Abstract:
Subcontracting relationship of local SMEs with TNCs of the host country can serve as an important channel for the transfer of knowledge and technology, enabling the enhancement of SME competitiveness. However, there are only few studies, which have probed various kinds of assistance flow from TNC to subcontracting SMEs using quantitative methods.
This paper analyses the extent, diversity and benefits of TNC assistance to SME subcontractors along with the factors for the variation of the assistance, using primary data collected from SME subcontractors of two Indian auto TNCs located in Bangalore. These SMEs were able to receive more of product related and purchase process related assistance and moderate managerial know-how related assistance. But the assistance was less for SME subcontractors who were in the growing stage of the relationship while it was more for SMEs who were in the enduring stage of the relationship.
Moreover, age of the relationship, technical education background of the entrepreneur and the nature of products supplied had positive effects on the TNC assistance in the growing stage of the relationship whereas only nature of the products had a positive effect on the TNC assistance in the enduring stage. Knowledge enhancement, superior work culture and quality improvement of the products were the major benefits these SMEs could achieve because of the relationship, apart from reputation and business volume.
This paper was contributed by Prof.R Sudhir Kumar, Department of Management Studies, IISc as part of Call for Papers for our World SME Conference 2009
