Employee Involvement Under Rising Competitive Pressure: Evidence from Two Manufacturing Firms in Japan

Abstract The purpose of this chapter is to provide fresh evidence and insights on a causal link from product market competition to the nature and scope of employee involvement using a case study of two Japanese manufacturing firms. The firm’s investment decision on two kinds of innovation activities, discrete innovation and continuous improvement, is likely to be a key driver for the adoption (or lack thereof) of the high-performance work system (HPWS) and employee involvement programs. As product market competitionintensifies (e.g., rising international competition and weakening exclusivesupplier–manufacturer relationships), the firm is likely to shift its innovation strategy from bottom-up continuous improvement activities, which almost always accompany employee involvement, to top-down discrete innovation activities, which downplays employee involvement. Such a shift of the firm’s innovation strategy results in declining employee involvement. This study will inform policymakers, practitioners of management, and the public about the importance of paying particular attention to the firm’s innovation strategy in understanding the interplay between product market competition and the HPWS and employee involvement. In spite of the rich body of evidence on the effects of HPWS, there are at least two relatively unexplored yet potentially important questions: (i) The conditions under which the HPWS is best introduced and best sustained; and (ii) in what way the HPWS will need to evolve when external environments change. Our findings fill this important gap in the literature by providing novel evidence and insight on the causal link from product market competition to employee involvement.