyama) participated in the World Hepatitis Day activities setting a new Guinness World Record. The conduct of a national public opinion survey about support for key policy issues constituted another pillar of the strategy with, as results, a substantial media impact, a change of perception by many members of parliament, and interest from the MHLW. The third strategic phase consisted of a health economic study regarding the burden of illness and the potential of the new treatments to reduce healthcare costs (2014): the conclusion and major argument were that increasing treatment would save up to 3.12 trillion yen. The study had an important media impact and was presented at the ISPOR,3 as well as the MLHV. In 2015, the Minister of Health (Mr. Shiozaki) proposed the promotion of Hepatitis C screening and treatment subsidies as one of the top three ways to save on healthcare costs. From a business point of view, the approval of the new treatment (Simeprevir) was accelerated with qualification for government subsidies, allowing a rapid launch in 2013 and stronger-than-expected 2014 sales. Nowadays, it seems to be one of the best-selling drugs in Japan alongside similar products from competitors such as Bristol-Myers Squibb, AbbVie, and Gilead Sciences. Furthermore, the strong competitive environment may also be considered as a factor having had an influence on the CPA campaign launched by J&J. Regarding the market of diagnostic products, it appears that the screening rate began to rise slowly, thus supporting revenues for Ortho Clinical Diagnostics as well as government subsidies.

3

 ISPOR: International Society for Pharmacoeconomics and Outcomes Research.

INTERESTS SUPPORTING Centrair Airport Chubu Economic Federation Toyota ANA Cargo, NCA

–

Approval

ARGUMENTS COST OR ECONOMIC IMPACT

Salience

OPPOSING –

Limited Low

Scope

Low

Level of conflict, competition

Extension of service

Other/ remarks

Benefit of new connectivity for central Japan

EXTERNAL STAKEHOLDERS: Centrair Airport, Toyota, Chubu Economic Federation, etc. STATE POWER: bilateral issue needing the agreement of each party

Bilateral, regulatory

Newness Level of policymaking

Approval, certification, conformity assessment

US government DOT JP government MLIT POLITICAL RESOURCES INTERNAL ORGANIZATIONAL: government relations in JP and close coordination with the government relations team in the US ECONOMIC: new flow of business for Centrair Airport

INSTITUTIONS

Firm-­ specific vs. industry-­ wide Access to Firm-­ Centrair Airport specific

ISSUE

9.1.2.3 UPS

232  E. ROMANN

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of local opinion/civil state interest society power Yes No Yes

OUTCOMES POLICY OUTCOMES Slot allocation

BUSINESS OUTCOMES Opening of a new line

Negotiation of access to Centrair Airport: economic benefits for Toyota and other central Japan’s actors Firm-specific Individual Strong support of Centrair Airport and a number of local actors The state (US government/DOT) was involved as aviation matters are bilateral, and coordination must be made with the interests of the other US players (FedEx, etc.) CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, strong Use of ECONOMIC resources: arrival at Centrair working as a strong inducement for the airport pressure viability Use of the STAKEHOLDERS (Centrair Airport and the business community) strong support to persuade the MLIT Use of the STATE POWER in a coordinative manner (US DoT and other US players)

Strong credibility/low representativeness

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

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For UPS, the issue was to get approval for access to the newly built (2005) Centrair Nagoya Airport. The story began after the completion when Centrair was striving to ensure sufficient traffic and client airlines. The most striking feature of this case lies in the gap between the pure economic rationality and the reality of government relations in an industry heavily regulated and implying a dual level of negotiations with two governments. Indeed, from a purely economic standpoint, the new airport strongly needed client airlines for a sound management as well as the Chubu region, whose businesses were interested in having new direct links to several parts of the US. In this sense, some observers standing in a mere management point of view may stress that UPS was rather welcome, and that the approval should not have been so much a hurdle. However, the specificity of the airline industry indicated that, as in the Delta case, things are not at all so simple. Airlines are regulated bilaterally with constant attention to ensure a delicate equilibrium between the interests of each government and those of the companies. One characteristic of Japan is that the airlines already present before the war could benefit from the status of incumbents with wide rights, including that of flying to every Japanese airport, whereas the post-comers, the non-incumbents, must apply and negotiate each new slot. The incumbents for the cargo segment were, on the Japanese side JAL, ANA, and NCA, and on the US side United, Northwest, and FedEx. FedEx entered Japan approximatively at the same period as UPS, but by achieving the purchase of Flying Tigers Line, a major US military charter operator which was holding incumbent’s status, it could take over all the attached traffic rights in Japanese airports. Thus, on the Japanese side there were almost no non-incumbents whereas, on the American side, all the other airlines (UPS, American, Continental, etc.) were, even though not all of them were a candidate to increase their activities in Japan. In this industry where governments frequently have a propensity to adopt more or less protectionist attitudes, every advance must be carefully gauged and balanced on each side. Therefore, UPS naturally had to apply for approval at the Japanese MLIT, but also convince the American DoT that, if the Japanese side accepts a package of new slots, their allocation

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should go in the first place to UPS rather than other US companies in a zero-sum game where, if a firm obtains the highest priority, other firms will lose. At that time, UPS had only two entry points, Narita and Kansai airports, and the rights for 24 flights per week. The problem was, then, not only to get approval for a third entry point but also to secure an increase in the number of authorized flights (6–8/week) to avoid reducing by the same figure the existing slots in Narita and Kansai. The negotiations were supported naturally by Centrair itself, but also by the Chubu Economic Federation, including Toyota, which had an important factory near Louisville, Kentucky, in the vicinity of the UPS global hub in the same city. They took two years to be finalized in autumn 2007, with participants indicating that it was the first time in the last 15 years that a non-incumbent succeeded in extending its rights this way. For the Japanese government, not generally inclined to give much to foreign companies in this domain, the economic argument and support from Centrair which needed traffic to ensure its profitability was obviously decisive, especially at a time where the domestic actors such as JAL, ANA or NCA were facing difficulties and could not increase their flights, whether in the cargo or the passenger segments. There was no real opposition, ANA cargo, and NCA being even supportive, betting on future benefits. The irony is that operations could begin only in May–June 2008, the time to build the infrastructures, just before the Lehman shock, which reduced the demand considerably, leading UPS to abandon Centrair six months later. This decision, although economically and rationally founded, was, however, heavily criticized by the MLIT, which worked hard to advance the case, on the ground that this does not correspond to the long-­ term committed Japanese manner. This point is often made when reluctance is shown toward foreign business, not because of the product/ service quality, but for the different management standards that have a strong impact on the aftersales services highly valued in Japan. In this sense, this case illustrates, in a negative way, a hurdle for which a combination of CPA and marketing is necessary to overcome, for foreign business in this country.

Firm-specific vs. industry-­ wide Firm-specific up to a point and industry-­ wide beyond Investment in a new system

Newness

Regulatory

Level of policymaking

INTERESTS SUPPORTING CAPEC (DHL/FedEx/UPS/TNT)

Approval, certification, conformity assessment –

JP Customs MOF POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: global know-how in efficient customs clearance systems ARGUMENTS TECHNICAL ARGUMENT

Proposal for a new system to streamline the customs clearance process INSTITUTIONS

ISSUE

9.1.2.4 DHL Scanner Salience

Low

Level of conflict, competition

Example of coopetition and solution proposing

Other/ remarks

Better efficiency in handling

EXTERNAL STAKEHOLDERS: express firms (FedEx, UPS, TNT)

OPPOSING –

Limited Low

Scope

236  E. ROMANN

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state local opinion/civil power interest society No No No

OUTCOMES POLICY OUTCOMES –

BUSINESS OUTCOMES Approval for the introduction of a more efficient scanner

New system for customs clearance: enhanced efficiency but mostly for DHL itself than for the customs side Firm-specific up to a point and benefiting to peers beyond Individual Exchange of information/loose support of peers (FedEx, UPS, TNT) having the same issue CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, limited Use of INFORMATIONAL/EXPERTISE to make a win-win proposal to the customs, allowing a pressure better efficiency at a lesser cost

Strong credibility/low representativeness

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

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This case is noticeable because it perfectly illustrates a variety and a stance of lobbying widely practiced but not always sufficiently recognized, at least in the general public. It is about proposing concrete and workable solutions instead of complaining and pressuring the counterparties; it corresponds perfectly to the distinction between pressure and persuasion. The story goes back to the mid-2000s when the customs clearance operations at entering Japan in Narita became increasingly unsustainable. DHL Express deals with small packages; at that time, the company used to clear about 12 million shipments per year, an extremely high volume of transactions representing approximatively 25% of all customs clearances at Narita. Some packages, such as books from Amazon, for example, do not require clearance, but, beyond a certain threshold value, the operation becomes mandatory and must be undertaken under very strict rules through people having the authorization in the company. Therefore, the clearance process, according to the company, used to be the biggest issue in terms of resources, time requirements, and cost. At that point, the company acknowledged that, unless a new worldwide free trade agreement materializes, a rather unrealistic prospect, it was impossible to eliminate the customs clearance process, and that only complaining about how burdensome and time consuming it is would yield no results. They, consequently, decided to come with a complete proposal regarding how to streamline the whole process in the form of a very high-speed scanner that was able to read and treat the data from the package stickers within the same day. It represented a certain level of investment in IT and scanner, the work stream also had to be modified and adapted but, as a result, the system was accepted and allowed the company to accelerate the processing in an extremely substantial proportion, with, in an ideal example, a plane arriving in Narita at 7 in the morning, being emptied by 8 and by 9 the packages on the trucks toward the distribution centers. Besides the positive CPA aspect, another interesting point lies in the relationship with the other foreign express companies, FedEx, UPS, and TNT. They were competitors, meaning that they did not share sensitive information regarding the technical details of their respective IT systems, which constitute one of their competitive advantages. However, they shared information relative to the general process and approach to the Japanese Customs so that, finally, a kind of common approval went to be granted while each company acted individually. In this sense, the action could be termed co-opetition, with competition and firm-specific issues up to a point, and wider industry collaboration beyond.

Firm specific

Adoption of a new diagnostic system INSTITUTIONS INTERESTS SUPPORTING

Approval, certification, conformity assessment Approval New product

Regulatory

Newness Level of policymaking

OUTCOMES POLICY OUTCOMES

CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA

Low

Level of conflict, competition

“Self-doing” CPA

Other/remarks

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state local opinion/civil power interest society

OPPOSING

Broad High

Scope Salience

BUSINESS OUTCOMES

POLITICAL RESOURCES INTERNAL EXTERNAL ARGUMENTS CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

Firm-specific vs. industry-wide

ISSUE

This case lacks the analytic material coverage of other instances, explaining the blanks in the table

9.1.2.5 O157

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In a sanitary crisis due to a new bacterium (O157), the company (Biomerieux), limited in size in the Japanese market, happened to develop a diagnostic system allowing detection within one hour compared to one week before. The top management of the firm, leveraging on the unique opportunity provided by the emergency and its network, launched a wide media and advocacy campaign through press, TV, and so on, which allowed the company to bypass the usual time-consuming/costly authorization and testing process. Strong support from many stakeholders helped the rapid adoption. The major strategic lesson that can be drawn from its originality is the skillful exploitation of a given situation, a crisis, where a combination of opportunity seizing and intelligence allowed the company to get the edge over rivals. The essence of the CPA action here consisted of being very rapidly the center of media attention and advocating intensively in various places and for various public in a sort of roadshow. The stakeholders, chiefly players in the food chain, had a keen interest in testing their products rapidly and, to this extent, were the best promoters of the new diagnostic. In this sense, the case may be considered close to the indirect CPA seen in the precedent section such as Hartford, with the major difference that, due to the emergency situation, it was done in less than six months, which is very short in the CPA universe; the interviewee interestingly qualifies this action as “self-doing” or “auto-CPA.” Nonetheless, not only the impact on sales was naturally significant, but the recognition gained by this affair in the domain of food safety opened new doors and created new business opportunities, in hospitals for example, for other health diagnostics which constituted the core of the firm’s business rather than food applications.

Industry-wide but with strong impact for the CPA promoting firms

Release the restrictions linked to land utilization to create a network of service shops not limited to showrooms. INSTITUTIONS INTERESTS SUPPORTING JAIA JAMA EBC

Approval, certification, conformity assessment – –

Salience

OPPOSING –

Limited Low

Scope

Low

Level of conflict, competition

Collective action conducted by JAIA

Other/ remarks

(continued)

Technical information to prove that no pollution or inconvenience for the neighborhood would occur CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS

EXTERNAL STAKEHOLDERS: support of trade associations (JAIA, JAMA, EBC)

Legislative, local authority

Newness Level of policymaking

MLIT Local authorities METI POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: informational (technical, economic) input ORGANIZATIONAL: leveraging on collective action and trade association capabilities ARGUMENTS TECHNICAL ARGUMENT

Firm-specific vs. industry-wide

ISSUE

9.1.2.6 Car Repair Shops

9 ANNEXES 

241

CRITERIA

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state local opinion/civil power interest society Yes No No

OUTCOMES POLICY OUTCOMES Issue of a guideline parallel to the main law (construction)

BUSINESS OUTCOMES Possibility to open new car repair shops

Issue with limited scope and social contribution Concerns the whole industry Collectively undertaken with industry associations (JAIA) Support from local interests (Japanese manufacturers) CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, limited pressure Use of INFORMATIONAL/EXPERTISE resources to advocate the case through technical and economic arguments Use of STAKEHOLDERS, chiefly constituted by the supporting trade association to convey its voice

Limited credibility/high representativeness

QUADRANT

(continued)

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This issue is related to a problem of zoning for the establishment of services, and above all repair shops, in residential areas with the view of limiting pollution or inconvenience for the neighborhood. The regulation governing the use of land is very strict and the size of the surfaces that can be allowed to commercial purpose restricted, ranging from zero to 50 m2, 150 m2, or 300 m2 depending on the type of area. The MLIT is in charge at the national and legislative level, but the application and final authorization depend on local authorities. The problem began in 2011 when foreign carmakers asked for a relaxation of the regulation with the view of building a network of aftersales service points, a key element in extending a market. As it concerned all the manufacturers, the action was undertaken with a collective dimension by JAIA that went to the MLIT for discussions. The key argument for extending beyond the 50 m2, the most frequently allowed in residential areas was that, apart from the fact that 50 m2 does not correspond to the reality of a workshop, modern cars no longer require noisy or polluting intervention, thanks to digitalization and electrification; in addition, these service points would likely be situated on trunk roads rather than in remote sectors. Since the issue was not limited to foreign carmakers, the domestic associations of JAMA and JADA were associated with the action to enhance its voice. However, the stake for domestic actors was somewhat different. Their networks were already existing, contrary to foreigners, and their problem was rather of obsolescence since many workshops dated back to the 1960–1970s when it was easier to obtain 300 m2. They feared to lose the right to rebuild 300 m2 if their land was classified in a more restricted residential area. The action went up to the vice-minister level, and finally, in 2012, a guideline was issued, opening the way for authorization of principle and leaving the final decision to the local authorities. Altogether, the results seemed positive because it opened a door, but, according to certain observers, it just displaced the issue from the central level to the local one, allowing the problems to be tackled case-by-case with no guarantee of success. Apparently, the ministry did not want to create a formal precedent that could have been exploited by other industries such as dry-cleaning. However, there seem to be further consequences: according to a foreign carmaker, when they filed for an extension or the setting up of a new workshop in a residential area, the local authority took 6–9 months for the first feedback; meanwhile, the landowner did not have the patience to wait so long.

Industry-wide but with strong impact on the CPA promoting firm

New environment law (Soil Contamination Countermeasures Act) harming the bad loans/ collateral lands repurchase business INSTITUTIONS

–

Legislative

Newness Level of policymaking

OPPOSING –

Broad Low

High

Scope Salience Level of conflict, competition

Attempt to block and/or change a law

Other/ remarks

Risks for financial institutions (credit crunch etc.) in case of non-revision of the bill

EXTERNAL LEGITIMACY: bringing of experts, law firms, use of media reports on the reality of loan rejection (Shiga Bank) STAKEHOLDERS: ACCJ, Banks, Keidanren, Japan Chamber of Commerce, and Industry

INTERESTS SUPPORTING Banks Keidanren ACCJ Japan Chamber of Commerce and Industry

Approval, certification, conformity assessment –

POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: informational input based on the US precedent (articles, studies, expert opinions, etc.) and centered on economic arguments despite the environmental character of the bill, meetings with Diet members, ORGANIZATIONAL: dedicated government relations team ARGUMENTS COST OR ECONOMIC IMPACT

Diet MOE

Firm-specific vs. industry-wide

ISSUE

9.1.3.1 GE lands

9.1.3  Reducing or Neutralizing Threats for Business

244  E. ROMANN

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of local opinion/civil state interest society power Yes No No

OUTCOMES POLICY OUTCOMES Decree parallel to the main law (land contamination)

BUSINESS OUTCOMES Possibility to undertake the new business of buying discounted lands

Issue with a country-wide economic impact (credit crunch) First motivation firm-specific, but industry/country wide problem Individual with the collective support of the ACCJ Explanations and advocacy by local stakeholders (banks, Keidanren, etc.) Use of external legitimacy resources: experts, law firms, etc CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion/strong Extensive use of INFORMATIONAL/EXPERTISE to inform the government and the stakeholders on pressure the potential economic consequences of a new law, based on the US previous experience Use of LEGITIMACY by bringing external experts to advocate and explain Extensive use of various STAKEHOLDERS such as banks, actors in the front line in case the risk materialize to indirectly influence Substantial noise and pressure through direct lobbying by the in-house ORGANIZATIONAL resources

Strong credibility/high representativeness

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

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E. ROMANN

The GE lands case was about the threat of a bill for a new environmental law, the Soil Contamination Countermeasure Act led by the Ministry of Environment. It is interesting because representing a good illustration of the unforeseen side-effects of regulation in an area (environment) having an impact in an entirely different field (finance). This disparity made the persuasion of the respective authorities particularly challenging as their logic differs essentially. Indeed, the bill submitted by the Ministry of Environment was intended to make explicit the rights and obligations of landowners in the case of cession, forcing the sellers to clean the soils in the event of pollution and giving the buyers the rights to take legal action against the previous owner so that they support the decontamination costs. The financial services unit of GE in Japan, GE Finance, was intending to launch a new business of buying bad debt with the collateral real estates at a discounted price from banks and other institutions striving to solve the issue of claims and non-performing loans due to the financial crises of the 1990s. The problem was that with the real estate bubble of the 1980s, many lands in urban areas originally used for industrial purposes were sold or submitted as collateral for a mortgage with the view to turn them into housing, but without the appropriate decontamination treatment. As a result, the holder’s responsibility, that is, a financial institution if the asset is used as collateral, was questioned. The bill was designed for environmental purposes, but the impact on the financial system, particularly in Japan, which relies heavily on bank financing with real estate as a mortgage, was out of the scope of its promoters. The risk was that the financial institution holding the collateral asset, even temporarily, was liable for the decontamination burden; this could lead to a credit crunch and banks were unwilling to accept lands as a mortgage. The same problem already occurred in the US in a previous period and took eleven years to be solved. GE reacted very sensitively to this aspect when it became aware of the bill. The whole business model of the newly planned activity would collapse if the financial institutions were not exempted from the liability and the obligation to clean the polluted land held. The essence of the CPA strategy was, therefore, to obtain an exemption clearly formulated to avoid any future risk of legal action and preferably in the mere law’s body. The objective was reached after an intensive campaign, but only in the form of a separate decree because, due to the Japanese institutional features, the bill was already in its final form when submitted to the Diet without the possibility of amendment. The company side was unsatisfied with this solution, arguing that the level of guarantee was insufficient, but accepted it with regard to the difficulties to reverse it in a Japanese context. As a result, the new business could start with reasonably good conditions and limited legal risks.

Firm-­ specific vs. industry-­ wide Firm-­ specific –

Bilateral, regulatory

Newness Level of policymaking

High

Salience

High

Level of conflict, competition

Attempt to block slot allocation for competitors

Other/ remarks

OPPOSING Politicians supporting the development of Haneda ANA, JAL United Airlines, American Airlines, etc., US competitors benefiting from Haneda extension

Medium

Scope

(continued)

Threat to unique links with Asia and impact on local business, threat to jobs at Narita Attempt to block the US/JP aviation negotiations

EXTERNAL STAKEHOLDERS: politicians with constituents in Narita, politicians from US cities threaten by stopping flights, etc. MEDIA: massive press campaign, especially in the concerned cities media to appeal for the risk of line closure

INTERESTS SUPPORTING Politicians with constituents in Narita Politicians of Portland, Minneapolis, Detroit, etc., whose only link to Japan/Asia rely on Delta

Approval, certification, conformity assessment –

US government DOT JP government MLIT POLITICAL RESOURCES INTERNAL ORGANIZATIONAL: Strong and aggressive lobbying capacities personalized by a famous Special Counsel ECONOMIC: Threat to cut flight to US cities linked with JP/Asia only with Delta, threat to jobs/tax revenues at Narita RELATIONAL: Network of supporting politicians in the US ARGUMENTS COST OR ECONOMIC IMPACT IMPACT ON BILATERAL RELATIONSHIP

INSTITUTIONS

Slot allocation at Haneda

ISSUE

9.1.3.2 Delta

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247

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state local opinion/civil power interest society Yes Yes Yes

OUTCOMES POLICY OUTCOMES –

BUSINESS OUTCOMES Failure to block negotiations or to obtain enough slots at Haneda

Slot allocation at Haneda and future of Delta’s Narita hub: economic and social consequences for business and workers linked to Delta Firm-specific Individual Support of numerous politicians and constituents in the Narita region as well as from the US cities/regions that might be impacted by line closures. Large-scale media campaign and mobilization of public opinion Involvement of the US government/DOT due to the bilateral feature of the issue and the reopening of the US/JP negotiations CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Limited persuasion, strong Use of ECONOMIC resources to threaten the US (line closure) and in Japan (jobs in Narita) pressure Use of STATE POWER to block the US/JP aviation negotiation disadvantaging for it Use of the MEDIA/PUBLIC OPINION resources to put strong pressure from constituents and mobilize the local US politicians

Strong credibility/high representativeness

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

(continued)

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249

The Delta case offers a somewhat complicated picture since, in the airline industry, many issues are bilaterally negotiated between governments, which means that CPA must be conducted in two countries in parallel toward politicians and bureaucrats of each side. Moreover, one must understand that what is here called the “Delta case” is in reality only a segment of a long story lasting for more than 15 years and that was isolated for the purpose of the study, a peak in a curve particularly remarkable but yet part of a continuous stream of lobbying. Thus, the case defined in such a way entails a series of action in the US and Japan, aiming at blocking the reopening of US–Japan negotiations leading to the allocation of new slots at Haneda, favorable only to Delta’s competitors, with the alternative of having sufficient slots offered so that Delta could be able to move all its operations from Narita to Haneda and compete on a level playing field. This second branch of the alternative is technically possible but rather seen as a mid- to long-term strategic objective; meanwhile, as long as the Japanese government is opening Haneda only at a very limited pace, the major strategy for Delta consists in trying to limit the competitive disadvantage it is enduring in the current configuration. To better understand this configuration, it is necessary to look back to the past. In 2008, Delta absorbed Northwest Airlines, which had a long history in the trans-Pacific market beginning before World War II. After the war in 1947, Northwest became the first airline to offer direct services between the US and Japan, with a hub initially in Haneda. With the launch of Narita, Northwest was forced to move there and invested much money in this expensive airport, creating a real hub for its Asian operations. Indeed, Northwest was benefitting from the so-called beyond rights which allowed it to fly passengers from the US to Japan, and then further to other Asian destinations. At that time, these were highly valuable rights because the competition, Continental or American did not have them and could not add many roads (United obtained them from PanAm). However, in 1998, a landmark agreement occurred between the US and Japan, followed by further ones, which gradually opened the market between the two countries, allowing additional flights. Furthermore, the evolution of technology in aircraft, allowing longer-range flights and overfly of Japan, also contributed to the reduction of Narita’s interest as a hub between the US and Asia. In addition, the recent opening of Haneda with increased capacities between Japan and Asia similarly downplays Narita’s role. This shift to Haneda is particularly prejudicial to Delta as it does not have a local partnership any longer (as previously with Japan Air System), contrary to American with JAL and United with ANA, which can benefit from a hub effect in Haneda, thanks to this relationship.

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To summarize, as Haneda opens up, Delta is facing an ever-increasing competitive disadvantage, hurt by the expanding capacities between Japan and Asia and Asia and US, whereas it is limited in reaction by the cost of double operations in Narita and Haneda, and particularly by the tight control over the rhythm of slots opening in Haneda by the Japanese government. Delta was in great position with its Narita’s hub, but over time, the concept is losing value. According to an observer, Delta’s current strategy could be focused on (1) the Japan–US market, (2) the leisure market from Japan to resorts (Hawai, Guam, Saipan, Palau), (3) the Asian market. The latter entails several possibilities, such as serving Asia through Incheon or Shanghai with its respective partners (Korea Airlines, China Eastern) or by itself through a Japanese hub. Consequently, to make this strategy work, Delta is ready to move its whole hub to Haneda and not only one flight or two because it is not viable to run a split hub; this is why it is campaigning in a long-term prospect. From this background, a specific sequence was isolated, consisting, as indicated above, of a campaign attempting to prevent further US–Japan aviation negotiations and allocations of new slots at Haneda, benefitting to Delta’s competitors. The offensive was deployed at the beginning of 2016 before the reopening of negotiations and consisted of an intensive press campaign and reach out to local US politicians whose area could be threatened by the closure of the only direct flights to Japan such as Portland or Minneapolis. On the Japanese side, various politicians having interests in Narita’s constituency were similarly approached as Delta providing jobs to about 800 people. As a result of the negotiations and despite Delta’s effort for a level playing field, the number of new slots opened was limited to 5 daytime + 1 nighttime for each country compared to the previous 4 nighttime only. With this new configuration, daytime flights from Haneda will be able to reach the Eastern US coast with a daytime arrival, thus offering great commercial opportunities to business demand. At the time of writing, only one slot has been allocated to Hawaiian Airlines, the remaining 4 still being subject to consideration within the US government to determine to which airlines they should be assigned, which implies continuing CPA within the US. In conclusion, as Delta’s position was either to retain the status quo or to be given enough slots to move all operations from Narita to Haneda, this outcome is unsatisfactory for them, but, as already stressed, this sequence is only a battle in the midst of a long war.

Firm-­ specific vs. industry-­ wide Firm-­ specific New business model

INTERESTS SUPPORTING –

–

Level of conflict, competition

OPPOSING –

Broad Medium High

Scope Salience

Attempt of blocking a law, getting an exemption from the regulation

Other/remarks

(continued)

Arguing that the new Payment Services Act cannot be adapted to their new business model and therefore irrelevant CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA MAJOR TYPE OF COALITION SUPPORT Use of Use of Use of state power local public interest opinion/ civil society

EXTERNAL STATE POWER: attempt to use the US embassy

Legislative, regulatory

Approval, Newness Level of certification, policymaking conformity assessment

POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: new business model ORGANIZATIONAL: frequent use and change of lobbyists, consultants, lawyers, etc. (internal + external) to exert pressure ARGUMENTS FEASIBILITY

FSA

Compliance with a new law (Payment Services Act) INSTITUTIONS

ISSUE

9.1.3.3 Pay Pal

9 ANNEXES 

251

OUTCOMES POLICY OUTCOMES –

BUSINESS OUTCOMES Failure to bypass or be exempted from the application of the new law, obligation to comply

New business model but with limited social No No Yes contributions Firm-specific Individual No local support Attempt to use state power without success CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Limited persuasion, strong Adversarial and non-cooperative attitude confronted with the introduction of a new law pressure Attempt to use STATE POWER but without results Pressure on the FSA through internal and external lobbyists (ORGANIZATIONAL resources)

Limited credibility/low representativeness

(continued)

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253

Considering the PayPal issue, it could be summarized by saying it illustrates the story of the emergence of a new type of business in an initial regulatory gray zone becoming subject to clearer regulation, leading to new operational burdens that could endanger its commercial viability in a market already abundant with payment solutions. PayPal business model is based on fees to business users for B2C/B2B (online shopping, etc.) remittance services and interest earning on pooled funds, enabling it to provide C2C payment services free of charge. In Japan, this type of activity was not really subject to specific regulations, the only existing framework, except naturally the banking system, consisting of agency payment with commission or payment on delivery as Yamato Transport or other delivery company used to practice. There was no specific authority either, the responsibilities being split between the MLIT for the transport companies and the METI for the e-commerce. Therefore, PayPal’s Japanese activities were broadly considered at the beginning as agency payment and treated within the existing framework as long as the business remained limited, but with its extensive growth as well as the general development and diversification of payment means by the end of the 2000s, the need for a new regulation arose, leading to the deregulation (and reregulation) of remittance services with the Payment Service Act in 2010. What has been isolated here as a case is, therefore, the story of the preparation of this Payment Service Act and the reaction of PayPal to it before and after. It was classified as a failure because, according to interviewed sources, PayPal took an adversarial attitude toward the FSA and did not succeed in making its arguments heard; nevertheless, when looking back now, it can be observed that PayPal did not leave Japan and is properly registered as required by the new law. In this sense, the case can be considered as an issue that lasted several years and was critical to PayPal but not to the point to threaten its existence in the Japanese market, to date. Concretely, the FSA began to consider a new regulation around 2008, and PayPal’s reaction was negative from the very beginning, arguing that the new framework was focused on offline rather than online stance. Consequently, they began lobbying actions to prevent the law to be passed or to be exempted, making “noise” in the “American style”

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through law firms, claiming loudly that the bill is not suited to their business instead of going to the FSA to make constructive propositions in a friendly manner, as the Japanese usually do. They tried to mobilize their embassy without success and finally had to comply and register in the newly created category of money transfer agent when the law went into effect. Even after the deadline, they were reluctant to comply with the details, particularly regarding the reporting system and the client checks with frequent system failures, thus worsening their relationship with the FSA. It must, however, be said that, according to analysts, Japan imposes a heavy operational burden with its anti-criminal and money laundering regulation requiring identity verification of clients and other costly and time-consuming operations. For this reason, PayPal was forced to interrupt its money transfer services between individuals within Japan when the law went into force in 2010. Moreover, as indicated above, the competition arena was already replete with a variety of payment solutions existing such as the convenience stores, and so on, leaving new entrants little prospect of substantially differentiating their service except by charging less than banks. Therefore, commercial viability and profitability have certainly been a serious issue for PayPal and CPA a necessity even though the method deployed did not bring the expected results.

Firm-specific vs. industry-wide

Approval, Newness Level of certification, policymaking conformity assessment – – Regulatory

Scope

Salience

Level of conflict, competition

Other/remarks

(continued)

Opposition Industry-wide Limited Low Low Collective action to an but with strong centered on the ACCJ unfavorable impact on the price hike of CPA the customs promoting clearance firms system INSTITUTIONS INTERESTS SUPPORTING OPPOSING JP Customs ACCJ NTT Data Office of Trade Ombudsman Express firms (DHL, FedEx, etc.) (Cabinet Office) US government MOF EBC JP freight forwarders POLITICAL RESOURCES INTERNAL EXTERNAL INFORMATIONAL/EXPERTISE: informational STAKEHOLDERS: support of trade associations (ACCJ, EBC, etc.) and (Viewpoint, technical, economic) input individual coalition firms (express firms, local freight forwarders) ORGANIZATIONAL: leveraging on collective action STATE POWER: support of the US government (embassy, DOT, etc.) and trade association capabilities ARGUMENTS DISCRIMINATORY OR FAIRNESS The change of pricing system would affect unfairly the express carriers which have big volume in comparison to freight companies with few and big shipments

ISSUE

9.1.3.4 NACCS System

9 ANNEXES 

255

OUTCOMES POLICY OUTCOMES –

BUSINESS OUTCOMES Changes in the implantation (more gradual) in the new fee system

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state power local opinion/civil interest society Limited credibility/high Issue with limited scope and social contribution Yes No No representativeness Concerns all the importers, foreign or Japanese Collectively undertaken with an ad hoc coalition and the support of the ACCJ Support from local interests (Japanese players) CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, limited Use of INFORMATIONAL/EXPERTISE resources to advocate the case through technical and pressure economic arguments Use of STAKEHOLDERS, chiefly constituted by the supporting trade association and an ad-hoc coalition to convey its voice

(continued)

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NACCS is the acronym for Nippon Automated Cargo Clearance System, which, as the name indicates, is an electronic system through which all entities (except Japan Post) importing goods into Japan must pass for customs clearance purposes. It is run by an administrative agency of the same name (NACCS Center), depending on the Customs and the Ministry of Finance. The system is divided between Sea and Air, the case concerned here being related to the upgrading of the Air-NACCS system that took place at the end of 2001. Though various patterns exist in the world, most countries do not charge users for their electronic clearance system as Japan does. An upgrade is made on a regular basis (8 years), but that time, it was accompanied by a structural change in the fee system. Until that date, there was a fixed monthly charge to rent a terminal with which it was possible to do as much clearance as desired. However, the NACCS organization proposed a change to a per transaction basis system. This new system would introduce a distortion between the freight companies with few/big shipments and the express carriers such as FedEx, DHL, and so on, which handle small items in great quantity, leading to an unfair and dramatic burden increase for the latter. Thus, an advocacy project centered on the ACCJ’s Transportation Committee was launched, beginning with the writing of a Viewpoint, an official position paper explaining the situation and the industry’s arguments. The Viewpoint was released, and meetings with the relevant ministries, bodies, and agencies (MOF, Customs, NACCS Operating Committee, etc.) were scheduled. Support was also provided from the EBC for the European carriers and the US government through the embassy and the government relations teams of the American carriers within the US. However, as no progress was recorded, the project team decided to appeal to the Office of Trade Ombudsman (OTO) belonging to the Cabinet Office and merged later with the different variants of the Regulatory Reform Council. This body had only a consultative power, and the opinions issued were not legally binding, but they were generally taken very seriously. A panel composed of representatives of all the parties, the ACCJ (represented by the Transportation Committee and FedEx), the MOF, the NACCS, and knowledgeable persons, was established, and the case examined. The result was very favorable to the claimants. The OTO stated in its report that explanations provided were insufficient and that all the parties’

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interests have not been taken into account. An important point that had a great impact and convincing power was that the NACCS system was designed and run with an exclusive contract by NTT Data, who could use its discretionary power to charge fees, contrary to the economic logic suggesting that as volume grows, unit cost should decrease. This became a self-perpetuating situation because NTT Data would tell that the codes they created for the NACCS were proprietary information that could not be released, thus preventing other companies from bidding for a less costly system because they could not get the standards. According to the OTO report, since the NACCS fee structure was designed to cover the functioning costs, there was not sufficient incentive for cost reduction and no competition was properly working. The report, therefore, recommended a reduction of costs through outsourcing and open tender, and a diminution of the fees as well as higher transparency. Finally, a gradual system with different steps was adopted, and in a parallel manner, the participation of users in the operating council of the organization was increased. It can be noted that the Japanese freight forwarders and other carriers handling small shipments in quantity were equally concerned and supported the ACCJ’s advocacy action. They, nevertheless, were very reluctant to express their opposition openly, and some of them clearly indicated that they would prefer the foreign companies to take the lead and would not speak first. The success of this action can be considered due to the size and weight of foreign firms in this specific industry, with global actors being much more substantial than the domestic ones. Another point from the OTO report can be denoted: the recommendation to connect all administrations’ systems for better service (“One stop service) and the shift to “e-Japan.” Thus, the OTO’s opinion may have also reflected a general policy and concern of the time, the shift to the digitalization of government, and better efficiency, a factor favorable to the case.

High

Level of conflict, competition

Modification of the legislation

Other/ remarks

(continued)

EXTERNAL STAKEHOLDERS: P&G, ACCJ, EBC, Cosmetic Europe, Japan Dentifrice Manufacturers Association LEGITIMACY: bringing world-leading dentist researcher to JP to educate members of parliament, MHLW, doctors, the Dental Association, etc. STATE POWER: on agenda EPA/FTA with the EU and Healthcare negotiations with the US

OPPOSING Japan Dental Association

Broad High

–

Regulatory

Scope Salience

Newness Level of policymaking

INTERESTS SUPPORTING Japan Dentifrice Manufacturers Association P&G ACCJ EBC COLIPA/Cosmetic Europe

Approval, certification, conformity assessment Standards and conformity assessment

MHLW Diet DOC/US-JP Healthcare negotiations EPA/FTA negotiations POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: technical data from the US, EU, production of a Viewpoint (ACCJ) ORGANIZATIONAL: in-house government relations capabilities

Firm-­ specific vs. industry-­ wide Increase of the Industry-­ level of fluoride in wide but toothpaste/ benefits to a mouthwash and limited alignment on number of international firms. standards INSTITUTIONS

ISSUE

9.1.4.1 Fluoride

9.1.4   Support for Investment Decision-Making

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OUTCOMES POLICY OUTCOMES Increase of fluoride amount finally approved but under strict conditions and with the obligation of further testings during three years

BUSINESS OUTCOMES Clarity obtained for the firm deciding not to invest in the requested testing process with regard to the expected return

ARGUMENTS TECHNICAL ARGUMENT Technical data from the US and the EU regarding safety CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state local opinion/civil power interest society Limited credibility/high Broad scope of public health: contribution to dental health Yes No Yes representativeness Industry-wide but benefits to a limited number or peer-firms (P&G, Sunstar) Support of local interests in a limited number (Dentifrice manufacturers) Initially, individual action that turned public because of difficulties and sought collective support such as the ACCJ, EBC, Cosmetic Europe and state support State support in the form of inclusion into bilateral health negotiations CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion/strong Initially, use of INFORMATIONAL/EXPERTISE resources (technical safety data) to convince pressure The support of local STAKEHOLDER (Dentifrice Manufacturers Association) was insufficient Decision to go public and use LEGITIMACY resources by bringing experts and researchers, external sources with the support of foreign collective STAKEHOLDERS (ACCJ, EBC, etc.) Decision to use STATE POWER by including the issue in the EPA/FTA (EU) and Healthcare negotiations (US) agenda, but without a strong priority and therefore a moderate level of pressure

(continued) 260  E. ROMANN

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The decision to invest, or not, in a country for a specific product, is an important component of firms’ global strategy. In this sense, the Fluoride case is illustrative because, as an interviewee stresses, the result of CPA was to obtain clarity, allowing a decision to be made in terms of investments. The fluoride concentration levels permitted in oral care products in Japan are not aligned with the higher levels authorized in other developed countries; Japan permits a maximum of 1000 ppm of fluoride in toothpaste sold as quasi-drug, whereas concentrations of up to 1150 in the US and 1500 in the EU are allowed. For mouthwash, a concentration of 226 ppm is sold in supermarkets in Europe and the US, while in Japan, it has been authorized only very recently and under strict conditions. The issue in Japan was centered on P&G’s Crest toothpaste and J&J’s Listerine for foreign firms and Sunstar that wanted to develop fluoride products for the domestic market. The point was that these limitations work as barriers, forcing the manufacturers to reformulate their products or renounce their sales in the big cosmetic market that is Japan. Consequently, P&G and J&J began CPA actions directly with the MHLW without results during four years due to the opposition of the Japan Dental Association. At J&J, Listerine was considered a growth driver for the Japanese market, but facing local resistance, they decided to go public and involved the ACCJ, the EBC, the American government, the European industry association (Cosmetic Europe), and so on. Finally, the MHLW took a step forward, allowing an increased amount of fluoride in toothpaste and showing signals of opening in mouthwashes. However, for mouthwashes, the products had to begin to be sold as a behind-the-counter prescription drug in the first testing phase for three years, then, only after having shown it is safe, could it be transferred to another category and sold as quasi-drug. For J&J, this was not acceptable because this meant to develop a specific product only for this purpose, provide much evidence that cost money, and sell for three years in a restricted market size that would not be profitable. Moreover, even if Listerine was a priority for Japan, this was not the case at the global level as, in reality, this was a low-end and old product already existing everywhere in the world, and to spend extra money to show the efficacy of a product already used in the whole world would not make sense. Particularly, times were difficult for business, dollar strong, implying cost-cuts to maintain profit margins and, therefore, without latitude to invest in a risky venture. Furthermore, a local competition was developing with Sunstar and other domestic companies. Consequently, the major result of CPA for J&J was to obtain clarity after having spent four years in vain and in uncertainty. Thanks to these actions, they understood that at least three more years would be necessary and could rationally decide that the investment was not worth it.

Firm-­ specific vs. industry-­ wide Industry-­ wide but with first mover advantage New concept/ standard

Newness

Technical and regulatory

Level of policymaking

Salience

Medium Low

Scope

Low

Level of conflict, competition

Indirect influence via strong influencers

Other/ remarks

EXTERNAL LEGITIMACY: creating conditions for debate such that the government cannot ignore it MEDIA: TV (Gaia no yoake), specialized magazines, press STAKEHOLDERS: direct clients and influencers (SB Energy, EURUS, shosha, banks, etc.)

INTERESTS SUPPORTING OPPOSING JP government (renewable+ FIT) General constructors SB Energy Eurus Energy, shosha, banks, investors, project owners, developers, etc. EPC (Kinden etc.) TMEIC etc. manufacturers

Approval, certification, conformity assessment Standards issue

POLITICAL RESOURCES INTERNAL INFORMATIONAL/EXPERTISE: new standard promotion; creation of debate and knowledge base, technical comments for modification of standards, trade shows, research SYMBOLIC: reputation abroad in the 1000 V field ORGANIZATIONAL: no government relation staffs but a transversal team of connected people RELATIONAL: personal relation with SB Energy

METI AIST (safety issues)

INSTITUTIONS

Promotion of 1000 V as low voltage standard in photovoltaic

ISSUE

9.1.5.1 ABB

9.1.5  Norm and Rule Setting

262  E. ROMANN

OUTCOMES POLICY OUTCOMES Ambiguity of technical standard lifted

BUSINESS OUTCOMES Opening of a new segment for ABB’ products Establishment of ABB brand

New concept/standard useful for international competitiveness (economic impact) Building on firm-specific competitive advantage Individual Indirect action through some strong local influencers and clients CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Strong persuasion, limited pressure Use of INFORMATIONAL/EXPERTISE resources for the promotion of a new standard useful for international competitiveness (economic impact), creation of a debate and a knowledge base Influence through STAKEHOLDERS clients/influencers creating the market Limited use of public MEDIA, focus on specialized media Use of LEGITIMACY by the input of knowledge (clients, influencers, etc.)

Strong credibility/low representativeness

MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state local opinion/civil power interest society Yes No No

Emphasize on a higher IRR for investors, better export competitiveness in case of adoption of this new global standard

CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA

ARGUMENTS COST OR ECONOMIC IMPACT

9 ANNEXES 

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ABB was already in Japan with several divisions for years but not really in the low voltage market due to the very fierce competition from local manufacturers such as Mitsubishi Electric or Fuji Electric and the commoditization of products. This was especially true in the power distribution segment, where, for example, in buildings, the market was completely dominated by those competitors. They already made attempts to develop in Japan a low voltage offer, but every time, given the longer than average return, the investments have been abandoned before bearing fruits. However, the approach changed in this case where it was decided to do a long span experience and continue to invest beyond the usual period. The underlying idea was that, considering the already substantive market share held in various countries, it could be worth to heavily concentrate resources to develop a new market with growth potential such as Japan rather than trying to gain an extra percentage point market share in other countries. This decision was seemingly not easy to take, but a consensus was reached internally, building on the success in the American market where the presence was initially limited and where the same long-term investment logic was profitably applied. Thus, a low voltage division was established in Japan, but the issue was: how to create market innovation in such a difficult market where no recognition for value exists? Client surveys indicated that they could buy if the costs were sufficiently low or if the lead times were especially short, but even then there was strong conservatism and hesitation in shifting from manufacturers with whom the business has always been conducted without problems. It was, therefore, decided to create value by offering a new market not yet occupied by local manufacturers and with large growth potential. The target was the photovoltaic (PV) business in drastic growth with the energy market liberalization and the introduction of a FIT (Feed-In Tariff)4 system giving incentives. ABB was offering various products such as string and junction boxes for power plants, the difference and strength being in the 1000-V DC technology, whereas local manufacturers chiefly produced in 600 V, the standard for low voltage in Japan. Indeed, outside  See note 1.

4

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Japan, the low voltage standard was 1000 V, corresponding to the IEC international norms. The question was, therefore, to obtain acceptance of this new 1000 V standard as an alternative to the traditional 600 V though it has been classified until then as high-voltage with all the limitations and proper regulations induced. Therefore, the campaign consisted of influencing, chiefly through clients, for a modification of the interpretation and lifting of the technical standard of regulatory ambiguities, allowing more clients to shift to this new standard and use ABB’s products for their projects. As investments in solar plants were booming, various types of fund providers and investors, including banks, were targeted with the argument that a project in 1000 V would show a better efficiency, increasing the IRR by 2–3%. The argument for the manufacturers was centered on the fact that shifting to 1000  V would make their products comply with the IEC, that is, the world’s most widely used standards, and therefore, support their exports from Japan. All these economically rational arguments were reinforced by a media campaign and a contribution to the public comments during the revision of the law regulating the technical standards for electric devices. According to the company, the string box business, starting from zero, has developed to reach approximatively 40% of the market, and the solar linked business represented in 2014 20% of total ABB’s sales in Japan. Finally, beyond the immediate success of this niche, the following objective was to establish ABB’s name in Japan to link it to future growth drivers such as wind power.

Level of policymaking

INTERESTS SUPPORTING AUTOLIV (Airbag manufacturer) Auto manufacturers and ACEA EBC EU Commission DE government

New Regulatory and technology technical at the beginning but politicized at the end (bilateral)

Newness

Salience

Limited Low

Scope

Low

Level of conflict, competition

Multilayer approach for a technical issue

Other/ remarks

OPPOSING METI MLIT JP government EPA/FTA negotiations EU Commission DE government POLITICAL RESOURCES INTERNAL EXTERNAL INFORMATIONAL/EXPERTISE: technical safety data for a STATE POWER: German government, EU Commission new technology STAKEHOLDERS: ACEA, JAIA, and other manufacturers, EBC ECONOMIC: success of the EPA/FTA negotiation (favorable for JP auto industry) in balance ORGANIZATIONAL: strong and centralized government relation team managed from Berlin and Brussels ARGUMENTS

INSTITUTIONS

Firm-specific Approval, vs. industry certification, wide conformity assessment New airbags Industry-­ Standards and technology wide but certification using hydrogen with first issue on imported mover cars advantage

ISSUE

9.1.6.1 VW Airbags

9.1.6  Global Strategy, Meaning of Japan, and Other Considerations

266  E. ROMANN

OUTCOMES POLICY OUTCOMES Exemption from law application

BUSINESS OUTCOMES Product authorized New sales

TECHNICAL ARGUMENT Provision of data, sending of engineers to convince regarding safety IMPACT ON BILATERAL RELATIONS Threat of blocking the EPE/FTA negotiations CRITERIA FOR THE BALANCE OF COALITION AND MAJOR SUPPORTS QUADRANT CRITERIA MAJOR TYPE OF COALITION SUPPORT Use of Use of public Use of state local opinion/civil power interest society Limited credibility/high New technology approval but with limited social No No Yes representativeness contribution At the beginning firm-specific but finally, concern the whole industry (first mover advantage) At the beginning individual action evolving in collective action due to difficulties Support of collective bodies such as the ACEA, JAIA, EBC Use of state power with the support of the EU Commission and the German government CRITERIA FOR THE BALANCE OF INFLUENCE QUADRANT CRITERIA Limited persuasion, strong INFORMATIONAL/EXPERTISE resources insufficient (technical safety data) to convince initially pressure Use of STAKEHOLDERS, that is, the collective resources of ACEA and JAIA to weight on the EU Commission and the Japanese authorities Use of STATE POWER and ECONOMIC resources: threat on the EPE/FTA negotiations 9 ANNEXES 

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The issue began in 2011 when VW discovered at the homologation stage that the new airbags installed on its new Passat import samples were not complying with the Japanese regulation. The airbags maker, Autoliv, had developed a new model inflated with hydrogen, instead of other gases used in conventional airbags, and presenting the advantage of having a better rate of expansion and being better for the environment. Moreover, an explosive device was used to initiate inflation. The new airbag technology has not been developed specifically for VW and could be adopted in the future by other components and car manufacturers. However, VW intended to sell it as a global standard on all its Passat in the world, the launch in Japan being planned for June 2015. The compliance problem was that, first, the use of hydrogen fell under a specific law, the High-Pressure Gas Safety Act, and, second, the explosive device under the Explosive Control Act, both depending on the METI and its specialized offices and agencies. Thus, when VW went to the MLIT for the technical model homologation, it was not too difficult to convince them that the new technology is common in the European market, that no specific risks exist to date in regard of the homologation already achieved in many countries, and that the company is providing other suppliers with this kind of airbags with therefore a great amount of information available. However, the agencies in charge of the high-pressure gas and explosive issues, while acknowledging that the car was complying with the automotive part of the regulation, stated that conformity to the other rules must equally be achieved. Concretely, this implied that an inspector had to personally and with his own eyes check the inflators deeply integrated into the fabric of the vehicle, something impossible on a large scale and without dismantling the car or activating the airbags. Everyone understood that it was physically impossible, but the position of the officials was that the rules must be followed. Thus, in the first stage, VW dealt alone with Autoliv, providing technical information to prove safety, but when they realized that they could not go further, they escalated the story to JAIA, the representative body of foreign carmakers in Japan, on the ground that it could become a collective case if other carmakers would switch to the new airbag technology in the future. JAIA took over in 2012 by having several meetings with the related authorities and asking for an exemption from the law, but there was no real prospect for a solution, whereas time was running out with regard to the deadline for commercial launching.

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Meanwhile, a scoping exercise to determine the scope and the level of ambition of the EU–Japan FTA/EPA negotiations had been launched after the start of talks had been decided in 2011, in which the issue of the airbags was included with Japan agreeing to tackle the issue. It should be stressed at this point that the European automotive industry was opposed to the FTA/EPA as it would mean the withdrawal of the 10% tax on imported cars from Japan without the guarantee of compensation and real risks on employment in Europe. According to observers, the FTA/EPA negotiations created a new game where this kind of issues could be politicized with the industry setting conditions in exchange for support, instead of being simply dealt at a technical level in a pre-FTA world. Consequently, confronted with the lack of progress, JAIA passed the issue to the ACEA, the representative body of the automotive industry in Brussels. Thanks to the new political leverage gained with the launch of the negotiations and the inclusion of the issue in the scoping exercise, the EU Commission, in the persons of Messrs. Barroso and De Gucht, could relay it to the Prime Minister, Mr. Abe, when they came to Japan for the official launching of the negotiations in 2013. At this stage, the foreign pressure was already effective, but, according to sources familiar with the matter, it was not until the visit of Mr. Abe in Germany in April 2014 and the submission of the case by Mrs. Merkel that things began to improve concretely. It seems that Mr. Abe agreed with the issue and gave instructions so that things could progress. As a result, an exemption was finally granted in late 2014, but as observers stress, it was not a modification of the regulation and could concern only VW; if another manufacturer faced a similar but not 100% identical issue, it was still possible for the same process to be followed again. This case was just about a specific airbag technology not yet recognized in Japan but without technical problems or political opponents. However, because this new technology was part of a global launch plan, intended to be standardized on numerous models in the future and drawing on economies of scale, it would have been difficult for VW to customize its new Passat, especially for Japan, particularly on a segment where volumes are very limited. The case is interesting for this book’s purpose because it shows well the different levels and the escalation, from the individual and technical to the collective and industry level, to the highest political spheres not only of a country, Germany, but of entire Europe. It was a multilayer and multiplayer approach with technical (production quality assurance) and economic (additional costs) arguments. It also illustrates

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how a bureaucratic blockade on an issue that could seem relatively minor from the standpoint of a carmaker’s global strategy can create an impressive Non-Tariff Barrier needing the mobilization of formidable political leverage, which happened to be possible in the specific circumstances of the pre-FTA negotiations but that could well not have existed or faded away as soon as the treaty is signed. More generally, when asked about the meaning and the positioning of Japan on the global market, the interviewees indicated that even if they sell more Audi and Porsche than Passat, Japan is certainly not a growth market but worth a place of observation for future trends such as urban configuration and aging society, not to mention technological innovations. Similarly, as an auto-parts (cable) manufacturer (Delphingen) points out, having sales in Japan is not necessarily for the sake of performance but for the rest of the world to witness that the firm’s product quality found its place in the country. Thus, Japan, in this sense, can rather be seen as a show window, a factor enhancing sales, but in the outside world, subtly and indirectly. To this extent, CPA in Japan can be considered part of a global strategy.

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Index1

A ABB, 8, 124, 126, 132, 135, 136, 141, 143, 154–156, 162, 164, 169, 174, 262–265 Access, 48 access good, 48 theory of access, 48 ACEA, 137, 266, 267, 269 Advisory committee, 5, 59, 67–69, 86, 100, 119 Agency theory, 14 Agenda-setting, 18 Amakudari, 77, 78 AMDD, 116, 116n20 American Airlines, 247 ANA, 232, 234, 235, 247, 249 Animal vaccine, 132, 143, 152, 162, 212–214 ANSI, 126, 200, 204 Argument, see Tactical building blocks, case study Autoliv, 268

B Balance of Coalition, 25 credibility, 22–28 representativeness, 25 Balance of Influence, 17–22 persuasion, 17–22 pressure, 17–22 Baron, 11 Biomerieux, 240 Boddewyn and Brewer, 10, 46 Bonardi, 130 Bureaucracy-led mass-inclusionary pluralism, 60 C Campaign contributions, 49, 62, 77 Canalized pluralism, 60 CAPEC, 236 Centrair, 126, 137, 141, 232–235 Chinjô, 84 Clear Channel, 211 Coalition building, 10, 11, 71

 Note: Page numbers followed by ‘n’ refer to notes.

1

© The Author(s) 2020 E. Romann, Nonmarket Strategy in Japan, https://doi.org/10.1007/978-981-15-7325-5

279

280 

INDEX

Codex Alimentarius, 32, 173 Collective action theory, 14 Comparative capitalism, 14 Coordinated Market Economy (CME), 23 Corporate contributions, 77, 87 Corporatism, 14, 23, 59–61 Cosmetic Europe, 137, 259–261 Corporate Political Activity (CPA) alliance, 47 argument, 47 definition, 12 outcome, 47 position, 47 tactic, 47 target, 47 Credibility case study, 145 concept, 25 D Dahan, 42 Dahl, 20 Daikin, 75, 75n5, 82, 83n8, 174 Dangô, 101 De facto, 2, 13, 60, 81, 90, 164, 187 De jure, 2, 13, 81, 90, 164, 187 Delphingen, 270 Delta, 8, 127, 132, 134, 135, 137, 141, 143, 148, 153, 156, 163, 234, 247–250 Developmental state, 60, 60n2 DHL Scanner, 127, 130, 132, 137, 156, 163, 236–238 Drafting language, 53 E Economic Partnership Agreement/ Free Trade Agreement (EPA/ FTA), 98–105, 120, 134, 137, 189, 259, 260, 266

Elite mobilization, 53 Epstein, 10, 15, 21, 23, 42 EU Parliament, 62 Expert mobilization, 53 F Face to face, 53 FedEx, 137, 233, 234, 236–238, 255, 257 Financial contribution, 86–89 Fluoride, 8, 127, 132, 134, 137, 141–143, 147, 152, 156, 157, 164, 165, 259–261 Flying Tigers Line, 234 Forms of coalition ad hoc coalition, 25 collective action, 25 individual, 25 joint venture, 25 peak association, 25 trade association, 25 Forms of influence Dahl; authority, 19; coercion, 19; force, 19; inducement, 19; manipulation, 19; persuasion, 19; power, 19 this book; adversarial, 21; cooperative, 21; persuasion, 21; pressure, 21 Four I’s, 16 Free-ride, 23, 24, 75n5, 171, 191 Fuji Electric, 136, 200, 201, 203, 204, 264 G Gaiatsu, 3, 5, 93, 115, 117, 118, 120, 149, 150, 153, 186, 214 GE lands, 129, 132, 133, 140, 141, 143, 152, 157, 163, 244–246 GE Smart meters, 126, 132, 136, 143, 156, 162, 169, 174, 200–204

 INDEX 

Grassroot grassroots mobilization, 10, 12, 33, 53, 144 Gyôkai, 73 H Hartford, 8, 132, 139, 141, 143, 156, 162, 169, 174, 205–208, 240 Hearing, 52, 53 Hepatitis C, 8, 127, 134, 138, 141, 143, 148, 152, 156, 163, 227–231 Hillmann and Hitt, 23, 25, 46, 50, 203 Hitachi, 82, 86 House of Representatives, 61 I Industry-specific factors, 39 lobbying spending by industry, 39 Influence Dahl, 19 ING, 207, 208 Insiderization, 217 Inside the castle, 3–5, 113, 115, 120, 189 Institutional theory, 14 Interest group, 37 interest group theory, 14 International business, 3, 14, 35, 44, 45, 48, 53, 55, 107, 125, 134, 142, 169, 196 Iron triangle, 60 ISO, 32, 103 Issue advertisement, 53 Issues case study, 125 categorization by strategic feature, 132 See also The 3 main drivers

281

J JADA, 243 JAIA, 129, 137, 140, 241–243, 266–269 JAL, 234, 235, 247, 249 JAMA, 140, 241, 243 J&J, 137–139, 141, 156, 230, 231, 261 Janssen Pharmaceuticals, 230 Japan Inc, 3, 59–61, 60n1 Japan Tobacco, 224, 226 JC Decaux, 211 Jimichi, 79 K Kacho, 79 Kakaricho, 80 Kansai Airport, 235 Kei-cars, 103 Keiretsu, 97, 110, 117 Kenkyûkai, 68 Kentôkai, 68, 168, 181, 190, 200, 203 Kindleberger, 15, 42 L Legitimacy, 45 Liability of foreignness, 46, 148, 158, 167, 188 Liberal Market Economy (LME), 23 Listerine, 261 Lobbying definition, 10 direct lobbying, 5, 52, 59, 76–80, 245 indirect lobbying, 53 inside lobbying, 52 outside lobbying, 52 technics, 53 transversal lobbying, 24, 146

282 

INDEX

M MC Decaux, 126, 132, 135, 136, 143, 156, 162, 174, 209–211 Mahoney, 16 Metlife, 208 Mitsubishi Corporation, 211 Mitsubishi Electric, 203, 204, 264 N NACCS, 125, 129, 132, 140, 148, 152, 157, 163, 255–258 Narita, 137, 143, 235, 238, 247–250 National Police Agency, 209, 211 NCA, 232, 234, 235 Nemawashi, 27, 64, 68 New institutional economics, 14 Nicorette, 132, 134, 139, 141, 143, 148, 152, 156, 163, 224–226 Nikkô Cordial, 207 Non-decision-making, 18 Nonmarket definition, 11 Non-tariff measures (NTM), 105–107, 110, 120, 125, 142, 189 EPA/FTA, 105 UNCTAD classification, 105 Northwest Airlines, 234, 249 NTT Data, 255, 258 Nye, 18, 21, 49, 151 O Office of Trade Ombudsman (OTO), 257 O157, 125, 163, 239–240 Organization theory, 14

Ortho Clinical Diagnostics, 156, 229–231 Osaki, 203 Outsourcing research, 53 P P&G, 137, 259–261 Paradox of plenty, 49 Paradox of technology, 81 Party tickets, 89 Patterned pluralism, 60 Pay Pal, 118, 132, 141–143, 148, 153, 163, 251–254 Persuasion case study, 149 concept, 17–22 PhRMA, 116, 116n20 Phylaxin, 139, 215 Pluralism, 2, 14, 17, 23, 59–61 Points of access, 59, 76 Policy Research Council, 61, 63 Porter, 11 Position paper, 52, 53 Power Barnett and Duvall, 18 compulsory, 18 Dahl, 17 hard power, 18 institutional, 18 productive, 18 soft power, 18 structural, 18 Weber, 17 Pressure case study, 149 concept, 17–22 Public advocacy, 71, 90, 187 Public choice theory, 14 Public comment, 52, 53 Public education campaign, 53

 INDEX 

R Regulatory Reform Council, 67–69, 257 Reports on the Japanese Business Environment, 94 Representativeness case study, 145 concept, 25 Resource-based view (RBV), 42, 171 Resources actor-controlled resources, 42 case study, 135 external, 42; legitimacy, 42; media, 42; number, 42; public opinion, 42; state power, 42; support of stakeholders, 42 influence perspective, 42 institutional resources, 42 internal, 42; economic, 42; financial, 42; informational/expertise, 42; organizational, 42; relational, 42; symbolic, 42 political resources, 42 strategic management perspective, 42 Rhone Merieux, 128, 132, 135, 139, 148, 156, 162, 215–218, 220 Rule-making, 13, 81, 85 Ryobi, 136, 209, 211 S SB Energy, 136, 262 Section 301, 114n16 Seven Bank, 223 Shingikai, 55, 60, 67–69, 78, 134, 168, 181, 190, 203 Shôgai, 83–86, 83n8, 90, 187 Social acceptance, 14, 45–47, 68

283

Strategy financial incentive, 12 financial strategy, 10 judicial action, 12, 21, 149, 150 private politic, 13, 35 rule-making, 13, 81, 85 Sunstar, 260, 261 T Tactical building blocks, 49 arguments, 50 case study, 142 targets, 49 technics, 51 Targets, see Tactical building blocks Technics, see Tactical building blocks Tepco, 136, 200–202, 204 Testimony, 52, 53 Theory of economic regulation, 14 Three I’s, 191 The 3 main drivers institutions, 31 interests, 37 issues, 34; approval, certification, conformity assessment, 36; case study, 125; categorization by strategic feature, 132; firm-­ specific vs. industry-wide, 36; level of conflict and competition, 37; level of policymaking and procedure, 36; newness of the product, technology or concept, 36; salience, 37; scope, 36; types, 35 TNT, 137, 236–238 Toshiba, 83, 203, 204 Tranparency registry of transparency, 89 Transaction cost theory, 14 Transnationalism, 14

284 

INDEX

Trans-Pacific Partnership (TPP), 32, 55, 98–105, 99n7, 111 Tripartite alliance, 60 Tripartite elite, 62 Tsukiai, 64 The 2 transversal dimensions, 17–22 U United Airlines, 98n6, 234, 247, 249 UPS, 126, 132, 135, 137, 141, 143, 152, 156, 163, 232–238 US Congress, 62 US-Japan Business White Paper, 94, 114, 115 USTR, 5, 104, 118

V Varieties of Capitalism, 23, 60 Volkswagen (VW), 8, 70, 124, 126, 132, 137, 141–143, 147, 153–156, 164, 266–270 VRIO, 171–173 W Weltanschauung, 19, 38, 45 Western Union, 128, 132, 139, 141, 148, 149, 157, 162, 221–223 WTO, 32, 104, 112 Z Zaikai, 60, 71, 73, 86 Zoku, 61, 62, 76, 79