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