Same same, but different: the heterogeneous nature of subcontractors inside Italian industrial districts

Abstract

This paper investigates the structural features and performances of small firms interacting inside regional production networks, with particular regard to Italian industrial districts specialized in footwear production. A typological classification of the various participants in the supply chains is introduced and used to interpret the performances of the main groups identified, focusing on a five-year period following the 2008 financial crisis. The empirical investigation is conducted using an innovative archive containing detailed information on a large share of Italian micro and small firms that are generally excluded from most firm-level databases. The results show that, inside industrial districts, subcontractors are best described as a set of heterogeneous agents with distinct identities and idiosyncratic approaches to the market. The most widely diffused type of supplier still retains most of the structural characteristics traditionally described by the literature. However, industrial districts are also characterized by the presence of advanced forms of subcontractors whose organizational structure differs from that of a traditional supplier: in fact, such producers share more commonalities with end product firms. The analysis of the performances indicates that advanced subcontractors displayed better results during the period 2008–2012, while traditional suppliers tend to occupy a peripheral position in most subcontracting networks.

Keywords:

• Subcontracting
• suppliers
• industrial districts
• global value chain
• outsourcing

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The authors would like to thank two anonymous reviewers for their helpful comments and Fulvio Coltorti, who provided feedback and comments on earlier versions of the paper. The authors are grateful to Claudio Pirolli and Francesca Bacchiorrini for their support and assistance with the Be On Business database.

Notes

1. The literature has highlighted that the main reasons behind the diffusion of business groups in Italy are the lack of managerial abilities, the possibility to evade fiscal and labour security rules and the possibility to access to financial benefits reserved for small firms (Barca et al. 1994).

2. Sector Studies are a system of presumptive assessment implemented by the Italian Ministry of Economics and Finance to encourage SMEs tax compliance. Survey data is collected yearly by the Italian Tax Revenue Office and used by Soluzioni per il Sistema Economico S.p.A. to estimate taxpayers’ revenue. The upper boundary in terms of turnover to be included in the survey is 5.16 million euro.

3. The data is available at the firm level but the results are provided only if the information is relative to a number of firms which is greater than 5.

4. For the rationale of LLMAs as a unit of analysis, see Sforzi (2012).

5. The decision to limit the analysis to this subset of indicators is motivated by the fact that the majority of firms in the BOB database are small businesses that adopt a simplified version of the balance sheet. Therefore, most of the variables generally used to identify the standard economic indicators are not available for a relevant share of the observations included in the sample.