Construction business systems in Japan: General contractors and subcontractors

The Japanese construction sector is characterized by the predominance of large general contractors, with multiple layers of small contractors and subcontractors working under their umbrella. Against the background of huge construction demand created by modernization (starting in 1868) and the resultant changes in the construction business (building style, materials and project scale), large general contractors and subordinate subcontractors gradually created a distinctive contracting system. The development process of the construction business based on collaboration and not free competition is discussed with particular emphasis on the unique nature of the contracting system using historical- and institutional-based analyses. One of the competitive strengths of general contractors lies with project organization at construction sites. How the subcontracting of building projects is controlled by general contractors and how subcontractors respond to their subordinate position is explored. Current strengths, inefficiencies and problems of the construction business are identified and possible systemic reforms are suggested, such as the development of competent subcontractors to revitalize the Japanese construction industry along actions for contractors, subcontractors, private- and public-sector clients.