Italian Industrial Districts on the Move: Where Are They Going?

Abstract

Since the second half of the 1990s the Italian economy has experienced a significant slowdown in the rate of economic growth. The “dwarfism” of its manufacturing firms, their specialization in traditional sectors and their organization in industrial districts have been identified by many scholars as major structural weaknesses in the Italian industrial system. Nevertheless, there is a vast and flourishing empirical literature showing that many industrial districts are actually changing in terms of sector specialization, international and innovation strategies and emergence of new forms of enterprise organization. In this paper, we provide a critical survey of the new and different patterns of industrial organization emerging in industrial districts.

Acknowledgements

The authors wish to thank Jorg Meyer Stamer and the participants in the Italy-Korea workshop held at the Seoul National University for their helpful comments. Financing from PRIN 2005 is gratefully acknowledged.

Notes

According to ISTAT (2005), 60% of total manufacturing employment in Italian industrial districts is in districts specialized in the Made in Italy sectors. See the second section for further details.

This opinion has recently reached a wide international audience thanks to a special issue on Italy that appeared in The Economist (2005).

For a review see Paniccia (2002).

The unit of analysis is the local labour system (LLS), defined on the basis on information about home-to-work commuting from the 1991 Population Census. First, 784 LLS are identified on the basis of the degree of commuting characterizing each Italian municipality. These LLS are groups of contiguous municipalities characterized by a certain level of commuting to work. Second, IDs are identified within LLS if they satisfy the following requirements: (i) the percentage of manufacturing employees in the LLS compared to the total non-agricultural employment must be higher than the national average; (ii) the LLS is specialized in one particular manufacturing industry; (iii) the percentage of employees in the LLS working in firms with less than 250 employees must be higher than the national average. This identifies 199 IDs (ISTAT, 1997).

In Italy, there is an ongoing debate on the appropriateness of the identification method adopted by ISTAT. Among others, Iuzzolino (2004) proposed a methodology that does not use the LLS as the unit of analysis. For an accurate discussion of methodological issues related to identification of IDs, see Giovannetti et al. (2005).

In this paper we do not analyse the recent industrialization process in the south of Italy, which is mainly based on the development of some areas of old craft traditions and on the establishment of new districts. For an accurate analysis see Cersosimo and Viesti (2003).

Confirmation of this trend comes from the increase in the average number of municipalities included in districts from 12 in 1991 to 14 in 2001. Also, the IDs identified in 2001 show an increase in terms of average population, employment and geographic area (ISTAT, 2005).

Data refer to 1996. More recent data on exports in the 156 newly defined districts are not available.

In the past, Italy has frequently used competitive devaluations to boost exports.

Italy is also lagging behind with respect to other advanced countries in terms of FDI inflows. During the period 1990–2000, Italy slipped from eighth to ninth place (in favour of Ireland) in the EU15 ranking in terms of FDI attraction (ICE, 2005). This can be explained by historical deficiencies in terms of infrastructure, human capital, bureaucracy and inefficiency in the public sector.

This indicator is the number of foreign workers involved (directly and indirectly) in the supply chain governed by the Italian local system of production and is estimated on the basis of the value of production outsourced abroad and the average labour productivity of Italian FDI in the same sectors.

In a study on the footwear producing district of Barletta, Boschma and Wal (2005), using social network analysis, show that among the local firms, those few firms that are connected to non-local actors are the most innovative in the district.

Medium-sized firms are defined as companies with 50 to 499 employees and a turnover of 13 to 260 million Euros (Mediobanca & Unioncamere, 2005).

According to this view, the process of industrialization can be described by four consecutive patterns of capitalism: the first pattern dominated by large private families, such as Fiat and Pirelli, starting from the 1930s the “second capitalism” of large public enterprises, such as ENI and IRI, then since the 1970s the era of small firms and IDs and, finally, in the most recent years the fourth pattern characterized by the emergence of a significant number of new leading medium firms (Turani, 1996).

The authors do not include in their sample “pseudo-groups, in other words groups created for purely fiscal reasons.

The database includes only company groups, and excludes individual firms.

This latter finding is statistically significant only for groups specialized in the textiles and clothing sector, confirming the literature on IDs, which suggests that agglomerative forces play a more intense role in traditional clusters.