Yoshio Miwa and J. Mark Ramseyer strive to overturn generations of scholarship, both in Japan and in the West, by challenging the very premise of the concept of the keiretsu. In the conventional historiography, some Japanese corporations formed horizontal cartels, often from the remains of prewar zaibatsu conglomerates, and resumed dominating the economy. According to critics, the keiretsu are sustained by intrafirm cross-shareholding, loans from main banks that enable firms to avoid bankruptcy indefinitely, the seeding of corporate boards of directors with bank officers, and intervention whenever necessary to rescue or rehabilitate struggling firms.

Miwa and Ramseyer claim not only that the theory of the keiretsu as we have known it has absolutely no basis in reality, present or past, but also that it was invented wholesale by Marxist scholars in postwar Japanese social science departments. These scholars, they assert, were intent on identifying new agents of monopoly capital as the nation's postwar economic nemesis and on crediting Japan's recovery to the wisdom of Japan's government and institutional actors that, they allege, engineered Japan's “plan-rational” economy. Furthermore, Miwa and Ramseyer argue that contemporary Western scholars were likewise disposed to accept this claim and did little to question the validity of the data (pp. 144–45). Over time, the authors argue, researchers came to accept the theory of keiretsu organization without critical scrutiny of the theory's empirical basis. The result, they claim, is tantamount to the enduring legend of the unicorn, which galloped its way through history as generations of authors cited and uncritically accepted the claims of peers and predecessors. The following passage sums up their thesis succinctly:

In addition to denying the very existence of keiretsu, Miwa and Ramseyer assert that their alleged ancestors, the zaibatsu of the prewar period, were successful not because they colluded to fix prices or conspired to manipulate markets, as asserted by their many critics. Instead, Miwa and Ramseyer contend that these combines were successful for entirely ordinary reasons and merely earned their pejorative moniker of “money cliques” because muckraking journalists of the 1920s and 1930s sought to blame someone for the economic depression (p. 52).

Miwa and Ramseyer level additional claims in disputing the theory of the keiretsu. First, Japanese firms are neither badly governed nor short of outside directors. Second, the Japanese government never seriously guided or intervened in the Japanese economy. Japan's postwar Marxist scholars, they claim, supported the bureaucrats and politicians who took the credit for Japan's progress rather than crediting the market. Western scholars, meanwhile, were pleased to embrace an explanation of Japan's growth that bolstered their theories concerning the nation's supposedly collectivist bent. Finally, Miwa and Ramseyer argue that Japanese corporations do not have a “main bank” system, despite the repeated claims of legions of commentators. The authors write, “Make no mistake: not only do banks and firms never negotiate legally enforceable main bank contracts, but they never even designate a main bank” (p. 64). The authors assail every claim ordinarily posited about the main bank system, especially that the main bank dominates corporate governance and intervenes to rescue ailing firms. They make a special point of debunking several stories of corporate rescues that have often been attributed to the power and influence of main banks, including the oft-cited story that Mazda was rescued by Sumitomo Bank in 1979.

Miwa and Ramseyer contest Richard Pascale and Thomas P. Rohlen (“The Mazda Turnaround,” Journal of Japanese Studies 9 [1983]: 219–63), who claim that Sumitomo Bank “played the pivotal role” (p. 67) in the turnaround of Mazda, by showing rather convincingly that Mazda's rescue was a balanced group effort involving several other firms. They point out that Mazda accepted several outsiders on its board of directors in 1974 but note that they did not come exclusively or even predominantly from Sumitomo Bank. The new members also came from the regional bank Sumitomo Trust, as well as two key trading companies with which Mazda did business. More tellingly, Sumitomo Bank was not able to oust Matsuda Kōhei as chief executive officer until late 1977 and did not fire him or install a banker in his stead. It merely made Matsuda chairman of the board and replaced him with one of Mazda's own engineers. Even in 1978, the authors note, Mazda still had only four bankers on its thirty-member board, and the group of rescue-actors divided Mazda's managerial duties quite evenly. Miwa and Ramseyer also stress that in 1977, Sumitomo Bank actually began cutting the amount of money it lent to Mazda, and it held only 14.5 percent of Mazda's debt in that year. They acknowledge that Sumitomo Bank did indeed lend more to Mazda than did anyone else, but they also point out that the bank never owned more than 4 percent of Mazda's stock during the years 1974–77, which was less than the Nippon Life Insurance firm. Miwa and Ramseyer conclude that Sumitomo Bank never had the magnitude of financial stake in Mazda that would compel it to save the company. Sumitomo Bank was merely one member of a group of actors that saved Mazda collectively. Bankers, they argue, know about finance, not how to build automobiles.

Miwa's and Ramseyer's data on cross-shareholding capitalization, relationships between board membership and bank affiliation, proportions of outside directors and loan sources, degrees of reliance on main banks, and corporate profitability call into question certain basic assumptions of the conventional model of the keiretsu group—namely, seamless coordination of market behavior, crossholding of great blocks of shares, immunity to failure or acquisition, intervention in management, and the propensity to tolerate perpetual mediocrity rather than pursue earnest profit.

Miwa and Ramseyer provide copious data in making their case but leave plenty of room for skeptics to question their declaration that the concept of the keiretsu is pure fiction. In discussing the Mazda rescue, they make no effort to explain what actually motivated the corporate rescuers or how they managed to get their way at all. Nor do they explain the coordinated behavior seen in many other examples of collective corporate action among firms identified as keiretsu. Finally, and most troubling, Miwa and Ramseyer exclude from consideration potentially influential factors such as social preference, managerial prerogative, and nonfinancial incentives.

Miwa and Ramseyer do not attempt to explain why companies continue to do business with core partners and suppliers despite higher costs. While perhaps not economically rational, such business relationships are real, common, and often long lasting. In my own research, I have found that Japanese subcontractors often refer to keiretsu and have likened their relation to a dominant firm to being in the shade of a large tree. Furthermore, beyond supplier relationships, Japanese companies typically maintain varying degrees of allegiance to an array of stakeholders and practices such as unions, employment policies, and financial and political institutions. Therefore, even in the absence of a main bank and significant cross-shareholding arrangements, how can one objectively account for the existence of so many curiously unprofitable business relationships?

Miwa and Ramseyer insist at the close of their book that non-economist area specialists must study both economic theory and data, and they claim that secondary sources are no substitute. They note that “those microeconomic principles will not explain everything one sees in Japan, but they will explain most” (p. 160). On this point I disagree. Although both economic theory and data are indeed indispensable, I contend that they alone cannot explain many of the most remarkable phenomena observed in Japanese corporate relationships. I have translated interviews with subcontractors who readily admitted turning down lucrative opportunities to compete against former partners or benefactors because they simply could not betray old debts of gratitude (giri). Others explained their choice to become subcontractors literally in order to apologize to firms against whom they had once competed unsuccessfully. Some company employees have even admitted to me that they continuously stole products from their employer in order to secretly stock their own shops, and the employer, aware of the thefts, chose to look the other way. Such attitudes and behaviors cannot be captured in purely quantitative data, but they must be factored into any investigation of Japan's business practices. Both sources are essential.