Introduction

1The transfer of technology has been studied and analyzed extensively in terms of flows between North-South countries. More recently, an important concern has been the transfer of technology within the boundaries of the firm, that is, between the R D function and production, R D and marketing or among individuals (see, for example, Gupta et al. [1985], Souder and Padmanabhan [1989] and Leonard-Barton [1995]). However, in the most recent works, it is the inter-organizational transfer of technology that is capturing interest : alliances, joint-ventures or buyer-seller relationships among highly sophisticated firms have become an important topic of study. With regards to aeronautics, the transfer of technology has been assessed mainly for related firms belonging to other industrial sectors (Lambert, 1993). We are interested, however, in the transfer of technology that takes place between closely related firms. Thus, our work focuses on the technology transfer among subcontracting firms within the aeronautical industry. In this setting, we expect a high potential for such transfers because of the high complexity of the technologies required for its products and processes. However, we are also interested in exploring their interconnectedness to foresee the possible effects their relationships might have on the quality of the technology transfer.

2The purpose of this chapter is to present the main findings of our exploratory research, which looks at the technology transfer that occurs in subcontracting relationships between six subcontractors and one main contractor in aeronautics ; Quebec’s aeronautical industry has been selected as the focus of our study. In this research, our objectives are : (1) To explore for the types of subcontracting agreement in the aeronautical industry and to propose a theoretical typology of subcontracting for practical application to the aeronautical sector ; (2) To explore the possible impact of each type of subcontracting agreement and of the way the relationship is managed on the quality of the transfer of technology ; and (3) To provide some empirical evidence to main contractors so that they can become aware of the potential of their subcontractors as a source of technical information and capitalize on the opportunities for developing knowledge and innovation through a combination of their know-how.

3We begin by describing the main features of Quebec’s aeronautical industry to characterize the research setting. Then, we review previously published works for definitions of subcontracting and the most relevant criteria to approach subcontracting, before proposing an integrated framework for assessing technology transfer in subcontracting relationships in the aeronautical industry. We continue by describing our study and discussing our findings. Finally, some important implications for managerial actions are discussed. We conclude by highlighting the technological potential of subcontracting and by suggesting the opportunities that both the main contractor and its subcontractor could exploit.

Quebec’s aeronautical industry

4Highly concentrated in Montreal and surroundings, Quebec’s aeronautical industry represents 57 % of the Canadian aerospace industry (see, for example, Grammond [1997]). It has a strong position in international markets (e.g. Bell Helicopter Textron has almost 60 % of the world-market share for civilian helicopters, CAE Electronics has 70 % of the world market for flight simulators and Pratt Whitney has 40 % of the world market for turbo-propulsion engines). The industry is “naturally” organized as a three-level pyramid in the same pattern as the international aeronautical industry (Lambert, 1989) (see Figure 1). In the first two tiers, there are 12 main contractors - the final aircraft assemblers (such as Canadair and Bell Helicopter Textron), and manufacturers of highly sophisticated equipment (such as simulators by CAE Electronics) and major subsystems (such as Pratt Whitney and Rolls Royce). In the third tier, there are about 140 subcontracting firms (Lefebvre et al., 1993).

Figure 1. Structure of Quebec’s aeronautical industry

5This hierarchy results in highly interconnected firms because subcontracting takes place horizontally as well as vertically. For example, Pratt Whitney deals with more than 70 of the 140 subcontractors in the sector and some of its subcontractors, medium-sized firms, are subcontractors of other main contractors (for example, Canadair and Rolls Royce), but at the same time they can also be main contractors for many other small- and medium-sized businesses. Therefore, it is no surprise to see the development of networks, partnerships and manufacturing consortia within which streams of technical information flow following different patterns that are not strictly hierarchical.

6The main features of this industrial sector are the degree of precision required in the manufacture and assembly of products and the complexity and variety of technologies that demand an ever-increasing specialization and segmentation of the manufacturing processes. The primes, the first tier, work on final product design, assembly and marketing, while the second tier of subcontractors provides them with engines, propulsion systems, undercarriage systems, fuselages and main subassemblies. These major subsystem manufacturers, the second tier, hold the industrial property of the goods they provide to the primes. These specialized suppliers own their know-how, holding patents and supplying brand name products. Their products are customized or at least adapted to the specifications dictated by the primes in terms of quality, flexibility and delivery.

7In the third tier of the pyramid are the more “traditional” subcontractors and suppliers of special products. These subcontractors offer a large spectrum of services in the fields of mechanics, thermal and surface treatments, electronics, computers and transformation of composite materials. The specialized suppliers’ fields are cutting tools, screwing, melting and other areas. The main contractors delegate this type of service and activity, but the subcontractors are subordinated to technical guidelines, blueprints and schedules.

8Thus, Quebec’s aeronautical industry carries on a highly heterogeneous and wide range of interrelated subcontracting activities, from the manufacture of simple and highly standardized parts to highly sophisticated, customized subassemblies. We find in this high-tech environment, a rich context for the study of such issues as flows of technological information, technology transfer and innovation. It should be noted that some firms in this sector spend up to 16 % of sales on R D (Senik, 1992 ; Grammond, 1997).

9The aeronautical sector faces most of the issues that characterize the business environment nowadays, that is, increasing competition, globalization, turbulent and changing markets, rapid technological change, and the growing need for a knowledgeable workforce (Lefebvre and Lefebvre, 1999). In short, it is an industrial sector highly committed to innovation strategies emphasizing supply chain management and subcontracting partnering (Fitzgerald, 1997 ; Grammond, 1997).

Revisiting subcontracting

10Subcontracting has been generally considered as a practice driven by cost reduction or as an option to cope with manufacturing capacity fluctuations. Nevertheless, it has been identified as a strategic component and as a factor of change since the 1970s (see, for example, Byle-Ottenheim et al. [1973]). More recently, some changing trends have been observed, inspired by the Japanese business model of supplier relationships and driven mainly by the adoption of such management programs as Total Quality Management and Just-in-Time, whether as a result of efforts to become a world-class organization or simply as a consequence of obtaining ISO 9000 certification, where the development of criteria for supplier selection is required. Still, the growing complexity of technologies makes it increasingly difficult for a single company to master all the knowledge and know-how required for the manufacture of its products, a situation that contributes to the ever-increasing number of subcontracting agreements, partnerships and strategic technological alliances.

11At the same time, a reduction in the number of subcontractors accompanied by the disappearance of small, non-innovative firms has taken place. Some have been replaced by subcontracting firms that no longer perform a passive role of simply producing what they are asked to do. Consequently, firms are becoming more involved at the early stages of product design, development and manufacturing. Firms largely recognize that supplier relationships are important technically, economically and managerially, as well as strategically, if they are to maintain and improve their competitiveness regardless of their size or the industry sector to which they belong. But apart from the reduction in the supplier base (Pratt Whitney, for example, reduced its supplier base from 800 in 1986 to 330 in 1992), and a re-thinking of the type of relationship (partnering, alliance or other form), the determinants of subcontracting relationship still need to be explored to provide an understanding of its full potential and to identify the role it could play in the current business environment.

12By looking for the operationalization of this business concept called subcontracting in order to determine the types of subcontracting emerging in the aeronautical industry, we find in the literature that the term itself is multi-faceted and potentially heterogeneous. We observe that many efforts have been reported to define subcontracting as a business concept but perhaps because it involves neither buying nor outsourcing, but rather some combination of the two, this ambiguity has not helped disentangle its complexity. In Table 1, we present some definitions to illustrate the diversity of meanings and the plurality of perspectives. Some authors consider subcontracting in a very general way (Valentin, 1979), others as a form of internationalization (Zampetti, 1973), as a part of outsourcing (Barreyre, 1968 ; Chaillou, 1977 ; Patry, 1994) or as a simple form of collaboration (Tidd et al., 1997). Although the characteristics of the subcontracting relationship are studied by some authors, they generally do not circumscribe all its dimensions (see, for example, UNIDO [1975], Manzagol and Saintonge [1990] and Martin [1992]).

13By considering the commonalities, we can only state that subcontracting is a relationship whereby a firm, named the main contractor (or the prime contractor), places an order with another firm, named the subcontractor, for the manufacture, transformation, assembly and/or finishing of a component incorporated into a good to be sold by the main contractor. However, many questions remain unanswered : does subcontracting have some specific properties that could be enhanced to get more than a cost reduction, a better quality of products and services or a good relationship ? What is needed to manage a subcontracting relationship ? How should the technological dimensions of subcontracting be approached ? And, finally, how should a subcontracting agreement be characterized in a practical manner ?

14The literature review does make it possible to distinguish between two broader perceptions of subcontracting, just like two opposite streams : the one stemming mainly from the marketing and purchasing domains, emphasizing the potential of subcontracting partnering with dynamical actors involved in innovation and technology (see, for example, Axelsson [1987]), and the other arising mainly from the technology transfer literature, where subcontracting remains an asymmetric relationship under the guidance of sophisticated and established firms in developed countries teaching very small firms (usually in less developed countries) the basics of the industrial discipline, such as production efficiency or quality. These two streams suggest a fundamental question about subcontracting, that is, what are the conditions that lead to one perception - or reality of subcontracting - or the other ?

15The typologies developed do not provide an answer because they are inevitably determined by the nature and complexities of subcontracting definitions and perspectives. In fact, we find a wide range of criteria reported leading to different types of subcontracting agreements (see Table 2).

16It should be noted that no classification takes into account the technological dimension. In fact, subcontracting as an environment for technology transfer and knowledge creation by the combination of know-how between a main contractor and its subcontractor has not been sufficiently analyzed. It is surprising that the technical dimension has not been considered in the typologies because some previous works have revealed the important role of the technology contribution in subcontracting agreements. For instance, Amesse et al. (1989) found that in the performance of contracts, unexpected technological results such as the “commercialization of new products and services” by the subcontractor, followed by improvements in “organization and methods” are the most significant by-products of the development of technologies in the subcontracted activities of the European Space Agency for the Canadian space industry. The same results have been reported early on for the European aerospace industry (BETA, 1980, 1988) and later for software development in the service industries (Garcia et al., 1996).

17Therefore, to capture the technological elements contained in subcontracting, we adopt the general typology developed by Garcia et al. (1996), which takes into account suppliers’ innovation and technology transfer capabilities. By combining this typology with the most relevant criteria identified in the typologies presented in Table 2, we propose three types of subcontracting likely to occur in the aeronautical industry. In ascending order of technological component, they are defined as :

• Subcontracting of economy (small suppliers) : simple, customized work (finishing, assembly, drilling, etc.) not requiring product innovation ; mainly cost-reduction-driven activities ; highly limited autonomy even in the choices of production methods ; the subcontractor is highly dependent on the main contractor, which is sometimes its sole customer.
• Subcontracting of specialization (up-and-coming suppliers) : performance of work by a subcontractor that has better facilities - tools, equipment and personnel - than the main contractor ; the subcontractor has developed special techniques with or without the assistance of the main firm ; the subcontractor has the skills required to improve the technical drawings and quotations provided by the main contractor and occasionally performs new product development and/or processes and improves them continuously. The main contractor and its subcontractor’s technical structures (information and competencies) are complementary.
• Subcontracting of supply (competitive technology suppliers) : the subcontractor owns the rights or property of goods delivered to the main contractor ; the subcontractor performs the design, chooses the means of production, constantly develops new products/processes ; and carries out procurement and technology transfer at international levels. This relationship is characterized by a better equilibrium in the power of negotiation with the main contractor.

18Because the purpose of our research is to explore the role of subcontracting, and more specifically the possible impact of the type of subcontracting agreement on the quality of the technology transfer that takes place between a main contractor and its subcontractors, we also take into account the managerial issues involved. In fact, we could expect that different types of subcontracting agreements should have a different impact on the quality of the technology transfer, depending on the way the relationship is managed. Thus a subcontracting agreement could lead to different forms of technology transfer depending, for example, on the strategic choices performed by the managers and/or the way they are implemented. However, technology transfer happens at different levels : product design and adaptation, manufacturing processes, organization and management. It can also take different forms or modes : licensing on the basis of patents and know-how, equipment sales, technical assistance, quality control and conformity to the specifications and standards, training, access to technological information and so on. It follows that we need to integrate the many variables and characteristics involved. This subject is discussed in the following section.

An integrated framework for assessing technology transfer in subcontracting

19To ensure integration of the managerial dimension into the technology transfer dimension already contained in the typology derived, we propose four key criteria for assessing any type of subcontracting agreement : (1) The main contractor’s strategic objectives (why the main contractor subcontracts, i.e. the main contractor’s decision) ; (2) The subcontractor’s capabilities and overall competencies (what the subcontractor can do, and the subcontractor’s core capabilities as well as its limitations, as defined by Prahalad [1993] and Javidan [1998]) ; (3) Innovation and technological transfer capabilities (how the technology transfer takes place, i.e. the technological content of the subcontracting relationship) ; and (4) The characteristics of the management style (how the subcontracting agreement is managed, i.e. the relationship and the interactions).

20The proposed integrated framework is presented in detail in Table 3. It describes the elements of the four criteria already portrayed, allowing for a meaningful characterization of subcontracting while distinguishing among the three types of subcontracting proposed in the previous section. So we define :

• subcontracting of economy, as the relationship that exhibits the lowest quality of technology transfer and the highest level of dependency responding to a cost driven strategy on the part of the main contractor ;
• subcontracting of specialization, as the relationship that involves a more relevant quality of technology transfer and a medium level of dependency where labour division is the main contractor’s goal ; and
• subcontracting of supply, as the relationship involving the highest quality for the transfer of technology and a low level of dependency fulfilling the technological leadership strategy followed by the main contractor.

21This framework constitutes the conceptual basis of our exploratory research, as well as a preliminary proposition for practical purposes to the aeronautical sector to be adapted or refined by individual firms.

Quality level of the technology transfer

22We have postulated that the quality of the technology transfer is implicit in the type of subcontracting. However, at the same time, we are looking for the impact the type of subcontracting agreement could have on the quality of the transfer. Thus, to approach the relationship between the type of subcontracting agreement and the technology transfer, we should start by considering that the technology transfer, as well as subcontracting, is both a process (link, connection, learning process, exchange) and a contract. Our hypothesis is that subcontracting could channel the transfer of technology. In addition, beyond the fact that it could facilitate the dissemination of knowledge or its adaptation to the specific conditions of a subcontractor, we also assume it as a contributing factor to technical and scientific knowledge and to the innovation process of the firms involved.

23Accordingly, the quality level of the technology transfer should be determined by the following : the content of the transfer, that is, more or less basic know-how versus highly specific know-how transferred or basic technologies versus key technologies transferred ; the dynamic extent of the transfer, that is, unidirectional (one-way transfer only), bi-directional (a two-way transfer, an exchange), or multi-directional (a set of relationships involved in exchanges, a network formed at least by the main contractor and its subcontractors) and the scope of the transfer, that is, the implicit knowledge shared (innovation capabilities developed, strategic exchanges) accompanying the explicit knowledge specified by the terms of the contract. Consequently, our hypothesis is that the type of subcontracting contract and the way it is managed should have a direct influence on the quality of the transfer.

24When technology transfer is conceptualized as a process, the assessment of its quality should involve both the type of subcontracting agreement and the way the relationship is managed. So, we could assess the quality level through the absorptive capacity of the subcontractor, the content, the dynamic extent and the scope of flows of technological information, that is, through the management style characterizing each type of subcontracting agreement. Yet, a subcontracting agreement could lead to different forms or modes of technology transfer, but it could also interfere with and inhibit this transfer depending on the way it is managed. It follows that a low quality of technology transfer will likely occur when technology is mastered only at control levels characterized by unidirectional flows of information, occasional contact frequency, discrete contacts and exchanges limited to the contract. A higher quality of technology transfer should occur when technology is mastered at levels where innovation takes place partly because bi-directional and multi-directional flows of information are developed, systematic and continuous contacts among participants take place, and exchanges are a result of shared strategic orientations rather than dictated by contract clauses. Firms involved in this type of subcontracting agreement should be empowered to deploy their innovative capabilities, management skills, and communication and collaborative abilities so as to reach ever higher quality levels.

Table 3. Integrated framework for assessing technology transfer in subcontracting

25These are the main arguments supporting our goal to determine the extent to which a given type of subcontracting could induce technology transfer, the type of transfer possible and the conditions favouring or impeding the technology transfer. They are all essential elements for driving us to propose the framework.

Our study and findings

26To meet the objectives of our exploratory research, we structured the study through the formulation of the following four propositions, subsequently confirmed by the results :

27P1. In the aeronautical industry, subcontracting leads to different types of agreements and contracts.

28P2. The quality of the technology transfer between a main contractor and its subcontractor is influenced by the type of subcontracting agreement.

29P3. The quality of the technology transfer between a main contractor and its subcontractor depends on the way the relationship is perceived and managed.

30P4. Subcontracting has the potential to contribute to the process of knowledge creation and dissemination through bi-directional and multi-directional interactions.

Methodology

31Nine in-depth, structured interviews were performed, three of them with managers highly involved in the strategic decision-making process of awarding subcontracting agreements for a main contractor, a firm that has an excellent reputation in Quebec’s aeronautical industry and is internationally recognized. These managers each identified two subcontracting agreements where, according to their judgement, technology transfer took place (the identified subcontracting agreements concern complex accessories, tooling parts, spare parts and raw materials, none considered critical). At the same time, they also provided us with the necessary information to contact and perform interviews with the six subcontractors involved in the identified agreements.

32Although this is a “convenience sample” and not a random one - since the agreements were selected by the respondents - the research is in fact a combination of two data-collection methods : the information, ideas and perceptions of those who have practical experience (nine people directly involved in the six subcontracting agreements) and case analysis. It should also be noted that we collect dyadic data from both the main contractor and the subcontractor for each subcontracting agreement, so as to assess their relationship.

33As a support for the interviews we used a questionnaire that circumscribes, in detail, the aspects summarized in the integrated framework presented in the previous section and asks for general information, technology transfer and management of the relationship (Dragoste, 1997).

34It should be noted that this research is exploratory, not allowing for generalizations (Maxwell, 1996). It is not our purpose to test the framework proposed, but rather to use this framework to provide some evidence of the dynamics of the technology transfer processes occurring in subcontracting relations. So, the application of the proposed framework to the six subcontracting agreements allows us to explore some issues which are summarized in the next section.

Main findings

Findings on the type of subcontracting

35The data collected allowed us to classify the six subcontracting agreements. Effectively, we found different types of subcontracting agreements in our sample. By applying our framework, we identified three agreements as subcontracting of economy, one agreement as a hybrid of subcontracting of economy/subcontracting of specialization - indicating that a sharp classification is not always possible, one agreement as subcontracting of specialization and one agreement as subcontracting of supply.

36Surprisingly, we also observed in our sample, that economy prevails in the subcontracting agreements and blurs all the other objectives. In fact, the group of respondents disagree with regard to the perceptions developed concerning their agreements. The respondents give different responses regarding the type of subcontracting agreement and the main contractor’s strategic goal. Subcontractors systematically perceive their subcontracting agreements (all six agreements) as the result of the main contractor’s cost-driven strategy, whereas the main contractor respondents recognize this strategy in only half of the agreements (the three agreements classified as subcontracting of economy).

37What we observed in our sample is that the main contractor looks after the technology transfer, but its actions do not support its objectives, particularly when assessed by the terms of the contracts and the management of the relationship. Thus, its subcontractors always perceive a cost-driven strategy, and this perception blurs any other objective. These facts suggest that subcontracting is always both a subcontracting of economy and a subcontracting of supply or specialization, thus joining the results observed by Dyer and all (1998) for a larger sample in US automakers partnering. These authors reported “an intriguing finding” when they studied US automakers and suppliers arguing that “partnering do not differ significantly from the arm’s-length relationships” because cost-driven behaviour prevails. Nevertheless, our observations further suggest that a subcontracting of economy also seems to foster subcontracting of specialization or of supply.

Findings on the nature of the technology transfer

38We also observed in our sample, that technology transfer effectively takes place but it is mainly unidirectional, going from the main contractor to the subcontractors except for subcontracting of supply, where a bidirectional transfer of technology is revealed, suggesting that the type of subcontracting could have a major impact on the dynamic extent of the transfer. Multidimensional transfer is not exhibited by any type of subcontracting in our sample.

39We also observed that partnering is not the rule. Even when these subcontracting relationships take place in a very dynamic high-tech industrial sector, “traditional” subcontracting practices still dominate (high dependency, one-way technology transfer, absence of innovative capabilities in the technology transferred). It suggests that cost reduction, increasing productivity, flexibility and competitiveness - all being essential elements required to succeed in a context of globalization and rapid technological change - constitute a complex environment that does not yet allow for sharing collaborative and interactive strategies, regardless of the type of subcontracting agreement involved and the long-term duration that characterizes all the agreements analyzed.

40Concerning the mode of the technology transfer, our sample shows that the most common mode is quality control and conformity to standards set by the main contractor. This mode of transfer is always present regardless of the type of subcontracting agreement, as should be expected because of the precision requirements for products in this industrial sector. More or less the same is observed for access to technological information, while training is limited only to subcontracting of specialization. Technical assistance indicated by the main contractor as a mode of technology transfer for the agreement, classified as subcontracting of supply, is not recognized by the subcontractor, highlighting once again the differences in their perceptions.

41Concerning the content of the transfer, we observed that product design and development, manufacturing processes as well as organizational and managerial transfers are more frequent in subcontracting agreements of specialization and supply. Subcontracting of economy is strongly limited to organizational and managerial transfers and occasionally to transfer in manufacturing processes. No product design or product development transfers were reported.

42In addition, the absorptive capacity of subcontractors is observed only in terms of control and maintenance of the technology transferred for most of the agreements. Capabilities for modifying the transferred technology are limited to subcontracting of supply and specialization, while capabilities for innovating on the basis of the transferred technology are completely absent in all the agreements.

43Innovation capabilities as core competencies related to products are constantly deployed only in the context of subcontracting of supply. Process innovation was reported as occasional and in only one of the subcontracting agreements of economy.

Findings on management of the subcontracting relationship

44In analyzing the type of subcontracting agreement and management of the relationship, we observed in our sample, that the frequency of communication between the main contractor and its subcontractor is systematic only for subcontracting of specialization and supply. For subcontracting of economy, it is individualized with formal and well-identified channels of communication. Moreover, formal and standardized documents exist for all types of agreement. Formal meetings and informal exchanges were also reported, and the scope of communication is said to be on contract and strategic matters. Paradoxically, all respondents agree on these two aspects though, at the same time, they reported a strong dependency or at least a medium dependency in all the agreements. It must be taken into account that under one of the agreements, subcontracting of specialization, 90 % of the subcontractor’s sales are to the main contractor.

45While our sampling does not allow for generalization, we observed nevertheless a higher quality level of the technology transfer confirmed for subcontracting of supply (in the subcontractor’s absorptive capacity as well as in content, dynamic extent and scope of the transfer though with room for improvements). A lower quality level was observed for subcontracting of economy.

46It should also be noted that, with regard to the main contractor’s requirements concerning the transfer of management technologies for continuous improvement, a subcontractor expressed misgivings saying that, in addition to the insecurity created by the clauses of their contract, now they were asked to disclose confidential information concerning costs and manufacturing processes. He also added that because of the nature of the knowledge transfer involved, they were forced to disclose their technical competencies. These observations illustrate the negative perceptions that a subcontractor develops and their impact on the technology transfer : instead of favouring the transfer, the subcontractor resists it because he feels deprived of its unique source of power, the minimum control over the uncertainty faced by its main contractor.

47Apparently our observations are in opposition to the findings of Kamath and Liker (1990), particularly because their work reveals that dependence promotes supplier innovation and investment. Instead, we observe that dependence inhibits and limits the transfer of technology. In fact, we rather think that our observations stress the importance of the managerial dimension of the dyadic relationship, which is not considered by the contingency approach of Kamath and Liker (1990). Indeed, our observations agree with the “inconsistency” dimension identified by Ford et al. (1986). Inconsistency, that is “ambiguity or lack of clarity in interactions”, captures the dynamic nature of any relationship. This dimension makes it possible to align dependence behaviour with the two versions (or perceptions) developed in any type of subcontracting agreement, because it induces changes in intentions and interpretations, thus allowing for the opportunities that subcontracting offers and the corresponding managerial actions needed to improve the subcontracting relationships.

Implications for managerial actions

48As a growing number of companies “are emphasizing supply chain management” in aeronautics and seeking to form partnerships with their subcontractors (Fitzgerald, 1997), this study suggests for them some practical as well as conceptual aspects, as follows.

49The learning process. It should become a key issue for taking advantage of the potential of subcontracting relationships. Our research suggests that there is room for change in terms of management practices regarding agreement and contract clauses and new product development capabilities. Managers are asked to create synergies between tangibles - material resources, equipment - and intangibles - knowledge, relationships, perceptions - to ensure the performance of their firms. The business conditions in the aeronautical industry demand from managers that they know how to collaborate with their suppliers and customers. The integrated framework for assessing subcontracting provides a practical guide for identifying improvement aspects. It also constitutes a preliminary structured tool to be tested, adapted and refined by individual firms. It could also be useful for aligning the type of agreement to be developed and the aspects that a firm - a main contractor or a subcontractor - should consider to trigger its action and make a match possible between its technological needs, managerial actions, relationships and objectives. The logics underlying suppliers’ management is that not all subcontractors need to develop the same type of subcontracting, some kind of segmentation is required. However, this does not imply that partnering is convenient exclusively in one type of subcontracting. In fact, different aspects of any subcontracting relationship could be enhanced by different types of partnering and emphasis on developing a “dyadic relationship”, rather than promotion of individual interests and interpretations. The more managers are involved in developing partnering, the easier it will be for them to identify the appropriate aspects and required actions to succeed in building subsequent subcontracting partnerships, thus elaborating further on the framework proposed.

50The nature of subcontracting contracts. Trust is a critical component of the development and maintenance of a client – supplier relationship when a long-term partnership to the advantage of both is envisioned (Smaltzer, 1997). We observed in our sample, that subcontracting agreements and contracts are usually complex and, more often than not, take the form of an open contract rather than a long-term contract, leaving the subcontractor in a fragile situation involving constant insecurity. In the cases we studied, the subcontracting agreements have a contractual nature described, in principle, by a long-term condition and continuity. There is a formalized period associated with the contract but no end date. In practice, because of this kind of clause, the main contractor seems to exercise implicitly a form of control over subcontractors (in terms of cost, quality and delivery). However, in reality, we argue that the main contractor misses an opportunity to build up a more profitable relationship. Under these conditions, it is no surprise that subcontractors resist sharing useful information and restrain their technological exchanges or any form of collaboration. The combination of know-how does not take place, technology transfer is inhibited and no knowledge creation or innovation really occurs. Development and implementation of coherent policies and practices stimulating and promoting an environment that facilitates and intensifies the exchanges, such as guarantees for the partnership and defined incoming business for a period of time, could significantly improve the working conditions and reinforce the relationships. These practices should, ultimately, result in the sharing of strategic orientations with carefully chosen subcontractors having common interests. When the relationship reaches that level, it becomes a powerful competitive advantage for the main contractor and the subcontractor alike. It then becomes possible to obtain much more than cost and quality-control benefits from a subcontracting agreement : innovative collaboration, knowledge creation and technological developments should also normally be fostered.

51Autonomy and dependence. Our observations also suggest that by regarding technology transfer and innovation opportunities not as by-products but as strategic components, main contractors could develop a specific capacity for building up and improving their subcontracting relationships. We observed that some subcontractors attribute a negative value to the information provided because they interpret the transfer as an interference by the main contractor in the management of their business. Firms want to keep their autonomy and be independent. Therefore, an adapted style of management that takes into account the subcontractor’s should provide for autonomy as well as for a “convenient dependability” established between the parties allowing for space for individual and collaborative growth. Moreover, it can be recognized that, because of strong dependencies, main contractors cut themselves off from any benefit and learning experience stemming from subcontractor networks through other types of relationships. Establishing complementarity between a main contractor and its subcontractor should then be essential for fruitful collaboration.

52Different perceptions. Our study suggests that if technology transfer is perceived as a control instrument, it will not be favoured by a subcontractor. However, if the main contractor does not facilitate exchanges by inhibiting the technology transfer, the subcontractor will not share its technological resources. As long as a subcontractor perceives technological transfer as a “threat” that increases its dependence and improves the main contractor’s ability to control the relationship, the technological potential of subcontracting relationships is misused and undermined. Consequently, a learning process that transforms the capabilities of a main contractor and its subcontractors should be supported by involvement, aligned perceptions and a shared vision for building on a competitive advantage that will favor a continuous flow of innovation and technology transfer allowing for business consolidation of both the main contractor and its subcontractor.

Conclusion

53Our study is exploratory and, as such, analyzes a limited sample of subcontracting agreements. Still, it allows us to observe a recurrent concern and an old question that confronts management practitioners and academics alike : the gap between formulated strategies and actions. Our observations suggest that perceptions play a key role in the assessment of this gap in addition to being a strong indicator of the inner contradictions in the actions performed :

1. We observed in our sample that perceptions of the subcontracting relationship limit the potential for high-quality technology transfer. Even when the main contractor is concerned with technology transfer, cost-driven actions blur the technological objectives of any type of subcontracting agreement.
2. Even though the six subcontractors are aware of a technology transfer, they were unwilling to accept it, suggesting that it is perceived as a threat that will increase their dependency. A transfer does occur, but it remains unidirectional and limited.
3. It has also been observed that some managerial conditions of contracts are not conducive to a better quality of technology transfer : open contracts, formal communication and a limited amount of informal communication do not create opportunities for implicit knowledge exchanges.
4. The many contradictions arising from the analysis of subcontracting relationships should lead us to ask whether high-quality technology transfer is indeed possible under the conditions of the subcontracting agreements in question.

54We have argued that the essence of high-quality technology transfer is partnership, sound collaboration, cooperation and sharing. A strategy that calls for “learning to collaborate”, knowing the partner, and discovering complementarities, as well as “double loop learning” as defined by Argyris (1991), should be required for the two-way technology transfer that is the basis for multidimensional exchanges. The subcontracting relationship could become a “quasi-firm” but our study suggests the necessity of additional efforts, and a commitment by management if the benefits of the investments in subcontracting are to be achieved. The framework proposed here could well constitute a basis to perform future research on a larger sample of main contractors and their subcontracting relationships.