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SMALL AND MEDIUM ENTERPRISES AND REGIONAL PERFORMANCES IN ITALY
PIERLUIGI DADDI, LUCA PIERONI and LUCA SALMASI
Department of Economics, Finance and Statistics, University of Perugia
Keywords: Industrial clusters, SMEs, Regions Abstract
The paper attempts to investigate the relationship between the government of a territory (as Regions or State) and the small and medium enterprises that are settled in the same territory. We introduced the example of the Veneto Region., located in the North-East of Italy as a case of good management of these relationships and we shows some data of the SMEs of the selected area, that are often linked in different clusters of performance according to the different industrial production.
1. INTRODUCTION: ITALY AND SMES
The European Industrial Relations Observatory (EIRO), as well as other institutes that made annual survey on Italian's economy (such as ISTAT, Banca d'Italia and others University's studies), demonstrates every year how the Italian industrial division in composed mainly by Small and Medium Enterprises. Despite of this small dimension the Italian economy succeeded in being competitive and the so called «Made in Italy» leads in the fields of fashion (shoes, dresses, etc.), mechanic, food and furniture. This fact is due to the Italian firms capacity of self-organize themselves in networks called Industrial Clusters or Industrial Districts (it: Distretti Industriali).
The Industrial Districts phenomenon has been studied during the last 20 years from different points of view and from a large number of scholars (e.g. Piore and Sabel, 1984; Becattini, 1987, 2003 and 2009; et al.); nowadays scholars has identified the Industrial Districts as one of the possible organization of economic activities that overcome some of the limits of the classic big Fordistic firms and allow the competitiveness of the SMEs.
The aim of this paper is not to investigate other strictly economics aspects of the SMEs and of the Industrial Districts, but to explain how the Italian laws discipline the relationship between small and medium firms and the institutions (especially between SMEs and regions) and what this means in terms of governance.
In this article, we analyse the case of the Veneto Region and its Industrial Districts, to explain the politics and the governance system of the SMEs .
2. THE GOVERNANCE OF THE SMES AND INDUSTRIAL DISTRICTS IN VENETO
As we have just showed, industrial clusters are one of the main features of the Italian industrial model. This model of industrial development is characterized by small and medium-sized businesses that gather
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together in local and international production chains and develop an exceptional ability to react to the market.
Even if most of these territorial structures have been developed by themselves, at the beginning of the nineties the Italian Government understood that a law was necessary to better define and discipline this ensemble of SMEs.
The first law officially recognizing these de facto territorial structures is Law n. 317 of 1991, which defined the industrial clusters as «those local territorial areas characterized by a high concentration of small companies, with particular regard to the relationship between the presence of companies and the resident population and to the production specialization of the whole of the companies» and delegated the regions themselves to identify such clusters through regional laws. In this work we will analyze the Veneto Region as case study. Veneto is a region situated on the North East of Italy and is one of the leading regions in terms of GDP per capita, import and export. Moreover, Veneto is one of the region in Italy with the biggest concentration of SMEs: it is the third region in Italy for number of enterprise with less than 50 employees (277.151 enterprise on 4.738.313 inhabitants in 2005 ).
Veneto was one of the first regions to set out a regulatory framework and identify the clusters in its territory, in order to create specific development policies to encourage competition at a global level. The Regional Law n. 8 of 4th April 2003, «Regulations for Production Clusters and local industrial policies», defined a set of consistent rules for actions in favor of production clusters, providing criteria for the identification of clusters and the procedures for their recognition, as subsequently amended and implemented by other laws ( such as Regional Law n. 5 of 16th March 2006, «regulations for production chain aggregations, production clusters, and local industrial and production development actions»).
These laws established the identification criteria for the industrial clusters, based on a geographical subdivision of the territory in statistically defined administrative districts.
This Regional law introduces and regulates the concept of production cluster and meta-cluster , thus becoming a strategic tool for Regional industrial development policies. The broad presence of SMEs in the territory can be recognized in the whole region, and this implies that the meta-cluster becomes the focus for the implementation of the Region's economic development policies, through both competitive calls for grants and the new possibility of giving out prizes for best innovative projects (overall «start ups» and «spill outs»).
These reasons, expressed also in the official guidelines issued by «Veneto office for production clusters», characterize the regional law as far in advance of the 1991 national law, that was limited to the «legitimization» of the existence of the clusters on the basis of statistical parameters and delegated their identification to the individual regions.
The law permitted the definition of 10 meta-cluster and 34 clusters in the whole Region , but this is not the only way of identification of clusters of small and medium enterprises.
Besides these clusters, identified pursuant to the instructions in a regional law, the region also boasts an important industrial cluster project in the field of nanotechnologies, promoted at a national level by the Ministry of Education, University and Research: the Veneto Nanotechnology Cluster. This cluster was not originated by the more common and traditional bottom-up approach (typical in the other Districts), but a top-down logic. The Veneto nanotech cluster was created in 2002 within the framework of the 20022004 National Program for Research (NPR). The NPR, drafted by the Ministry of Universities and Research (MIUR) together with the regional administrations, identified a set of strategic areas for national research, in order to stimulate technological innovation and competitiveness in the national economy.
In particular, the program aimed to recognize and stimulate potential synergies between the Country's production specialties (Made in Italy) and some particularly dynamic high-tech sectors. This demonstrates how the laws could also help the creation of new realities and not only regulate the preexisting situation.
Once all those clusters have been recognized from an institutional point of view, they shall be stimulated and helped with appropriate policies promoted by the regional government.
This is how in Veneto the institutions (the regional government) and SMEs have a dialogue and how they are strictly networked together, but we would like also to show briefly some evidence of the performances of these SMEs linked in Industrial Clusters.
3. PERFORMANCES OF SMES, EVIDENCE FROM ITALY
Italian district firms are facing the effects of globalization: emerging Asian economies, China and India, and the new European currency introduction have lead to the obsolescence of traditional business strategies, i.e. costs reducing and leaders imitating.
The public support and the new form of competition gave to the firms the opportunity to record the results that you can find on this paper.
The national Italian Institute of Statistics (ISTAT) carried out a ten-year survey (within the framework of the industry and services census) of Italian clusters. The procedure adopted by the national statistical office does not refer to the definitions provided in the various regional laws on clusters; rather, it is based on statistical parameters used to identify the territorial concentration coefficient (or localisation coefficient), widely used to determine the economic importance of a specific production sector in a local economy within the context of the national economy. Moreover, ISTAT, in its census, uses cluster names based on their geographical location, not their production specialisation (as is the case in the regional law).
Given these differences, only 7 of the 44 clusters and meta-clusters identified pursuant to the regional law and mentioned in the list above, are monitored by ISTAT in its censuses (the latest one dates back to 2001).
For these Venetian clusters there is a series of more detailed information available to improve the level of comprehension, even if it is necessary to remember that they are not completely compatible with the classification contained in the regional laws, with few notable exceptions (for instance, the Montebelluna Sportsystems cluster is classified by ISTAT as the Montebelluna cluster).
As we can notice from the Graph 2.1 and 2.2 the companies, inside the industrial clusters, are SMEs and mainly operate in to the services sector. The average size of the industrial cluster's businesses is smaller, to facilitate specialisation and flexibility: companies prefer to be specialised in few phases (or even in just one phase) of the production process, but operate in pursuit of common goals and interests. The result is a chain of companies all working together and obtaining important successes on the market thanks to this work division process (that does not entail a lack of competition within the cluster itself).
As we can see in Graph 2.3, the average growth rate of the value added in the Italian clusters is not so surprising, but we have to take into account that:
- the cooperation between the public administration and district firms allowed the latters to record a good performance, this cooperation will be even more important nowadays, with the financial crises, to let firms hedging;
- there are some firms that have recorded an excellent performance, well known at an international level, i.e. Geox world leader in the production of shoes or Dainese leader in the production of protective sportswear.
In general, the territory where the cluster is located continues to play an important role from the point of view of the creation of know-how that supports innovation and activities with a higher added value; however the cluster's territory alone does no longer suffice to guarantee economic results: it must be supported by investments in R&D, design and ICT.
100 98 96 94
92 90 88 86
EE
Castelfranco Conegliano Montebelluna Pieve Di Soligo Portogruaro Este Montagnana Veneto
Graph 2.1: Dimension of firms and institutions (number of employees)
250 and more employees 50-249 employees 9-49 employees 0-9 employees
Source: ISTAT data (2005)
Euro 25.000 24.000 23.000 22.000 21.000 20.000 19.000 18.000 17.000 16.000 15.000
100 90 80 70 60 50 40 30 29 10 0
Castelfranco Veneto
Conegliano
Este
Montagnana Montebelluna Pieve Di Soligo Portogruaro
Graph 2.2: Structure of the employment in the districts per sector
Agricolture
Industry
Services
Source: ISTAT data (2005)
2001 2002 2003 2004 2005
— Castelfranco Veneto 22.440 23.303 23.521 23.896 24.206
— Conegliano 22.118 22.515 23.029 22.337 22.939
— Este 15.905 17.717 18.751 19.668 20.653
... Montagnana 18.446 19.198 19.957 19.541 20.663
— Montebelluna 22.520 23.591 24.788 22.418 22.080
— Pieve Di Soligo 17.366 18.243 20.144 21.293 22.813
— Portogruaro 18.463 18.987 19.164 20.972 21.494
Source: ISTAT data (2005)
Graph 2.3: Economic performance based on value added, value added per capita
%
%
4. CONCLUSIONS AND PERSPECTIVES
Due to the specificity of the economy, we all agree on the fact that to implement in Russia a system completely based on the Italian example of clusters and meta-clusters could be difficult or even impossible to realize.
Some advises, instead, could be useful to the legislators to develop SMEs businesses in his region, such as:
• Cooperation between institutions and networks of SMEs: as in Veneto already happened, a stronger relationship between authorities and entrepreneurs improves the results of the local business; the quality of the relationship itself and the lack of corruption helps the network to be well developed;
• Institutional support of SMEs activities: technical high schools, support in the export activities, concession of loans, creation of business competitions, implementation of a brand which defends the local business, etc;
• Marketing cooperation among SMEs: both upstream (purchasing cooperatives), and downstream (cooperation on sales, brand image and export);
• Both for institutions and for SMEs, it is mandatory to understand the reality of SMEs as a system of enterprises and not as an universe of unique and separated points: as the knowledge economy teaches, the presence of a big network of relations inside a local reality helps all the business processes through shared experiences, spill out, carry over and mutual trust (we should not forget that the SME reality is deeply involved in the local social network, much more than transnational companies).
REFERENCES
Becattini G., Bellandi M. and De Propis L.,2009, A handbook of industrial Districts, Edward Elgar Publishing, Cheltenham.
Becattini G., Bellandi M. and Dei Ottati G., 2009, From Industrial Districts to Local Development: an itinerary of research, Edward Elgar Publishing, Cheltenham.
Becattini G. and Dei Ottati G., 2006, The performance of Italian districts and large enterprise areas in the 1990s, European and Planning Studies, Vol. 14 No. 8, pp. 1139-1162.
Becattini G., 1987, Mercato e forze locali: il distretto industriale, Il Mulino, Bologna.
Coro G. and Volpe M., 2004, International fragmentation and cooperation polizie among local productive systems, Paper presented to SASE Conference, George Washington University.
ISTAT, 2006, 8° Censimento generale dell'industria e dei servizi. Distretti industriali e sistemi locali del lavoro 2001, ISTAT Publisher, Roma.
Piore M. J. and Sabel C. F., 1984, The Second Industrial Divide: Possibilities for Prosperity, Basic Books, New York.
