Knowledge transfer under subcontracting: Evidence from Czech firms

We investigate the significance of subcontracting arrangements as a source of knowledge transfer and increased efficiency for Czech firms during 1993- 96. We draw on detailed enterprise surveys and interviews with the managers of 373 manufacturing firms in the Prague region. The results suggest a pos itive correlation between employee training and subcontracting. Subcontract ing is also associated with a reduction in variable costs and a price premi um on the stock market. The effect of subcontracting on other firms in the same industry is weak. A high share of subcontracting activity in a particu lar industry is associated with increased valuation of firms without foreig n partners as investors anticipate more 'subcontracting arrangements. (C) 2 000 Elsevier Science Ltd. All rights reserved.