Leadership Lessons from Japan’s Cotton Spinning Industry

Shared Leadership More Likely Leads To Long-Lasting Success

Nov 10, 2020
Management and Organization
As Featured In 
Strategic Management Journal

When it comes to a company’s success, many have wondered whether it’s better to have one strong leader at the top or several leaders sharing the responsibilities. Leadership in firms that became enormously successful in the early Japanese cotton spinning industry might have the answer, according to new research from Maryland Smith, published in the Strategic Management Journal.

Maryland Smith professors Rajshree Agarwal and Serguey Braguinsky, together with Hitotsubashi University's Atsushi Ohyama, examined leadership structures from successful firms in Japan’s cotton spinning industry during the late nineteenth and early twentieth centuries.

With regard to the longstanding question of whether solo or shared leadership matters more to a company’s success, the first, preliminary answer is neither, says Agarwal. However, a more in-depth analysis shows that shared leadership is more likely to lead to long-lasting success, provided some other conditions are met. These conditions have to do with the stability of the top management team, she says.

“Contrary to what I had thought prior to starting this study, firms that become particularly successful are not being spearheaded by strong, powerful individual leaders,” says Braguinsky. “They actually tap into diverse talent of team-based leadership where each individual leader caters to their own strengths and relies on other members to complement him or her.”

“When leadership is shared, you will see conflict. It’s not the conflict itself that prevents the company from growing or succeeding, it’s how conflict is managed that determines it,” says Agarwal, the Rudolph P. Lamone Chair and Director of the Ed Snider Center for Enterprise and Markets.

“Stable shared leadership was at the heart of firms that ultimately attracted the best candidates and grew to become centers of gravity,” says Braguinsky, an associate professor at Maryland Smith.

Deviating from the traditional methodological approach of specifying a hypothesis, the researchers used a historical method that examined archival data and identified patterns between successful firms.

The Japanese cotton spinning industry lent itself well to this research, Agarwal says, because it shares similarities with today’s major tech companies like Google and Microsoft with regard to heightened competition and their role in shaping their entire industry.

It was also an ideal industry to study, Braguinsky says, because of the abundance of preserved data at their disposal.

“What came with this industry’s success was a remarkable trove of data, which included what and how things were produced, the cost of production and issued shareholder reports from every half year,” says Braguinsky. “The comprehensive business histories coupled with detailed econometric analysis allowed us to see what leadership styles translated into firm growth.”

The analysis revealed that firms where leaders ironed out conflicts by showing a willingness to promote talent in defiance of glass ceilings created by prevailing social norms were more successful in the long run.

These firms were able to leverage their superior managerial skills by scaling their operations, including through the acquisition of plants with superior technology, noted Braguinsky.

These lessons are worth taking note of by current firms if they want to scale and eventually grow to become centers of gravity within their industry, says Agarwal.

“The goal isn’t to avoid all conflicts, without them, no one is challenging each other. But conflicts arising from ethical infractions or personal disagreements should be reduced so that leaders can pay attention to the successful resolution of strategic conflicts,” she says.

“If you can focus on that, then you are much more likely to succeed.”

Read the full research, “Centers of Gravity: The Effect of Stable Shared Leadership in Top Management Teams on Firm Growth and Industry Evolution,” in the Strategic Management Journal.

 

About the Author(s)

Serguey Braguinsky is an Associate Professor at the University of Maryland Robert H. Smith School of Business and the Department of Economics, a Research Associate at the NBER Productivity, Innovation, and Entrepreneurship Program, and an Affiliated Fellow at the Institute of Social and Economic Research, Osaka University.

Rajshree Agarwal

Rajshree Agarwal is the Rudolph Lamone Professor of Entrepreneurship and Strategy and director of the Ed Snider Center for Enterprise and Markets at the University of Maryland. She studies the evolution of industries, firms and individual careers, as fostered by the twin engines of innovation and enterprise. Agarwal's scholarship uses an interdisciplinary lens to provide insights on strategic innovation for new venture creation and for firm renewal. She routinely publishes in leading journals in strategy and entrepreneurship. An author of more than 60 studies, her research has been cited more than 10,000 times, received numerous best paper awards, and funded by grants from various foundations, including the Kauffman Foundation, the Rockefeller Foundation and the National Science Foundation. She is currently the co-editor of the Strategic Management Journal and has previously served in co-editor and senior editor roles at Strategic Entrepreneurship Journal and Organization Science respectively.

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