The strategic reactions of Italian firms to globalization under the EMU

Objectives. The paper aims at investigating the different strategic choices of Italian firms in response to globalization. Methodology. Firms are classified in four groups according to their productive efficiency and its dynamics, and the probability to fall in each category is estimated using a multinomial logit regression. Findings. We show that firms followed different strategies to respond to globalization under the constraints of the European monetary union. Human resource strategies appear to be at the core of strategic options: firms that showed sustained productivity growth used more qualified, high salary workforce, while other firms tried to keep the pace by lowering labour costs, by exploiting the market labour dualism. Research limits. The study is based on a sample of continuing firms and is silent about the actual effect of entry and exit on technological progress. We do not analyse productivity dynamics related to mergers and acquisitions. Practical implications. Dualism of labour market gave room to a “regressive”, short lived, adaptation of a group of firms to the increased global competition. A more balanced labour market would promote investment in human capital and push firms towards the use of innovation as competitive weapon. Originality of the study. The investigation relies on an original database with rich information about labour forces that allows us to study firm strategy. The use of efficiency measures combined with ordered logit model permits a novel look at the dynamics of Italian firm strategies.