Subcontracting

Subcontracting is a particular form of service provision or cooperation in production between two enterprises. More specifically, it refers to the service provided by a subcontractor to a buying firm or a principal for the production of pieces, components, or subassemblies that are to be incorporated into a product that the principal will sell.

Depending on the disciplinary perspective taken, emphasis is placed on the nature of the economic relationship, the existence of a formal or informal contract, or the relationship of trust or subordination between the buying firm or principal and the subcontractor.

In the current intellectual climate, where particular attention is paid to institutions in industrial economies, this form of production organization is mainly interpreted using the theory of contracts or transaction cost theory. The ...