The discreet charm of the districts

Over the last few years the phenomenon of the Italian industrial districts has been closely studied. Documents devoted to the districts as case studies for their ability to reconcile development and employment have been discussed at both "G7" and European Union summits. Delegations of journalists, university professors and public administrators of various countries have asked to interview business owners, local administrators and union officials. Italian economic diplomacy uses the districts as the cutting edge of the Made in Italy image, and recently prestigious business schools have begun to study the phenomenon as well, in order to derive useful indications for regulating multinational companies. Beyond the special attention given to the phenomenon by journalists in search of novel trends, certain facts stand out in the economic development of the country: the districts constitute the largest reservoir of resources and know-how in Italian industry; they are the structure which has best preserved the vast patrimony of handicrafts, art, natural resources, culture and gastronomy of our past; at the same time they are also the most aware of and open to new developments, eager to meet the challenges posed by globalization.
The districts constitute an original and effective response to the new systems which are rising from the ashes of the "mass production" systems with a new set of competitive rules. Thus the industrial districts are often indicated by the expressions "post-fordism" and "neo-handicraft".

The recipe of the districts

Problems obviously do exist in the Italian districts and their recipes for development are not the only ones possible, nor necessarily the best in every situation, yet the "menu" which they offer is one which many governments would like to achieve today:

• dynamic companies, rooted in the territory and projected toward international markets;
• limited unemployment rates in the presence of above average levels of activity;
• high level of participation of the female population in economic activities;
• per capita incomes above the national average (and often above European averages).

The discreet charm of the districts is tied to a multitude of economic, social and regional factors. In the general classification drawn up each year by the IMD of Lausanne, Italy occupies the 34th position, in sharp contrast with our international rank which places us in fifth position for Gross National Product and third position for trade balance. It also contrasts with our 46th place in the classification regarding the quality of public services, 45th place in terms of the efficiency of the parliamentary system, 43rd place as far as business taxes are concerned and 42nd place with regard to the presence and management of infrastructures.
Various interpretations have been brought forward to explain these Italian anomalies; many agree in emphasizing that the real protagonists of our excellent economic performance are the small and medium-size companies of the industrial districts whose exports have greatly contributed to the success of "Made in Italy": approximately one third of Italian exports are produced by companies which operate in the industrial districts . These small companies have managed to secure large shares of international markets with a series of products that are rich in non-material content such as fashion and design, display a sensitivity for beautiful things, and are sustained by historical, cultural and social factors tied to the history of our country and its particular lifestyle. In every sector in which Italy is a protagonist on the international market, the role of the districts is decisive.

The Economic Foundations of the Districts

In studies on industrial organization, the concept of industrial districts was introduced by Alfred Marshall towards the end of the last century. Remaining for years at the margins of economic doctrines, it was retrieved in the 1970s by Giacomo Beccatini in his studies on the "light" industrialization of Tuscany.
In general terms, the industrial districts are limited regional systems (in the Italian experience, the largest consist of 400/500,000 residents) characterized by:

• specialization in the production of a particular family of products; in practice a prevalent sector which is an integral part of the identity of the region (the marble of Carrara, the pots, pans and valves of the provinces of Novara and Verbania, the knitwear of Carpi, the silk fabrics of Como, the women's hosiery of Castelgoffredo, the buttons of Grumello, etc...);
• a production scenario principally composed of small and medium-size industries and a large number of business owners;
• an articulated division of labor among companies which tend to specialize in single phases of the production process; the style of operation reminds one of the last moments of a concert when "without previous arrangement the explosion of applause is gradually organized into a rhythmic clapping". All this is possible because a particular social capital is impressed into the watermark of the districts, constituted by widespread know-how, good credit relations, a spirit of emulation, and well-established channels for the circulation of information;
• the presence of an efficient network of public and private services which operate in direct contact with the companies of the particular sector;
• an economic and social life regulated in a non-conflictual manner by trade associations and labor organizations;
• an elevated civic awareness which characterizes entrepreneurship as well as cultural (associations, clubs, volunteer organizations...) and administrative life;
• a strong relationship between economic activities and the cultural and social life of residents (schools, training institutes, industrial museums, local newspaper reporting, etc...).

The districts first developed in the central and northeastern regions of Italy, but in the last few years the phenomenon has been spreading to the Mezzogiorno as well.

The Economic Importance of the Districts

Over the last few years many efforts have been made to trace a map of the Italian districts. The Istat (National Statistics Institute) has identified 200 of them. The economic importance of the districts in the Italian economy is well-illustrated by the following data:
The district system considered globally

• 2,2000,000 are employed in the manufacturing sector equal to 42,5% of total occupation in the manufacturing sector in Italy.

• 700,000 employed
• 90,000 companies
• 80 billion dollars in sales (approximately 60% of the products of the "Made in Italy" CD-ROM)
• 35 billion dollars in exports (44% of the production created in the industrial districts)

Entrepreneurs and Industrial Districts

In the postwar period, Italy has taken part in the international division of labor by directing its efforts towards the production of certain goods which many economists rather hastily considered suitable only for those countries with low labor costs. The evolution of consumer habits in industrialized countries has rewarded not low costs but the capacity to offer goods with a high relational content: design, personalization, and a spirit of the times. The particular organizational structure of the industrial districts, with its many flexible small and medium-size industries and a rich patrimony of social and cultural traditions, has shown itself to be especially effective in the production of this type of goods. Various interpretations have been put forward to explain the success of the districts, often citing historical or cultural factors, such as the "Renaissance Effect".
Nonetheless, one must not underestimate the competitiveness and the great capacity for adaptation and innovation which characterize companies operating within the districts. In fact, it is unthinkable that in the age of globalization a success such as that of the districts and of the Made in Italy production could be sustained exclusively or principally by cultural factors.
Experts have carried out detailed studies on the companies in the districts, revealing a set of extremely effective key points which determine an original business style that has been shaped over time by the following distinctive characteristics:

• internal competition; life for the companies in the districts is not easy because of high evels of competition; in every district there are tens of companies which compete for production and market quotas; the competition pushes them to the frontiers of economic efficiency;
• professional competence in manufacturing; the companies within the districts do not have internal operating manuals, but rather depend on their great patrimony of technical and organizational know-how, which is continually updated in an informal manner; furthermore, the Italians are very capable in the production of the machinery used by the districts in their respective production activities; Italy produces more industrial machinery than the United States and is the third exporter after Germany and Japan;
• business styles; production facilities within the districts are agile, companies are family-run, organization models are simple, and motivational systems very effective;
• the trade fair effect; the concentration of many producers in the same sector within a range of a few kilometers allows the client to evaluate market offerings as if at a trade fair;
• collective market research; district business owners are dynamic, traveling constantly around the world; direct contact between hundreds of entrepreneurs and their clients makes for the gathering of detailed, first-hand information on market tendencies; this information is sorted and translated into production programs which guide the operation of the districts' companies; from this point of view, there is no institute which could possibly rival the entrepreneurs themselves in their market research activities.
• frequent cross-pollination between a network of businesses which possess a profound knowledge of production systems on the one hand, and an advanced services network which ranges from design to finance, from specialized publications to marketing and the hotel industry on the other.