How does subcontracting matter for SME performance? An empirical examination in the Indian context

Growth over a period of time can be used for performance measurements of Small and Medium Enterprises (SMEs) since this, rather than short term performance, will reflect the long-term strategy of the firm. Subcontracting relationship with large enterprises, especially Transnational Corporations (TNCs), can be an important source for technological innovations of SMEs leading to their better performance. An attempt is made in this paper to probe into how far Indian SMEs carry out technological innovations as a result of technology and other related inputs acquired through subcontracting relationships and achieve growth using the case study approach covering two SMEs in Bangalore. Customer requirements were the major causal factors while internal factors such as self-efforts and in-house technical capability along with external factors in the form of technical inputs, suggestions and initiative from Large Enterprises (LE) customers were the sources of innovations for these SMEs. Because of these innovations, SMEs achieved growth in terms of investment in plant and machinery, output and customer base, which are ideal indicators of SME performance.