Subcontracting Structure and Productivity in the Japanese Software Industry

This paper presents an empirical analysis of the factors determining the productivity of the software industry in Japan, using individual data from the Survey of the State of the Information Service Industry conducted in August 2006 by IPA (Information-Technology Promotion Agency, Japan). This paper focuses on the relationship between the subcontracting structure and productivity in the Japanese software industry. Software enterprises are classified as prime contractors, intermediate subcontractors, end-contractors, and independent enterprise. A comparison of their productivity levels reveals that intermediate subcontractors are the least productive. However, it is observed that the intermediate subcontractors possessing a high quality of human resources measured the proportion of employees passing the Information Technology Engineers Examination (ITEE), or the intermediate subcontractors adopting the IT skill standard which defines the skills for IT human resources clearly and systematically, has a high productivity level. It can raise the productivity in software industry as a whole.