The effects of subcontracting forms on the sustenance of SMEs

Abstract

PurposeDespite the potential of SMEs in economic development, their activities have remained largely unsustainable in Nigeria. These enterprises are constrained by a number of challenges- high cost of production, poor power supply, high infrastructural deficit etc. which have made there operations largely unproductive. The purpose of this paper is to examine the effects of production subcontracting forms on the sustenance of small and medium enterprises as a panacea for achieving the targets of goal 8 of sustainable development goals (SDGs) in Enugu State, Nigeria.Design/methodology/approachThe paper adopted a number of methods comprising of field observations, a reference to relevant literature and a questionnaire survey of 96 SMEs. The paper also adopted a quantitative approach comprising of simple descriptive statistics of mean and standard deviation as well as regression analysis to analyze the data.FindingsThis paper found that the three forms of production subcontracting (supplier, specialized and capacity subcontracting) identified in the paper were used by SMEs to achieve sustenance (cost reduction, risk reduction and access to resources) in their operations. The paper suggests that the sustenance of SMEs through the utilisation of the different forms of subcontracting can become a strategy towards achieving the targets of SDG 8 in Nigeria.Practical implicationsThis paper has shown that the prevalent high cost of production and ever-increasing production risks, which are the common features of SMEs in Nigeria, can be mitigated through the various forms of production subcontracting analysed in this paper. SMEs, through seminars, workshops, entrepreneurship and business fares, can be encouraged to take up this strategy, considering its ability to address their various operational bottlenecks.Originality/valueThis study adds to the limited available evidence concerning the effects of subcontracting forms on the sustenance of SMEs in Nigeria. This study is the first to consider subcontracting forms and how they have led to sustenance SMEs in Nigeria.