Local Development in Italian Districts "After the Deluge"

The Italian industrial structure is characterised by the importance of SMEs and their weighty contribution in terms of employment, sales and exports. The international competitiveness of Italian SMEs has been enhanced by another peculiarity of the Italian industrial structure: the sectoral concentration of production in specific, small, areas. The industrial districts borne by this concentration were instrumental for the development of many areas of Italy which were eccentric from the powerhouses of Italian industrialisation and development, the large conurbations of the North-West (the “industrial triangle” Turin-Milan-Genoa). The additional distinctiveness of these districts was the strong interaction with the local community, thereby the Italian districts can be seen as an evolution of the Marshallian industrial district. This evolution is characterised by the importance that in the establishment and successful development of these districts had the community and the people of the area. According to Becattini, a homogeneous system of values and views is a preliminary requirement for the development of a district and the people forming the local community are integrant part of the districts. This structure was subjected to increasing tension because of the globalisation process. At the beginning it made easier for the district firms to move to international market and greatly expanded their areas of activity (in many districts, exports made up more than 50% of the total turnover). But globalisation increased also the competition, in particular from low cost countries. This put pressure on the leading firms in the districts, the ones that were actually present in the foreign markets. The pressure to lower costs to remain competitive against these new rivals induced many of them to outsource some inputs and/or to delocalise. These measures had indeed the expected result of reducing the production costs of these firms, allowing them to remain competitive (sometimes increase their competitiveness) in the world market. However, the fragmentation of their production in different countries and the disarticulation of their value chain was in part the negation of the constituting factors of the districts: the homogeneous community sharing values and views could barely survive the shifting of local jobs to other parts of the world. The downside of globalisation for Italian industrial districts was that either their firms shifted the production in lower cost countries – terminating the connection with local territory and community – or they could not face the increased price competition and disappeared from the market. In either case the result was, or might have been, the end of the district, the reversing of the developmental process, the relative impoverishment of the area and the disintegration of these forces that made the districts and their firms the engine of well-balanced development of many areas of Italy. The last ten years have been rather disruptive for the Italian districts. The paper will look at two of them. One that has managed to weather the storm and is still home to a number of internationally successful companies and still deeply rooted in its local territory. The other that has succumbed to the evolution of the situation and has basically ceased to exist. Causes of success or failure shall be investigated and the effect of the evolution, in its various steps, on the local territory evaluated.