Why Tokyo’s small factories?

I realized when presenting at RIHN in Kyoto on Friday that I still have some work to do with regards to one of my thesis’s major arguments: Small factories in the ward area were more successful because they were more efficient “users” of urban space.

My dissertation looks at the 23 wards of Tokyo from 1945 to 1970 from two major angles: the first is production, where this post fits in. The second one is livelihood, which I will describe a little more in a future post.

The production part asks which qualities of Tokyo’s urban space favored small factories over their larger peers? To make this argument, I first need to establish that small factories were in fact more successful, before going into the core of the narrative, which talks about things like mixed-use neighborhoods, live-and-work arrangements, etc. — i.e. where I let urban studies inform the more classical economic history elements of the study.

For my narrative, small factories need to be competitive in a two-fold way. They need to outperform large factories in the ward area AND their small factory peers in Japan as a whole. Otherwise, we could observe them being successful just like other small factories across the country (in which case, their superior performance would have little to do with urban space). If they performed equally well as large factories in Tokyo, then urban space here would benefit factories regardless of their size.

Both “outperformances” can in fact be observed in the data, but I need to be clearer and more systematic in showing this for any future journal article or monograph. The latter would allow a lengthy excursus, where this can sit. As I realized at RIHN on Friday, a (journal) article has less space for a detailed explanation of that kind, so a few statements to the extent of small factories’ superior performance will have to suffice.

These may open with some statistics on the average firm size as well as manufacturing employment. Then comes the information on performance as shown by value-added per worker metrics, and in how far small factories closed the performance gap with larger factories faster in the 23 wards than elsewhere in Japan.

The seminar at RIHN saw me pursue the idea of urban space as a factor of production that may explain this outperformance in Tokyo’s ward area. I think of urban space as urban land including but also beyond its mere physical attributes.

Before going into urban space, however, I perform a more “traditional” factor of production analysis by focusing on labor and capital. This shows that small factories consistently paid higher wages in the ward area compared to their national peers and successively higher salaries than their larger peers in Tokyo. Small factories were also more “capital-efficient”, a term I use to denote their relative capital intensity and faster asset turnover.

The tables and their discussion may feel a little like an excursus, too, as they are not directly related to the urban space thread and may therefore also be confined to the monograph. Alternatively I may put all this together in one article and look for an economic history journal that may have an interest in this.

Because not too long ago, this was a very up-to-date policy debate: In an article in 1981, Amjad compared Japan to ASEAN countries and wondered why small factories were so competitive in the former, and what other countries could learn with regards to the peculiar blend of Japanese labor-intensive industrialization.

I would like to bring this debate back to our attention and re-focus it on the urban space. After all it was here that small factories were even more competitive than at the national level.

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