This research analyzed the effects of subcontracting firm’s transaction relations on technological innovation, by extracting 505 firms, including service and manufacturing industry, from 「Technology innovation network investigation」 carried out by PKNU Industry-University Cooperation Foundation in 2014. Transaction relations were defined by outside technical cooperation network that contrasts with market oriented firm and characteristics of subcontracting firm (delivery dependence on main transaction firm, transaction duration and delivery competition). Also technological innovation was defined by new product development, product improvement, process innovation and patent application. The result of the analysis can be summarized as followed.
First, results from analyzing outside technical cooperation network shows that in the case of subcontracting firms, customer firms contribute to process innovation and patent application, in the case of market oriented firms competitors contribute to new product development and suppliers of raw material & component contribute to product improvement and process innovation. From this, it can be inferred that different outside technical cooperation networks contribute to technological innovation. However, suppliers of raw material & component contribute to patent application of both subcontracting firm and market oriented firm.
Second, delivery dependence on main transaction firm showed a reverse U shape for product innovation(new product development, product improvement) but showed minus results in only linear terms for patent application. This suggests that the subcontracting relations with main transaction firm can be beneficial in the aspect of technical cooperation but if the dependence on the main transaction firm is too high, it can lead to adverse effects.
Third, it is proven that transaction duration with the main transaction firm contributes to process innovation and from this we can infer the benefits of continuous long-term contract. The reason why transaction duration contributes to process innovation is because subcontracting firms are process innovation oriented in relation with customer firms.
Fourth, delivery competition in the aspect of product improvement and process innovation for 5 or over suppliers, compared to sole supplier, showed minus difference and did not form a reverse U shape. However, when it became over 10 suppliers, the minus absolute value increased and showed the negative effect of excessive delivery competition on innovation outcome. On the other hand, difference in amount of patent application was found for more than 10 firms and this can be interpreted as a result of supplier firm’s action to exclude competing firms as delivery competition increases.