(DP 1981-12) Subcontracting and Technological Deffusion in the Philippine Manufacturing

Abstract

Policy-makers in developing countries, long frustrated with the difficulties, encountered in programs to foster small-scale industry, are giving increased attention to the scope that exist for large firms to assist in the development of small firms. In spite of the large literature on Japan, the nature and extent of inter-firm linkages in developing countries is a relatively unexplored field. This paper present a preliminary analysis in subcontracting in the Philippine appliance and motorcycle industries based on a recent survey of firms in the industries. Local content in these industries rose significantly in the 1970s, partly as a result of government policies, but inter-firm linkages remain very weak, and large firms play a minor role in upgrading the technical and managerial capacity of smaller firms. This situation is likely to remain unless there are some fundamental changes in the industries. Government attempts to promote subcontracting in themselves are unlikely to contribute to a significant strengthening on inter-firms linkages.