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By Tetsushi Sonobe, Keijiro Otsuka

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These findings are similar to the case of garment producers in Kenya (Chapter 3). Moreover, in these regressions, the coefficients of manager’s prior experience and father dummy are positive and highly significant in 2000 but not significant in 2005. These results may reflect that managers’ specific production experience and help from their fathers in the garment business are important in determining the enterprise sizes only in the early year. The general ability of managers to collect and decode information and social relationships conducive to developing cooperation between enterprises and traders, however, has become more important for enterprise management over time.

He complained that he could not protect new knowledge embodied in samples of products if the samples were given to his subcontractors. 8 shows indicators of changes in the subcontracting system. Value added ratio is defined as the ratio of value added to revenue, which, according to Adelman (1955), can be taken as a measure of vertical integration. Over time, the value added ratio has increased, suggesting that the production structure of enterprises has been gradually moving towards vertical integration.

According to the managers in Laphu, finding reliable domestic and foreign customers has become increasingly important. Thus, managers who have relatives engaged in trading garments in foreign countries use this advantage to export their products. The community relationship seems to have been used as the major instrument of contract enforcement. Probably this explains why producers prefer to sell products to their relatives (Hayami, 2006). indd 17 9/30/2010 12:18:30 PM 18 Cluster-Based Industrial Development Managers in Laphu, however, could not have increased their export volume and expanded markets without improvement in the quality of products.

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