Business Groups in Prewar Japan: Historical Formation and Legacy

The objective of this article is to examine the evolution and economic function of business groups, often referred to as zaibatsu, in prewar Japan. It should be noted, however, that, in spite of the prominence of the zaibatsu as economic actors, the share of business groups in the prewar economy was not as high as is often assumed. While the share of business groups in an economy varies depending on definitions of business groups and dates of estimation, their prewar share was also modest when compared to the shares of their counterparts in developing economies. In prewar Japan, most large firms operated as stand-alone entities, and most of them were listed on the stock exchange. Focusing on the three established zaibatsu and Nissan, this article examines how business groups evolved in prewar Japan, and what functions they served.