Global Value Chains and Open Networks: The Case of Italian Industrial Districts

Abstract

Italian district small and medium enterprises (SMEs) developed aggressive strategies to extend their sales networks and supply chains abroad. Literature on districts offered alternative explanations about the impacts of internationalization on local manufacturing systems. The authors consider the evolution of Italian districts in the framework of global value chain approach, focusing on the role of leading firms. Based on a survey of 650 Italian SMEs and financial indicators, the paper describes the rise of a new district firm model, the open network, which becomes a key node of global value chains. The paper also analyses the relationships among internationalization, innovation strategies and performance of SMEs.

Acknowledgement

The authors wish to thank Gary Gereffi and Jonathan Zeitlin for their helpful comments. The shortcomings of the paper are our responsibility alone.

Notes

TeDIS is the Center for Studies on Technologies in Distributed Intelligence Systems of Venice International University. For more information please visit http://www.univiu.org/research/tedis/research/tedissurvey/

The 2002 balance sheet was the last one available.

Based on the Kraljic's (1983) contribution, we defined as “strategic” a supplier that has a partnership with the firm and that is relevant for the competitive advantage of the company we interviewed (value creation). We defined as “subcontractor” a supplier that works on behalf of other companies. This form of supply chain management characterizes the Italian organization of district business-to-business relationships, where small suppliers work on raw materials and/or components provided by their customers.

More specifically, we used two sets of variables in order to assess the commercial and the productive presence abroad. The first one is represented by a variable measuring firm's direct investments in commercial infrastructures (located in Italy, abroad and neither in Italy nor abroad). We do not consider a firm's export ratio, as it does not discriminate between clusters. The international organization of production is measured through three variables: the percentage of strategic suppliers (of the total number for each company) abroad; the percentage of subcontractors (of the total number for each company) abroad; the presence of FDI. The SPSS two-step cluster procedure of analysis was used.

Data used to build clusters are from the industry median value (cumulative growth of the turnover and the gross operative margin/turnover), to avoid distort effects of the trend dynamics specific of firm industry specialization.