One reason that the Japanese economy continues to have so many small manufacturing firms is because large and small firms are linked and interdependent. Large manufacturing firms develop long-term subcontracting and distribution relationships with smaller firms. This allows the large firms to obtain parts and components at lower cost. They can also manage economic fluctuations by reducing subcontracts rather than by laying off their own employees. When business is good, the small firms benefit from their relations with large firms and share in the general prosperity. They may also benefit from the large firm’s technology and expertise