Do contractors undertake more learning and innovation than multinational subsidiaries at least developed host-sites? A study of clothing firms in Cambodia

This paper seeks to test the argument that contractors introduce significant learning and innovation activities comparable more or than integrated multinational clothing producers at least developed host-sites. This follows from recent developments in the theory of multinationals that lead firms are increasingly abandoning peripheral innovation activities that are characterised by low value added operations to focus on branding and associated R&D activities. Any such development will offer opportunities for contract manufacturers, both national and foreign owned, to upgrade and specialise in innovative activities related to manufacturing at distant host-sites as the brand holders at major markets will then specialise on product R&D and design, and branding activities. The results from tobit regressions show that contract firms show higher process technology and innovation capabilities (ICs) than integrated firms in the clothing industry. Hence, there is econometric evidence to support the argument that changes in manufacturing offers tangible opportunities for contract manufacturers in global value chains to upgrade into cutting-edge processes and techniques, and ICs.