Following WWII, Japan experienced three decades of rapid productivity growth and convergence with the US. This column studies the Japanese Productivity Program, a joint US-Japanese initiative to transfer American management and industrial knowledge to Japan. Overseas study trips were a key part of the programme, allowing Japanese managers, engineers, and union representatives to observe modern American factories, offices, and management systems firsthand. It finds that the programme helped firms grow in scale and management sophistication, laying the foundation for future productivity improvements, which made Japan a leader in industrial efficiency by the 1980s.
In the 1980s, Japanese manufacturing firms – led by Toyota and employing the iconic Japanese Management System – became global symbols of efficiency and innovation, outperforming traditional US companies in both productivity and product quality. These results were reached after three decades of strong productivity convergence between US and Japanese factories. In the late 1940s – in the aftermath of WWII – manufacturing productivity in Japan, as well as in Western Europe, was roughly one-third to one-half of US levels (Silberman et al. 1996, Van Ark et al. 1993). By the 1980s, Japan had closed much of the gap through rapid productivity growth.
However, over the past 30 years, the productivity gap between US and Japanese firms has started to widen again. The US has strengthened its productivity advantage, particularly due to the adoption of information technologies (IT), while Japan has faced slower growth, especially in its service industries.
These large fluctuations in productivity gaps between countries have long puzzled economists. At the aggregate level, differences in productivity account for at least 30% of the differences in average per capita income across countries (Hall and Jones 1999, Jones and Romer 2009). Moreover, even within countries, large productivity differences across firms and sectors exist and persist (Syverson 2004, Hsieh and Klenow 2009).
The Japanese experience raises a key question. What can explain such outstanding variations in productivity across firms and countries? One natural explanation is that it depended on the adoption of ‘hard’ technological innovations, for instance firm adoption of new machinery and information and communication technologies (ICT). Another important factor, however, could be ‘soft’ technologies, like management, which can be thought of both as practices (the management systems that firms put in place) and people (the CEO and other managerial talent that firms acquire).
In a new working paper (Giorcelli et al. 2025), we investigate the origin of Japanese management and its role in firm productivity growth.
After Japan’s defeat in WWII, the country faced the challenge of rebuilding its economy. Factories were destroyed, managers and engineers were purged, and productivity lagged far behind that of the US. To address these problems, the US and Japan launched a cooperative effort to transfer American management and industrial knowledge to Japan. This initiative, known as the Productivity Program, was modelled after similar programmes in Europe that had been part of the Marshall Plan.
The programme’s goal was to help Japanese industries modernise their management, production, and labour relations practices by studying successful American businesses. It also sought to foster cooperation between workers and management — an important goal in postwar Japan, where industrial relations were often tense. In 1955, the Japan Productivity Center (JPC) was established to lead the programme.
The heart of this intervention was overseas study trips to the US. These trips allowed Japanese managers, engineers, and union representatives to observe modern American factories, offices, and management systems firsthand. Between 1955 and 1961, when US funding was active, 3,986 Japanese participants joined 393 study trips, mainly to the US and later to Europe. Each trip involved several months of preparation in Japan, followed by a two- to six-week study tour overseas. Even after American funding ended, Japanese firms continued to finance these missions themselves, showing how deeply the initiative had taken root. Figure 1 shows the evolution of the number of Japanese participants, based on newly digitised data of Japanese programme participants.
Initially, top executives dominated these trips, but over time more middle managers and engineers participated, helping spread management reforms throughout companies, as shown in Figure 2. The focus of the trips also evolved over time — early missions emphasised factory productivity and industrial methods, while later ones covered topics such as corporate governance, human resources, and strategic planning.
The training heavily drew upon the US Training Within Industry (TWI) programme, a management system developed during the war to improve production efficiency. TWI emphasised:
- Job instruction (J-I): teaching supervisors how to standardise and communicate tasks
- Job relations (J-R): managing people effectively and maintaining morale
- Job methods (J-M): finding better, faster, and safer ways to perform tasks
Japanese firms enthusiastically adopted these ideas, but they did not simply copy them. Instead, they adapted TWI principles to Japan’s specific conditions of resource scarcity, close teamwork, and long-term employment. Over time, these ideas evolved into what became known globally as ‘lean production’ and ‘Kaizen’ (continuous improvement) — key pillars of Japan’s industrial success.
In Giorcelli et al. (2025), we provide the first quantitative evaluation of Japan’s Productivity Program. We digitised records of all participating firms from 1955 to 1988 and matched them with financial data from stock-listed firms between 1957 and 1976.
We find that participating firms were larger in size (in terms of both employees and sales) before joining the programmes, suggesting that bigger, more established firms were more likely to take part. After participation, these firms experienced faster growth in employment and total sales over the next ten and 20 years. However, labour productivity (sales per worker) did not increase significantly — indicating that growth was mainly driven by business expansion rather than by greater efficiency per worker.
These findings imply that the programme’s main contribution was to help firms grow in scale and management sophistication, laying the foundation for future productivity improvements rather than delivering immediate efficiency gains.
It should be noted, however, that the sample for this analysis is limited to stock-listed firms, meaning that many programme participants were not listed. Stock-listed firms are typically larger and may have less room for productivity improvements compared to small and medium-sized firms. To explore the programme’s impact for a broader set of firms, we are currently digitising and constructing a comprehensive firm panel database around this period.
In addition to its quantifiable outcomes, the programmes also likely initiated a cultural transformation. They promoted systematic management, teamwork, and the belief that every worker could contribute to improvement. The Japan Productivity Center also brought American consultants to Japan and published extensive materials to spread these ideas domestically. By the late 1950s, Japan’s productivity movement had grown into a nationwide campaign supported by businesses, unions, and the government.
Japan’s success eventually inspired other Asian countries. With US encouragement, Japan helped establish productivity centres in Taiwan (1955), Korea (1957), India (1958), and Pakistan (1961), and the Asian Productivity Organization (APO) was founded in 1961. By the 1960s, Japan had transitioned from being a recipient of technical assistance to becoming an exporter of management knowledge, sharing its experience with neighbouring countries.
The Productivity Program marked a crucial stage in Japan’s postwar reconstruction. It helped Japanese managers learn modern business practices, improved communication between management and labour, and fostered a culture of continuous improvement. The combination of American training principles and Japanese adaptation ultimately led to innovations such as Toyota’s lean production system, which later influenced manufacturing worldwide.
By the 1980s, Japan had become a leader in industrial efficiency — so much so that the US and other countries began to study Japanese management methods. In a sense, the Training Within Industry ideas that America exported after WWII were later ‘re-imported’ in the form of Japanese lean production techniques.
Authors’ note: The main research on which this column is based (Giorcelli et al. 2025) first appeared as a Discussion Paper of the Research Institute of Economy, Trade and Industry (RIETI) of Japan.
This article first appeared on VoxEU on December 5, 2025. Reproduced with permission.
