Informal Institutions and Yamaha's Mysterious Diversion

This is a study of firms and about the experience of the two Yamaha--the Yamaha Corporation and Yamaha Motor Company. Despite the fact that Nippon Gakki, the predecessor of the two companies, had no prior experience in the motorcycle industry, the company made a decision to go into the new industry all of a sudden, and quickly succeeded in becoming gone of the dominant motorcycle manufacturers not only in Japan but all over the world. This paper attempts to understand why this happened through the lens of institutional economics and the emerging capabilities theory of the firm. Of particular focus is on the role of informal institutions in shaping the firm's objective.