The Generalizability of the Hidden Investment Hypothesis in Leading Japanese Corporations

The present study tests the generalizability of the hidden investment hypothesis (Wakabayashi, Graen, Graen, & Graen, 1988) for Japanese management systems. The hidden investment hypothesis was derived from a 13-year longitudinal study of the career progress of a cohort of 85 college graduates who joined a single Japanese company in the same year, and states that the higher the quality of the vertical exchange relationship between a manager and supervisor, the greater the career progress of that manager. To test for the generalizability of the hidden investment hypothesis, 1,075 line managers at four different hierarchical levels were sampled from five of the leading corporations in Japan. Hierarchical regression and path analysis showed that both vertical exchange quality and hierarchical level contributed uniquely to investments in managers’ careers after the contributions of company, age, tenure, education, technical specialty, and intrafirm mobility were controlled. The contributions of these control variables were estimated and a summary path diagram is presented. Implications of these findings for our understanding of Japanese management development are discussed