SME subcontracting as bridgehead to competitiveness: framework for an assessment of supply-side capabilities and demand-side requirements”, Asia-Pacific Development Journal

The current business environment is typified by fierce global competition and rivalries, more sophisticated and ever-changing final markets, and profound transformations in production technologies and supply organizations. Inter-firm subcontracting offers a ready short cut to enhancing productivity and other non-price determinants of domestic and international competitiveness. However, a more objective and systematic approach is needed to induce convergence of supply-side capabilities and demand-side prerequisites from the partner firms. A framework of 78 guidelines and parameters is proposed to assess and benchmark the capabilities and competitiveness of small and medium-sized enterprises (SMEs). Subcontracting preconditions from transnational corporations and large enterprises, 14 in number but involving 36 mostly composite variables, are derived from a large number of case studies. The survey and matching-up processes can also help relieve the chronic shortage of data and information on SMEs, long a constraint on policy efforts to foster SME sector development itself. SMEs are, and will remain, the economic backbone of most developing countries in the foreseeable future. SMEs are an important source of social and regional stability in terms of overall job creation and employment opportunities for women and for those with limited skills and capital in particular. They can be found across domestic regions and in peri-urban areas, including many locations disadvantaged by access or poverty. The promotion of SME efficiency and dynamism can thus yield increasing social and economic returns in virtually all economies. Indeed, the threshold of tiger capitalism of a conglomerate nature may have been reached along with the 1997/98 economic crisis among most of the first- and second-generation “miracl