Decision-Making by Precedent and the Founding of American Honda (1948–1974)

by Ramon Casadesus-Masanell and John Heilbron

Overview — While the production and distribution of goods in a firm is commonly overseen by a hierarchy of management, decision-making within these organizations is often frenetic. This paper demonstrates empirically that the president of American Honda made important strategic decisions by following the precedent set by his boss and former mentor, Honda’s chief strategist, Takeo Fujisawa—by making careful, educated guesses about how Fujisawa would have addressed similar issues. This study identifies the guiding influence of historical precedent and hypothesized intentions and emphasizes the social character of strategic decision-making.

Author Abstract

American Honda was founded in 1959 as a wholly owned subsidiary of the Honda Motor Company to facilitate sales and distribution in the United States. The details of American Honda’s early history have long served as evidence in debates among scholars and practitioners about the managerial determinants of the subsidiary’s success. In particular, it is debated whether American Honda operated according to a deliberate or emergent strategy, i.e., whether or not strategic decisions made in the States conformed to the intentions of upper management. This paper presents evidence that Kihachiro Kawashima, president of American Honda from 1959 to 1965, made important decisions according to precedent set by his boss and mentor, Honda’s chief strategist, Takeo Fujisawa. It presents further evidence that these decisions may have contributed to the recovery of American Honda from its sales crisis during the late 1960s and its continued success thereafter. Addressing ourselves to concepts in the management literature, we argue that strategy realized by the appeal of subordinates to the historical precedent of their superiors defies categorization as deliberate or emergent.