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Subcontracting dynamics and economic development: A study on textile and engineering industries

Author

Listed:
  • Erol Taymaz

    (Department of Economics, METU)

  • Yilmaz Kilicaslan

    (Department of Economics, METU)

Abstract

Recent studies on small and medium sized establishments emphasize the importance of networking and regional clusters for industrial development. This study is focused on an important form of cooperation between firms: subcontracting relationship. Our aim is to estimate the determinants of subcontracting in Turkish textile and engineering industries, and to derive policy implications of our estimates. We estimate subcontract offering and subcontract receiving models for both industries by using panel data on all establishments employing 25 or more workers in the period 1988-97. Our findings show that short-term/unequal relationship exists between parent firms and subcontractors in the textile industry whereas subcontracting relationships in the engineering industry are established between "similar", relatively advanced firms that have complementary assets and technologies.

Suggested Citation

  • Erol Taymaz & Yilmaz Kilicaslan, 2001. "Subcontracting dynamics and economic development: A study on textile and engineering industries," ERC Working Papers 0108, ERC - Economic Research Center, Middle East Technical University, revised Aug 2001.
    • Handle: RePEc:met:wpaper:0108
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    File URL: http://www.erc.metu.edu.tr/menu/series01/0108.pdf
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    References listed on IDEAS

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    1. Yossef Spiegel, 1993. "Horizontal Subcontracting," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 570-590, Winter.
    2. Richard Arena & Joël-Thomas Ravix & P.M Romani, 1992. "Firm, coopération and subcontracting," Post-Print halshs-00469059, HAL.
    3. Belderbos, Rene & Capannelli, Giovanni & Fukao, Kyoji, 2001. "Backward Vertical Linkages of Foreign Manufacturing Affiliates: Evidence from Japanese Multinationals," World Development, Elsevier, vol. 29(1), pages 189-208, January.
    4. Kumar, Nagesh, 1996. "Multinational Enterprises, New Technologies and Export-Oriented Industrialization in Developing Countries: Trends and Prospects," UNU-INTECH Discussion Paper Series 1996-02, United Nations University - INTECH.
    5. Gonzalez-Diaz, Manuel & Arrunada, Benito & Fernandez, Alberto, 2000. "Causes of subcontracting: evidence from panel data on construction firms," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 167-187, June.
    6. A E Clarke, 1994. "Spatial Linkages and Subcontracting Relationships among High-Technology Industries in the Northeast Ohio Region," Environment and Planning A, , vol. 26(10), pages 1579-1603, October.
    7. Christerson, Brad & Appelbaum, Richard P., 1995. "Global and local subcontracting: Space, ethnicity, and the organization of apparel production," World Development, Elsevier, vol. 23(8), pages 1363-1374, August.
    8. Kelley, Maryellen R. & Harrison, Bennett, 1990. "The subcontracting behavior of single vs. multiplant enterprises in US manufacturing: Implications for economic development," World Development, Elsevier, vol. 18(9), pages 1273-1294, September.
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    Cited by:

    1. Tanmoyee Banerjee (Chatterjee) & Ajitava Raychaudhuri, 2011. "Subcontracting, Renegotiation Of Contract And Quality Provision," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 56(01), pages 113-144.
    2. Joaquín Andaluz, 2009. "Vertical product differentiation with subcontracting," Papers in Regional Science, Wiley Blackwell, vol. 88(4), pages 785-798, November.
    3. Sanda Renko & Alica Grilec Kauric & Mario Lesina, 2014. "Dealing With Crisis: Using Subcontracting For The Development Of The Croatian Leather Manufacturing And Processing Industry," Interdisciplinary Management Research, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 10, pages 463-474.
    4. Saibal Kar & Meghna Dutta, 2018. "Outsourcing and Productivity During Economic Crisis: Evidence from Indian Manufacturing Firms," Arthaniti: Journal of Economic Theory and Practice, , vol. 17(2), pages 168-182, December.

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    More about this item

    Keywords

    Subcontracting; firm cooperation; vertical integration;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment

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