Strategic and operational choices for small subcontracting firms: Empirical results and an interpretative model

Based on empirical research, presents an interpretative model of the dynamics occurring in the subcontracting relationships between large purchasers and small subcontractors. Shows that the small units often supply a product that is not sufficiently differentiated and technologically advanced; are for the most part dependent on a few large purchasers; find it increasingly difficult to follow the contractor's quality and reliability requirements; have an adequate amount of machinery but neglect other forms of investment (i.e. in data processing equipment, education and training); and have problems with the introduction of innovations especially due to the lack of a skilled workforce. Illustrates the subcontracting behaviour of small businesses by means of a model which considers two aspects: the ''strategic positioning'', evaluated in terms of kind and object of subcontracting; and the ''operational positioning'', regarding the introduction of innovations into the operations. The different areas of strategic and operational positioning are discussed in terms of competitive and earning success. Indicates a possible strategic-operational development pathway leading towards more qualified subcontractors/large purchaser relationships.