Industrial policies for the districts

A case of development from the bottom up without public help

One of the questions which is often asked of us by the many delegations of directors and local economic agents on their frequent study tours dedicated to the Italian districts concerns the range of industrial policy options available which is arranged at national and regional level to foster their development.
Let's be clear about this right from the start: the Italian industrial districts came into being without any aid or assistance programmes; they developed at different times and followed different paths to expansion. The manufacturing sectors in which they specialise are different too.
In Italy there are no judicial or government bodies which deal with the industrial districts institutionally; only in a few Regions have local development agencies been created but this happened once the districts had already proven themselves and their activity is often limited to collective projects in the field of promotion, training and disseminating economic and technical information about the sector.
The programmes of industrial policy adopted in Italy and in other Countries have concentrated on high-tech sectors, on the chemical and car industries, on large companies, on the creation of new businesses and new jobs in disadvantaged areas. In most cases, industrial districts do not possess these prerequisites: they are specialised in traditional sectors (the fashion business, household products); they are made up of a network of small and medium-sized enterprises; they have low unemployment rates and they are not based in Regions that have problems with development or deindustrialisation.
Furthermore, the industrial districts are often described as successful systems which did not require resources or specific intervention. These protagonists of the various local manufacturing systems did not bother to get together to claim intervention in their favour directly: the Industrial Districts Club was created at the end of 1995.
It should not be surprising, therefore, if the industrial districts occupy exactly the opposite position on the Italian Government's political agenda to that granted them in public documents and debates. Even European Union programmes, which dedicate a lot of space to small and medium-sized enterprises, have not grasped the spatial dimension in development and in the relationships which persist between groups of businesses located in the same area. The experience of the industrial districts shows instead that small businesses' flexibility and capacity for innovation is closely tied to the territorial dimension and to their interaction.

Economic Policies and Industrial Districts

Industrial policies did not directly support the development of the districts, but this does not necessarily apply to individual firms in the districts who, in many cases (and like all other firms), were able to use the more general strategies of industrial policy put in place by Italian Governments.
In particular several initiatives proved quite effective. Among these, remember the 1965 law introducing incentives for investment in machine tools (Law no. 1389/1965 known as "Sabatini"). As well as offering a contribution to an investment account on mutual contracts between small businesses for investment in machinery, this law gives guarantees in favour of the constructor of the machinery ("retention of title" up until the debt is discharged). The "Sabatini" law has been used by many firms, both within and outwith the districts, who otherwise would not have been able to renew their own plant.
Other public initiatives that supported the spread of technology embodied by the new-generation plant are incentives in the capital account and investment account encouraging investment by handicraft businesses ("Artigiancassa" funds).
In both cases (Sabatini law and Artigiancassa) the total amount of public contributions does not exceed 10% of the value of investment, plus it remains much less advantageous than the incentives allowed for investments in disadvantaged areas.
Businesses in the districts still made full use of two other types of incentive envisaging "promotional associations" (law no. 83 of 1989) and "credit unions" (various programmes, among which law 371/'91). Associations between businesses in the same sector or in a district are in fact a very widespread phenomenon in Italy, and not just in industrial districts.
In the field of promotional activity (participation at trade fairs, collective trade missions, promotional campaigns in the specialist press...) there are more than 300 local or sectorial associations at work. In this case the public contribution by area of business is in proportion to the costs incurred and to the number of firms in association.
However it does not exceed 300 million a year per association.
The network of credit unions is more widespread. A total of 800,000 firms spanning 640 associations are members. They offer two types of service. The first consists of supplying credit institutions with additional guarantees (collective fund) thus increasing the volume of financing accessible; the other consists of negotiating lines of credit at more favourable rates than those reserved for small businesses, which are often punitive.

The 1991 Law

Apart from this general assistance, the districts have been left out of Italian industrial policies, particularly those on training, research and technological innovation.
In fact, an explicit attempt to support the industrial districts was completed in 1991 with a law (no. 317/'91, art. 36) which transferred programmes for developing districts to the Regions.
This law, however, sets some very convoluted statistical criteria for identifying districts eligible for intervention. In practice, the Regions may only officially recognise as districts local work systems (or labour pools) which show a high degree of sector specialisation, and levels of microbusinesses considerably above the national average. These rigid limitations have created a lot of problems because the district phenomenon is made up of many parts and does not lend itself to being penned in by a few statistical parameters.
For the moment there are 9 Regions who have officially recognised industrial districts (Abruzzo, Campania, Friuli-Venezia Giulia, Liguria, Lombardy, Marche, Piedmont, Tuscany and Sardinia) and only 3 have launched initiative programmes. Moreover, the resources allocated have been modest: the Lombardy Region has allocated contributions worth 12 million Euro, Tuscany 1, and Piedmont 6.
Apart from the resources invested, regional laws allow for the institution of "district committees". As expressed in the Piedmont Region's programmes, "their function is to constitute a local base for the exchange of views between interested parties on the subject of local industrial policy". Programmes about to be launched by the Regions (we are still in a running-in phase) contemplate a wide-ranging raft of objectives. In all cases the public contribution may not exceed 40% of the value of investment, and the direct beneficiaries may not be individual companies, only associations or the district system overall.
The most notable aspect of this is the official recognition of a different way of making policy in favour of the districts, but this will only count in the future.

Strategies at local level

The lack of initiatives to encourage districts on the part of central government has been partly compensated by the action of local economic organisations and bodies who have supported district development with the few options at their disposal. For example, the Regions have funded "service centres" (small companies specialising in dynamising the districts' manufacturing systems); local authorities have equipped industrial areas or constructed water purification plants; the unions have organised industrial relations in non-confrontational ways; enterprise associations and Chambers of Commerce have taken care of professional training and developing collective services (trade fairs, transport, etc.). These are some examples from a fairly varied survey of minor initiatives promoted in the Italian districts using funds allocated by Community, national and regional laws.

Overall, public support, even if not to be overlooked, has never played a primary role in the development of the districts.