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Innovation starts from the bottom up Signs of a new economic cycle for the industrial districts have begun to show in recent months, though in a context that remains somewhat uncertain, at least for the moment. Numerous analyses on a local level connected with current economic trends indicate a cold climate, where anxieties about fluctuations in production combine with worries about a progressive exhaustion of the expansive impetus. It's not the principles of district competitiveness (enterprise, flexibility, creativity ....) that are in question, but rather the deep confusion caused by international exchange and continual waves of new technology that, as usual, sow doubts about their ability to resist. And, as usual, the battle is to be fought in the field of innovation. When considering the extraordinary number of successful innovations realised in the districts by the equally numerous "professional workers", one finds that innovations don't constitute the end product of an explicit and linear course; more often, these come from blends of varied forms of "know-how", only partially linked directly to "scientific " or R & D activities. Indeed, most of these are linked to practical knowledge, and can be found in the deep rooted understanding of unwritten procedures and the material culture of the district population. As always, the most effective weapon to combat this current slow economic trend is innovation, but this time the importance of scientific knowledge is beginning to be felt in the more innovative areas of our districts. More than ever, official documents on economic policy (from the G7 summit to national and European summit meetings) repeat the importance of sustaining innovative strategies, particularly for small to medium sized industry. But apart from their declarations of good intent, the policies adopted up to now really haven't been able to pin the problem down. From analysis of the experience in the districts, it's possible to pinpoint three fundamental points to develope for correcting the aim of innovative and SMI (small/medium industry) policies. One: the most effective lever for assisting innovation lies in an efficient industry. In the SMI context, most maintenance and assistance activities must be decentralised (otherwise they'd be impossible) with the direct involvement of the beneficiaries. Two: If the pendulum of innovation in the new competitive scenario shifts from the practical toward more formal kinds of knowledge, one of the main aims must certainly be that of enriching the economic and scientific knowledge of district populations. Varied research has found that their level of education is often lower than national averages due to the fact that young people in the districts start their professional carriers very early. The relationship between general and professional education is somewhat delicate, and has to be handled through intervention based on the particular combination of histories, cultures and productive specialisation that characterise the various districts. Three. A central component of policies aimed at innovation is formed by research centres (Cnr, Enea, Experimental stations, Universities ......). A frequent point of argument often regards the specialisation of such centres and their distribution throughout the territory (access). Since the 80's, efforts have been made to bring these structures nearer to the districts, with various results that on the whole have been disappointing. The path that should be followed is another. A portion of the funding destined up until now to these centres should be utilised in a different way. It would be much more
appropriate and effective to give the districts the chance of deciding what
forms of research to finance and to which organisations available funding
should be destined. This would give the research world a good shake-down,
and create a bit of competitive pressure (like the kind felt in the
districts themselves) that would certainly do the centres a power of good.
The vote in the industrial districts Analyses published in the newspapers regarding the territorial distribution of voting in the 21st April elections emphasised the presence of a fairly close correlation between the preference of voters and the socio-economic structure of their regions. Indeed, from a rapid glance at the votes it can be concluded that in highly urbanised areas with a consolidated industrial base coupled with well structured representative organisations (unions, sector associations), the 'Ulivo' coalition (the left) got most votes, whereas in equally urbanised areas with a greater presence of tertiary activities both public and private, candidates where elected predominantly from the 'Polo' (the right). On the other hand, electoral areas under the 'Northern League' (Northern federalist party) are distinguished by the presence of a high number of dynamic small industries that operate in areas where settlement densities are still relatively limited. This "macro" analysis, together with the fact that a large proportion of the constituencies in which the 'Lega' won the highest percentage of votes (over 40% of preferences according to the majority system) are concentrated in provinces characterised by high levels of "local interest" (Vicenza, Treviso, Belluno, Pordenone, Bergamo and Brescia), illustrates a type of correlation between industrial districts and political preferences in favour of the 'Northern League' and federalist policies in general. As we wrote in our "Manifesto on industrial politics" (Italian districts no. 2; December 1995), the Club's proposals indeed point to the need for institutional reform directed toward a decisive transfer of administrative functions and development policies to the Regions themselves and to regional self-governing systems. Federalist type political leanings are widespread among the industrial districts, as the press has well underlined. But the correlation is limited to this. The Northern League has effectively functioned as collector only of part of the federalist demands present in our districts. This clearly emerges from a local level survey carried out in the Club's member districts (see Table)
How the districts voted (General election, 21st April 1996) Indeed, socio-economic characteristics "explain" the differences in the electoral behaviour of industrial districts only in part. Most of these differences effectively derive from geographical factors and traditions: the Northern League gets votes in North Eastern districts; the "localist" interests of the North West divide in practically equal parts between 'Polo' and 'Ulivo', while Central regions show a preference for the 'Ulivo'. In practical terms there is no regularity in the electoral behaviour of the industrial districts, this being valid for all political line-ups. The International attraction of the districts The belief that Small to Medium sized Industries (SMI) play a decisive role in furthering economic development and assuring greater social stability has been continually strengthening over the last decade. The basis of this belief is illustrated by numerous successful examples in various countries, among which the example of the Italian industrial districts is particularly outstanding. The creation or consolidation of districts or "clusters", as economists define sectorial and geographical groupings of industry, should become the objective of specific regional and national policy. A fundamental role for their development could also be played by co-operation between such clusters, through common development programs aimed at exchanging experience and knowledge, and by sharing intervention models at local levels. Last March, on the basis of these ideas, the UNIDO (United Nations Industrial Development Organisation), together with the Italian Foreign Ministry, launched an economic development support program for certain developing countries, aimed at promoting modernisation and restructuring of specific clusters in these countries. The basic idea is to draw on the practical experience matured in the Italian districts, and apply this to the developing countries participating in the program. In particular, it is felt that co-operation between the Italian districts and those of the participating countries may accelerate those learning and emulative processes that were the key factors in the Italian success. The advantages of this initiative are reciprocal: Italian SMI are helped on their path to internationalisation, entering new, not easily accessible markets, while the SMI of the benefiting countries may be stimulated to dynamic internal development through contact with the experience matured in the Italian context. The program is substantially aimed not simply toward sustaining the development and competitive growth of the benefiting countries, but at offering numerous opportunities to Italian enterprise as well: the investments, commercial exchange and productive relations that may be derived from the creation of a network of international relationships. In this type of approach it is extremely important to identify a common local body (associations, consortiums, chamber of commerce, service centres, local government, etc.) for the clusters in such a relationship, that is able to act as reference point for co-ordinating the dialogue to be developed between the industries. Once such communication has been established at an institutional level, the SMI of the participating countries will have easier access to the information necessary regarding foreign markets and opportunities, as well as about potential commercial and industrial partners. Competition and Services The key role played by Italian industrial districts in the National economy seems clear. The districts have a significant influence on the production of wealth at a national level, and widely contribute to making Italy competitive on an international level. The background to this success can be found in a series of characteristics, or factors critical for success, typical of the Italian districts: high level technological innovation, highly developed design capacity, significant levels of organisational flexibility, high level specialisation and a great inclination toward associationism. Thanks to the continual development and refinement of these capacities, the districts are able to operate in the competitive international field at their best.
The new definition of competition The competitive contexts from which they emerged though, are now changing and the comprehension of new tendencies is crucial for maintaining and renewing a strongly successful position. The primary evolutionary directives of contemporary international competition can be grouped into two categories: Increasing market complexity and competitiveness : competition from the low costs of developing countries, the progressive reduction of barriers to competition, the significant compression of times and spaces and the rapid growth of geographically distant markets result in the need to control an ever increasing number of competitive variables; The increasing importance of service content : the high impact of computer technology, the critical nature of "made to measure" financial services, the relevancy of communications and the increasing importance of research and innovation emphasise the importance of making advanced services available to hedge off competitors. These emerging trends have significant implications for the districts. One of them stands out in particular: competition is no longer simply between national or international productive poles, but rather between "integrated competitive systems" which include these productive poles coupled with the services that sustain them, as well as the political economy that directs them. How can the districts cope with this new definition of competition in an adequately effective manner ? Where can the right allies be found to beat this new competitive challenge ?
The role of services Services to industry, in particular, may play a key role in this new competitive scenario. The evolving international economic situation described above calls for adequate and urgent action. To this end, many companies that provide essential support to district competitiveness (financial services, telecommunications, transport, research and design, professional training ......) are showing a certain sensibility toward the great opportunities for development that are emerging, creating strategies destined for improving their own, as well as district performance. This development, though, must be different to previous types of intervention. Service companies have to abandon both the approach to the districts determined by the logic of supply, as well as the concept of independent action, not considering what companies from other services are already providing. Indeed, to respond adequately to the evolving rules of competition, new rules also have to be defined in the field of service-district interaction. On one side, services have to encourage deeper collaboration with district, with the scope of developing intervention aimed at specific need areas. Furthermore, intervention by the various services have to be distinguished by high levels of integration and co-ordination, to ensure unidirectional development of the district reality. On the other hand, the districts, too, have to play their part in the course of this evolution. The effectiveness of this form of intervention could be ensured by a structured approach, permitting services to intervene at three levels: Interventions within the district : These are aimed at sustaining the Critical Success Factors of the districts, and contributing to the development of their organisational structures; Interventions on links between districts : are proposed to consolidate critical areas and links in the network of inter-district collaboration; Interventions between districts and associated bodies : aimed at improving interaction between the network of districts and suppliers of services dedicated to the network ( sector associations, promoting bodies, etc. ..... )
Research applied to the districts Such competition related problems are frequently analysed, using avant-garde techniques, by the Monitor Company, an American firm of strategy consultants founded by Prof. M. Porter. For many years, Monitor has been occupied with themes concerning the structure and improvement of national and regional competitiveness, and has developed an applied methodology in several countries. Monitor is currently analysing the Italian productive scenario under a nation-wide project entitled "Crescita" (an acronym for Costante Ricerca dell'Eccellenza dei Servizi per la Competitività dell'Italia - Continual Research into Excellence in Services for Italian Competitiveness). The main objective of this initiative is to identify strategies and action areas through which Italian service industries can provide a key contribution to the development and improvement of the districts. Thus collaboration has begun with the leading exponents of the Italian services scenario, with whom a dialogue has been opened also aimed at involving representatives of the more significant regional realities, to develop joint solutions permitting the districts to operate with maximum success within this new definition of competition. By the Monitor Company The "Crescita" project and its
first results are to be presented in Venice, and the San Salvador Research
Centre (San Marco 4826) on 17th October 1996) Sardinian districts After the economic boom that involved the industrial triangle of North East and Central Italy, a new chapter in the history of Italian economic development is timidly opening up. In various Southern regions, and particularly along the Adriatic axis, numerous territorial SMI systems have begun to sprout. Their performance in terms of company establishment, employment and export gives a completely new image to the South of Italy. The foundations sustaining these forerunners of a potential new wave of development are highly unstable; "company capital" isn't solid like that of civilised Emilia; the infrastructure certainly doesn't assist these enterprises to take wing; the burden of external inefficiencies still hinders the internal growth process, Nevertheless, in subjective terms, a certain grass-roots level thrust and enterprising force can be felt, that recalls the economic climate of Prato, Sassuolo, Treviso, Castelgoffredo or Brianza in the late 'sixties. Another new element is constituted by the fact that after the failure of the grand industrial poles, the idea of promoting the southern industrial districts has jumped to top of the list on southern Italy's agenda for industrial development. The Sassari Association for Industry has rapidly grasped the potential of this new wind driving the industrialisation process, promoting an in-depth analysis of the three local small industry systems developing in the provinces: the Calangianus cork district, the cheese producing districts (sheep cheese), with Thiesi as its most important centre, and the granite district that has recently come to the fore in Gallura (The industrial districts of Northern Sardinia : protagonists, relationships and prospects ; Consortium 21, May 1996). The production of granite, sheep cheese and cork are profoundly linked with the history, culture and territorial configuration of this region. Together, these sectors employ over 5000 persons, and have a turnover in the region of 1000 billion Lira. Despite their differences in market and industrial processes, the three districts have certain elements in common, such as the division of the workload into small and medium industries, their independence from the intervention systems of industrial politics (having grown up relying entirely on their own abilities)and the position of leader (market share) in their specific sectors. The presence of integrated industrial systems that have been able to initiate processes of autonomous development (and that above all have the prospect of further development) constitutes and extremely significant element: unemployment levels in the province of Sassari are among the highest in the country: 26% against an average level in the South of 22.2% (12.3% in Italy). Production and employment could grow further, but at this point the development of the districts comes up against a series of limitations, among which deficiencies in infrastructure must be remembered (a critical factor for the transportation of granite and for the disposal of waste products resulting from cork processing) along with bureaucratic tangles (planning delays for extraction licenses) and rigid credit politics. Standing out among the indications for industrial policy emerging from meetings specially promoted by the Sassari Association for Industry (the "Northern Sardinia 2001" project) are regional forestation, support for enterprise on international markets, links with university research centres, greater attention to the district image and product and the launch of a specific industrial policy in accordance with Legislative Decree 317 art. 36 1991.
The cork district 130 companies work in the field of cork processing, employing a total of 1400 persons. To this, a further 1200 persons are employed in auxiliary activities: extraction, transport, machinery and services. The occupational trend is positive: + 3.5% in the last three years. Production values are in the region of 180 billion Lira, with 80% of production being destined to the wine making sector. The sector's problems are in part linked to the availability of the raw material (over one third of processed cork is imported) and in part to company economic structure; cork seasoning effectively requires a significant amount of working capital that is often covered by the companies through recourse to short term loans.
The 'Pecorino' (sheep cheese) district 24 cheese dairies operate in the "dairy" district of the province of Sassari (10 industrial companies and 14 co-operatives), employing 900 persons, with a turnover in the region of 330 billion Lira. As raw material for cheese production (Pecorino romano, Pecorino sardo doc and Fiore sardo doc) and other dairy produce (mainly cottage cheese and other soft cheese), the milk used is collected from over 10000 sheep farms possessing a total of 2.5 million sheep (the regional livestock total is 4 million head). Among the sector's major problems are marketing policies (product image, denomination of origin markings) and process innovation (interventions in cold processing for range expansion).
The granite district The granite district is a recent development (around 20 years old) and has its significant centres in Tempio Pausania, Arzachena, and Budduso Ala dei Sardi. There are currently 260 operative quarries (extraction) and 20 granite cutting and finishing companies. Quarrying activities employ around 1500 persons, with processing companies employing a further 500. Turnover is around 240 billion Lira, of which 50 comes from export. Quarrying capacity is estimated at 400,000 cubic metres per annum (90% of national production). Production and employment have
grown significantly over the last four years, and there is still ample
opportunity for expansion, particularly in the field of processing. Federico Visconti
The small (and pugnacious) army of researchers that battles on the front district research has published, and continues to publish, a rich array of research. The contents of such works are often very different, but they find their common denominator in fact that they are all centred on relationships between "groups of companies" and the contexts in which these are situated. Studies of the districts, thanks to the deliberately "systematic" approach, have produced extremely interesting results, and promise equally surprising results for the future. Nevertheless, this approach has created a gaping difference between the amount of attention dedicated to the overall strong points of companies (considered in "groups") and the amount reserved for the study of each single company and the competitive mechanisms used by the same. Riccardo Varaldo has attempted to bridge this gap by focusing on what he defines as the "district company". A new contribution in this direction is proposed by Federico Visconti in a book which concentrates the experience of a university course taken together with his colleague Guido Corbetta: Small and medium industry strategy of industries operating in the districts (L. Bocconi University). As well as evaluating district structure and performance, company economy can be put to a more specific examination of individual company presence and operation, this being an almost obligatory passage toward understanding the evolutionary dynamic of both the individual entrepreneurial formulas and the industrial districts themselves. While only general outlines can be gained from studies carried out on territorial "blocks", through this type of research it is possible to develop a more real image of the strategic decisions of the individual companies. The challenge that this presents becomes particularly complex because the companies in the districts are immersed in a territorial context in which relationships between company and surroundings take on a form and intensity such as to create a delicate web loaded with implications. All the same, this doesn't impede wide ranging autonomy on an operative and economic level that allows a large number of entrepreneurs to mould their organisational architecture and effectively reach their goals. These themes, that up until now have only been superficially touched on, form the basis of Visconti's considerations. The most original chapters of the volume are dedicated to the birth of companies, to recurring entrepreneurial formulas and competitive archetypes that up until now have received more exposure from journalistic investigations than from field research; the decision to link analysis to prevalently "second hand" entrepreneurial cases doesn't detract from the effectiveness of the overall picture. The relationship between companies and territorial context is not given primary importance, but is certainly not neglected; even if read from a company point of view, one can easily conclude that the district, as well as being a source of opportunity, must also represent a patrimony for each entrepreneur, that should be constantly nurtured. This invitation to approach the districts from the viewpoint of company economics has a validity not limited simply to the individual companies; Visconti emphasises that there is ample space even for handling the territory's managerial level problems regarding local development. The study of single companies retains its value, but the presence of certain specific factors also suggest the possibility of an interpretation above and beyond individual entrepreneurial initiatives. Important "midi-directional" functions are also to be found in this local sphere, among which the author underlines the fertilisation of the local context, communications and the formulation of medium term projects. Attempts to understand district problems promised by province, chamber of commerce, local banks and associations have offered a valid analytical contribution, but in reality have had little effect on their development; on a political level, attention has been mainly given to transverse factors of development: training, infrastructure, technological exchange, the creation of consortium structures, the real SMI services. From this point of view as well, the study of company economy on one side, and the clearer image of such midi-directional functions on the other, can make an important contribution toward a new series of interventions on the economic systems of our industrial districts NEWS AND EVENTS New members The Santa Croce tanning district (PI) The Club and district local authorities After the first meeting in Lecco on 22nd March, the mayors of the district capitals met again in Pesaro (27th June) and in Prato (13th September); various themes were discussed at these meetings, that will be published in the next edition of this newsletter. For information, contact the mayor of Carpi (Corso Alberto Pio, 19. 41012, Carpi. Tel: 059-649111 / fax: 649200) or the deputy mayor of Prato (Piazza del Commune, 50047, Prato. Tel: 0574-616232 / fax: 21763.
Meetings with the foreign press On the 10th of May, Luca Paolazzi, a journalist on the staff of 'il Sole 24 ore', presented the peculiarities of the Italian industrial districts to foreign press correspondents in Italy. This meeting was held at the Press Club in Milan. Also present were Enrico Botto Poala (President of the Club), and friends from the districts of Carpi, Montebelluna, Prato, Biella, Belluno and Lumezzane.
Club organs The Club participated in the following events: - The Ski-boot Museum Foundation Internationalisation of the Arzignano, Belluno, Montebelluna districts Montebelluna, 18th May 1996.
- The Sassari Association for Industry Cork, Dairy - cheese, Granite: the industrial districts of Northern Sardinia. Protagonists, relationships and prospects. Tempio Pausania, 3rd May 1996
- The Novara Association for Industry The Cusio valve, taps and fittings industrial district Borgomanero, 10th May 1996
- C.N.R. New research frontiers in the national textile sector. The potential of the CNR Biella, 14th May 1996 - SDA Bocconi Strategies of SMI operating in the industrial districts. The contribution of institutional exponents to district entrepreneurial development: The case of Biella and the role of the Industrial Districts Club. Milan, 15th Mat 1996
- 5th Congrès des Centres Européens d'Enterprise et d'Innovation Les districts Industriels: le remaillage de PME pour le renoveau industriel Bruxelles, 29-30-31 May 1996
- Industrial Union of Biella OECD-LEED PROGRAM / GERMAN MARSHALL FUND: Study tour to industrial districts in Italy for U.S. policy makers Biella, 17th June 1996
- Pesaro Council European industrial districts: the role of the district capital. Pesaro, 27th June 1996
Industrial Union of Biella Young Entrepreneurs Group. BIELLANA. Meeting of young European textile entrepreneurs Biella, 13th September 1996
Publications - Industrial Union of Biella. Research Centre Population and employment in the province of Biella (1951 - 1991) Research Volume n.9, Biella 1996 Local development (periodical edited by Rosemberg & Sellier) "Local socio-economic change and comparative studies" Vol. II, III, 1995 - 96, n. 2-3 The Region of Emilia Romagna, Carpi council Carpi district textile clothing sector observatory Third report. Carpi, March 1996
Conventions I.R.I.S. The industrial district and the interpretation of local development Meetings on "local development",
Artiminio, 9-13 September 1996
Copyright©1996 by Club dei Distretti Industriali
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