Abstract

Current debate focuses on network structures and firm strategies. In this perspective, the analysis is concerned with allocative issues. This essay proposes a different interpretation. Starting from that theoretical framework, we emphasise the nature and the implications of different types of networks with respect to socio-economic development from a distributional point of view. Within this context, we develop the analysis of subcontracting as an analysis of governance in production by considering the attitudes of the actors involved, i.e. medium and small enterprises, and transnational corporations. The externalisation of activities by large transnationals, which characterises current corporate restructuring, is related to the search for greater flexibility, but also for greater power over governments, labour, and subcontractors. Differently, networks that are not directed by a large transantional could possibly reach, under particular conditions, important economies of scale or scope without breaking the links with localities. Our conclusion is that the impact of subcontracting networks varies enormously. An understanding of this is crucial not only to an understanding of experience in economies throughout the world but also to an understanding of future trends and possibilities. Not least, firms and public policy agencies currently looking to appreciate the role and significance of networking to their own success or to the success of the economies of which they are a part, need to understand the implications of different forms of subcontracting network and need to have some appreciation of the way those forms actually differ in practice.