1 AIT Asian Institute of Technology

Structure and role of subcontracting in the informal small-scale manufacturing sector : a study of the garment and fabricated metal industries in Seoul, Korea

AuthorKwon, Tae-ho
Call NumberAIT Diss. no.HS-94-01
Subject(s)Small business--Korea--Seoul

NoteA dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy, School of Engineering and Technology
PublisherAsian Institute of Technology
Series StatementDissertation ; no. HS-94-01
AbstractOver last two decades' research of the urban informal sector(UIS) has led to the recognition of its role in providing income and employment opportunities to about 40-65 percent of urban working labor of developing countries. However, when the issue is the growth potential of the sector, it is not good enough to simply contend that the sector has a promising future because of its current contribution to income and employment. Though inf01mal-formal sector subcontracting linkage has been seen as a possible contiibutor for the evolutionary growth and expansion of the sector, the empirical knowledge and insight on the linkage are far from sufficient to reach an agreement upon which efficient planning policies could be drawn. Largely due to individual researcher's intellectual inclination, informal sector subcontracting studies have not been conducted in a very objective way. This is reflected in the preoccupation of one set of studies with the theory of capital accumulation and another set's with that of positive aspects of subcontracting. Furthe1more, most of the existing studies tended to cover a few aspects of the linkage, and thus failed to provide a comprehensive picture on the mechanism and the impact of the linkage. With this in view, this study aims to explore and assess the structure and role of subcontracting linkage with a case study of the ga1ment and the fabricated metal industry in Seoul, Korea. In order to examine nature of the subcontracting relationship, terms and conditions of the transaction were analyzed. Here, a pa1ticular emphasis was placed on the significance of the contractors' subcontracting motivation, subcontracting market structure, and subcontracting stability as factors influencing the nature of informal small-scale subcontracting. It is seen that the metal subcontractors, overall, are in a better position in negotiating terms and conditions of the transaction with contractors than the garment subcontractors. A comparative analysis of the working process, the related issues including the relationship among workers, and the level of production facility suggests small subcontractor firms' potential for technical and skill improvement. As major factors underlying locational pattern of the ga1ment and the fabricated metal subcontracting chain, the significance of production immediacy, access to consumer market and the government's industrial location policy were highlighted. In the analysis of inter-film cooperation, it is found that the small subcontractors pursue smooth and efficient production through the different types of cooperation with the related shops. In pa1ticular, advantage of saving on overhead cost, risk alleviation and innovation are observed from the newly emerging trend of joint production and joint utilization of advanced machine/tool in the metal subcontracting and this is considered as an important impact of subcontracting production in the study area. Through the assessment of both the contractors' assistance to the subcontractor films, positive role of the contractors is partially discernible, particularly in the metal subcontracting. In the analysis of technical and economic impact of subcontracting, it is found that, compared to the garment subcontractors, the metal subcontractors have more frequently experienced expansion or modernization of production facility, change of raw material and production method. In the analysis of macro-level factors affecting growth of the subcontracting production in Korea, the impact of the government's small/medium industry (SMD policy and labor market changes was highlighted by relying on the related secondary data. On the whole, two major conclusions are drawn. Firstly, the nature of subcontracting relationship is neither exclusively exploitative iii nor totally beneficial to small subcontractors. Rather, both exploitative and beneficial elements mark the linkage pattern at the same time. Secondly, the potential for the evolutionary growth and expansion of the small subcontractor firms is clearly greater in the metal than in the ga1ment subcontracting. With regard to policy implication, an emphasis is placed on the necessity of the government intervention in the info1mal-formal sector subcontracting transaction in order to correct the unfavorable terms and conditions of the transaction such as excessive unit price discounting and delayed payments, especially in the ga1ment subcontracting. In the metal subcontracting, an important policy direction is development of concrete programs such as establishment of a district center for technology and market information and a district fund for the small metal subcontractors by which their potential for evolutionary growth can be financially assisted and technically reinforced.
Year1994
Corresponding Series Added EntryAsian Institute of Technology. Dissertation ; no. HS-94-01
TypeDissertation
SchoolSchool of Engineering and Technology (SET)
DepartmentOther Field of Studies (No Department)
Academic Program/FoSHuman Settlement (HS)
Chairperson(s)Amin, A.T.M. Nurul
Examination Committee(s)Weber, Karl E. ; Routray, Jayant Kumar ;Shrestha, Ram M. ;Haruo, Nagamine;
Scholarship Donor(s)Government of Japan ;
DegreeThesis (Ph.D.) - Asian Institute of Technology, 1994


Usage Metrics
View Detail0
Read PDF0
Download PDF0