Small and medium-sized enterprises and their use of organizational forms in Japan after World War II

ABSTRACT This study investigates how people recognize and use organizational forms in the process of economic development. In order to do this, I will focus on the recognition and use of the corporate form as well as the private limited liability company (PLLC) form in Japan after World War II (WWII). Before WWII, the corporate form was considered as an instrument for big businesses, while the PLLC was for small and medium-sized enterprises (SMEs). After WWII, however, many SMEs started to use the corporate form, even though they could not fulfill all the legal obligations. Even though this situation was criticized as ‘abusive’ use of the corporate form, SMEs continued to use it, but the extent to which they preferred it to the PLLC form has changed over time. By referring to discussions of legal scholars as well as statistical data, I found that several different factors affected this phenomenon: the trustworthiness of corporations, the cost of using the corporate form, and its usefulness for the modernization of management.