Determinants of subcontracting and regional development: An empirical study on Turkish textile and engineering industries

Taymaz E. and Kilicaslan Y. (2005) Determinants of subcontracting and regional development: an empirical study on Turkish textile and engineering industries, Regional Studies 39 , 633-645. Recent studies on small- and medium-sized establishments emphasize the importance of networking and regional clusters for (regional) industrial development. This study is focused on an important form of cooperation between firms: the subcontracting relationship. The aim is to identify the determinants of subcontracting in Turkish textile and engineering industries and to derive policy implications from our empirical analysis. Subcontract offering and subcontract receiving models are estimated for both industries by using panel data on all establishments employing ten or more workers between 1993 and 2000. The findings show that a short-term/unequal relationship exists between clients and subcontractors in the textile industry, whereas subcontracting relationships in the engineering industry are established between 'similar', relatively advanced firms with complementary assets and technologies. Moreover, subcontracting flourishes in regions densely populated by firms.