Capability building and functions of SMEs in business groups: A case study of Toyota's supply chain

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This paper investigates interfirm relationships from the point of view of small- and medium-sized enterprises (SMEs) in Toyota's supply chain, and their capability building profiles. It addresses the overall organisation of the Toyota Group, taking into account the specific role played by SMEs. How do SMEs convert their resources in order to develop their capabilities, and what are their functions in this business group? After presenting the analytical and methodological frameworks, this paper discusses the historical development of the Toyota Group, focusing on organisational specificities built between the 1940s and 1960s. Then, it compares the trajectories of 13 SMEs in Aichi prefecture, through four main analytical cases constructed on two parameters: the nature of each firm's capabilities and the degree of participation in collective decision-making processes. This qualitative inquiry investigates both the construction of the external boundaries of business groups, and the overall function of SMEs. Copyright © 2013 Inderscience Enterprises Ltd.