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Technological innovation in the districts
We can safely say that the policies adopted to support innovation in the
SMEs up to now have met with scarce success. With regard to the former, we have to admit that the demand for these services from the district enterprises has been rather low, 90% were small sub-contractors. More than support in the transfer of technology, they need to qualify their productive processes and for this, their request is for certification, laboratories and testing that are already largely available on the market. These companies find it difficult to dialogue with all the institutional apparatus for innovation (universities, research centres, agencies, experimental stations, etc…) and the whole survey shows that there is no dialogue simply because they feel no need for it or they consider it a far-off world or a place where people speak a different language.
This should not surprise us or cause an outcry that small companies do no
research and make no innovations: in many cases, they do all that is
strictly necessary to be competitive on the market. There are, however, other leading companies or "district champions" who demonstrate considerable innovative capabilities and complain of the difficulties encountered in working with the realm of institutional research. In this case, the criticism regarding the arduous task of cultivating relations with the authorities dedicated to innovation are founded. It is true that even these companies are not always sufficiently equipped (centres, employees with a degree..) to confer with men in white coats. However, this prevents no-one from tracing an Italian path, possibly a path that can be followed by the district industries, pushing the process of innovation towards our small and medium enterprises. The lesson learned from past failure gives us some useful indications on how to grasp the transfer of technology and innovation.
A first indication consists in keeping to mind all the needs on the carpet
and in segmenting the instruments. Many of the district businesses do not
ask for complex transfer operations or particularly ambitious programs;
there are already technological services on the market for this and a
greater use should be encouraged. Meriting a decidedly better-aimed system of offering innovation services, made to measure for the company, the activity of these organisations ought to "get off their high horse" and assume a "market-oriented" approach. Finally, the industrial districts ask to be taken seriously not only on the "economic theory front" but also, more importantly, in the allocation of resources for innovation, most of all when sharing the principle that they have to aim at strengthening the core of our competitive system. Plans for innovation must overcome the sectorial logic and marry those modular interventions not only on single companies' programs but also on the productive branches and the territorial systems in which they are located. District turnovers
To follow the evolution of the districts by observing indications from the
companies turnovers: this is the intent of the first number in the series of
Quaderni di Ricerca issued by the Industrial Districts Club.
In this first report, the editors (Hermes lab) examine eight districts:
Biella and Prato for textiles; Cusio-Valsesia, Lecco and Lumezzane for
mechanical engineering and metallurgy; Belluno for spectacles; Fermo and
Montebelluna for footwear. These indicators show us, first of all, that the performance of the districts during the period examined was superior to that of the examples given in the annual Mediobanca report, composed as we well know of mostly medium and large companies. 1998 was a year of stagnation for Italian industry which suffered the repercussions of the Asian crisis and the district companies did not escape this tendency. The turnover trend, however, is better in the districts (+1,1%) with respect to big enterprises where it dropped by 0,3%. Again district industry has shown greater rapidity in adapting to a new place on the more dynamic markets although there are some notable differences. The textile and footwear districts show a drop in turnover (Fermo -5%; Montebelluna -9%; Biella -4,5%; Prato -1,2%) while mechanical engineering and metal-working areas have given a good performance (Lecco +3,1%, Cusio-Verbania +6,4%; Lumezzane +8,6%). Occupation has grown in five districts out of eight, while the Mediobanca figures show a drop of more than 21 thousand employees (- 5,2%). Furthermore, gross investments in the districts have remained high (+12,6% for investment of capital and in particular +27% for material investment) and more lively than those of big industry where growth of material investment was 14,7%. The databank contains a lot of useful information for whoever has to face the nodes of local development. The Quaderno, however, does give details of the delicate relationship between big companies (leaders) and the performance of the districts. In the last decade, in fact, some districts have followed paths of evolution that has brought them to modify the models of organisation adopted in the past: the importance of scale economy in trading (global brands) and the thrust to operate in increasingly longer networks have favoured the establishment of the leader companies. Using a rough indicator of concentration (incidence of the turnover of the first five companies on the total district turnover), the survey distinguishes between three groups of districts: highly polarised (presence of strong leader companies), with medium concentration (significant number of medium companies and absence of real leader companies) and districts characterised by diffused entrepreneurship. The first group comprises Belluno (where the first five companies produce a turnover of about 2000 billion) and Montebelluna; the second includes Lecco, Lumezzane and Biella, with an overall turnover of the first five companies reaching about 1000 billion with no company making a turnover of more than 400 billion; the third group, finally, comprises Fermo, Prato and Cusio-Valsesia, three districts where the overall turnover of the first five companies varies from the 400 billion of Cusio-Valsesia to the almost 700 of Fermo. By analysing and comparing the yield of invested capital (ROI, income generated by industrial management per lira of invested capital), we find that this is lower altogether in the districts where there is a marked presence of leader companies, whilst the difference between the districts in the second and third groups is less obvious. These first indications, therefore, do not seem to show that the presence of leaders in the district necessarily brings about better results, at least from the yield point of view. If, instead of the yield of invested capital, we consider the operative margins against the turnover (the ratio between gross profit before deduction of financial costs and taxes and the turnover) the difference is less. As the authors emphasise, the volume presents the fruit of a first reading of complex phenomena; to reach more solid conclusions, it would be necessary to observe a wider number of districts and enterprises to soften the effects of the specificity (first of all, sectorial) of the single districts. Club dei Distretti has already decided to repeat this survey on 1999 turnovers, increasing the number of companies and districts examined. The Electronics District of Sestri PonenteFor many years Genoa's economy has been marked by the processes of industrial decline in its leading sectors, with the crisis of the big public companies and heavy industry: steelworks and shipbuilding. The city's face is still scarred by (or healing from) de-industrialisation. The worst now seems behind us, problems are not lacking but phenomena such as the rapid development of new activities in the electronics and services sector are a tangible sign that the tendency has inverted, underlining a wish to change. From the ashes of activities gone bad in the sectors of naval construction, electrical-mechanical engineering, steel-works, military production, means of transport there have arisen ("spin off") tens of new companies operating in the field of advanced technology, in electronics, and bio-medical products. A recent study made by the Province of Genoa has numbered more than 100 companies in these sectors, mostly localised in the Ponente area and centred ideally in the part of the city most hit by the past industrial decline. These enterprises are quite different under an organisational profile: there are companies at the head of multinational groups (Marconi, Esaote and Piaggio Aero Industries); "spin-offs" from the old state-subsidised dinosaurs and many small and medium private firms; 20 companies employ more than 50 workers, the others are small but dynamic (turnover growth rate is 20% plus per year). Although there is no formal organisation structure, the operators in this reality are beginning to recognise themselves in an electronics district that can boast 9.500 employees and a turnover of about 2000 billion a year. With induced activity, the overall number of workers rises to 15,000.
In February 1998, a request was presented to the Liguria Regional
Authorioties to start procedures to recognise the Genoese Electronics
District but it is only now, thanks to the greater flexibility introduced by
the Bassanini and 140/99 laws that this path can be concretely followed.
A big step forward was made on 2 June 2000 in institutionalising this
district, replicating in the electronics sector the logistics of the fashion
producing areas and Made in Italy. At the end of a convention organised by
the Province of Genoa, Marisa Bacigalupo, councillor for productive
activities, announced the constitution of a Committee to support the
electronics and advanced technology district of Sestri Ponente. The Committee has fixed its task (ambitious, but always on hand) to organise a three-year plan for activities (infrastructures, training, animation..) to present to the Region. The document will be consigned within the year. The Region has been invited to adopt this project which moves in a different direction from that of the Territorial Pacts as it concerns a reality of increasing growth, with good prospects especially in linking business and research. Apart from the support arriving from the Region, this is a reality with excellent cards to play: the area is evolving coherently with the happenings in all specialised sectors: electronics for telecommunications, printed circuits, computer science, bio-medical, automated services, software, information technology. Again on this front, encouraged by the Department of Engineering, Biophysics and Electronics of the University of Genoa, the Province has allocated 200 million lire to contribute to a special "incubator". For the fashion and Made in Italy districts, experiences such as those of Genoa, not the only ones in any case, represent a source of ideas and practices that will reveal themselves to be very precious in the process of renewal. Biella, produces"Biella" and "produces" separated by a big red comma: this is the brand that from May of this year identifies the Biella textile district. The use of an area brand (pondered upon for some time by many Italian industrial districts) is part of a wider plan for promotion and communication thought up by the District Committee, a project foreseeing also the creation of a rich bank of historical, documental and visual data. The aim is to promote not only the typical Biella products (yarns, woollen textiles, knitwear, etc.), but the specific local culture. This singular "mix" of products and culture, in fact, has always permeated the Biella district and its industrial atmosphere with the inter-penetration of enterprise and territory, historical roots and economic spirit of initiative, social relations and life itself.
The brand was chosen among thirty-six proposals with the final specific aim
to have a simple graphic symbol, easily recognisable but at the same time
abstract and without an explicit reference to textiles. The new image proposed to the outside world is presented with a set of graphic rules and a first institutional "charter" consisting of three leaflets dedicated respectively to the textile sector, the other Biella economy and the environment, culture and tourist trade.
A video and a CD Rom have also been produced utilising to the material
collected for the databank and the promotional project created by the
District Committee. The Documentation Centre and Library at the Biella Trades Union Headquarters is a clear example, being the most important archive in Piedmont. Even the landscape is intimately linked with the process of industrialisation: the territory is still marked by factories built in the 19th century, now housing services and cultural activities, the first nucleus on the path connecting present and the past as well as local geography. The wool industry gave rise to many activities that find their common denominator in the business world of Biella: services, transport, computer sciences, telematics, financial institutes, and many food industries: mineral waters, wines, beers, biscuits, cheeses, etc. The textile industry has become increasingly aware and respectful of the environment, adopting the path of sustainable development. The historical-industrial heritage has become one of the themes for strongly valorising the tourist trade. All this completed with other highly qualified interventions on the environment such as the creation of parks partly thanks to contributions from local textile manufacturers.
Today the Biella district offers employment to more than 40,000 industrial
workers; 26,000 work in textiles, distributed among 1500 companies. About
half of production is exported, reaching mainly European neighbours as well
as the Far East and the Americas. The brand "Biella, produces" is another arrow in the bow for district operators in constructing an efficient means of communication to complement what, up to now, has been done very effectively by the companies. Envirdis.netEnvirdis (acronym for European Network for Virtual Districts) is a project co-ordinated by the Vicenza Industrialists Association with the participation of fifteen European partners: Industrial Associations and Technological Development Centres in France, Germany, Italy, Spain and Norway and the Industrial Districts Club. Practically, the aim of this project, which has the benefit of EU contributions foreseen by the Programs for Innovation, consists in providing companies with special tools and information through a dedicated Internet site regarding technological innovation and the possibility of forming partnerships with other companies or research bodies.
Substantially, the intent is to create a telematic network where
entrepreneurs, researchers, agencies, authorities, associations and
institutions inter-act to create a thematic "virtual district" centred upon
the demand and offer of services for technological innovation: the project
attempts to exploit the potential of Internet in order to involve small
businesses with a special eye to the world of industrial districts.
On an operative plane, each day sixteen organisations (authorities,
companies and institutions) will feed the site on the basis of their
knowledge of SME problems. Companies wishing to take advantage of the
services can choose between various types of query: "offer/"search"; "open/specific";
"confidential/public". Also there is a growing knowledge that the material industrial districts as we know them must absolutely make use of the new technologies and quickly develop Intranet services for electronic sales and the management of the supply chain. According to a study made by the European Commission, in 2010 there will be not more than 60/65 global enterprises operating throughout the world. These will be surrounded by a large number of small companies, small yes, but with a strong impact on the organisation and the efficiency of world production methods which will have an increasingly high density of human capital ("brain intensive"). This scenario confirms that there are no valid static models for any market, sector or tendency, but the recipes have to be transformed continuously to adapt to an ever-changing situation: not only the product and the process require innovation but also, and above all, the company organisation. This is all present in the district model and that is why the Italian industrial district is considered by the Envirdis project as an inspiring example. The industrial district is not a model to be copied passively, but a network of relations that can be adapted to the various situations: the ability to construct and maintain relations between the companies in realising flexible systems of production management is one of the dominating factors in the districts' competitiveness. The model of a virtual district does not require SMEs to change their nature, but offers an easy way of being active on markets where single resources are not sufficient to compete. They must be surrounded by additional resources (and here we have the virtual district enterprise): know how, specialisation and complementarity. Industrial districts and leader companies
Some industrial districts have modified or are modifying their
organisational structure, loosening their ties to the traditional division
of work between companies belonging to the "Marshall districts". These two evolutive vectors emerged from a survey made on four Italian districts; in particular, in-depth studies were made on eight companies operating in districts in the provinces of Bari/Matera, Forlì, Pistoia and Udine specialised as we know in the sector of furniture and furnishings. A first result emerging from the survey is that the leader enterprises located in the four districts are following a growth strategy that, with due differences, proceeds mainly along internal lines. The basis of this choice is the need to assume greater control over product quality and to optimise the whole organisation of production methods. The main feature of the growth channels followed by the companies analysed is the formation of industrial groups by means of takeovers, incorporation of existing companies or the establishment of new enterprises. In some cases, they are formalised groups with a complex structure, comprising financial holding companies or group leaders. In others, instead, the leader companies limited their action to acquiring shares, often a minority quota, of sub-contractors considered to be the more strategic; in the latter case, the groups are directly controlled by the company owner-entrepreneur who personally holds the shares and are seen as the continuation of an individual entrepreneurial growth and not as the passage towards a different relationship between ownership and management. A second aspect emerging from the survey is the restructuring of the inter-organisational network started by the leader companies.
The need to provide stable relations with sub-contractors, to control the
flow of materials, to manage all the information and reduce risks due to
malfunctions in managing the value chain has caused the leader companies to
restructure their relations with sub-contracting companies. The relations established between the companies become more stable with time even if in some cases they are formalised by short-term contracts referring to the single order and characterised by a high level of dependency. In most cases, in fact, the leader company asks for exclusive relations, programs the production of the third-party companies, controls the flow of information, provides the necessary raw materials and never delegates the planning stages. Despite a hierarchical superiority, in many cases the leader company does not use its own power to unload market fluctuations onto the third party, on the contrary in its quality of capacity buffer; it protects the growth of the sub-contractor inasmuch as the latter depends on it for the allocated quota of turnover. Finally it should be said that the different modalities with which the leader companies have continued their growth strategies along internal lines have had a different impact on the inter-organisational networks. In fact, in some areas an orientation has been found towards defining ties of collaboration with companies involved in strategic phases or with complementary competence and innovative capabilities. On the remaining network companies, typically those providing components and semi-finished goods not considered to be strategic, the leader companies have a great relational influence depending on the ability to saturate the production capacity, the elevated interchangeability that these enterprises offer within the district, the position of the leader companies on the market and their superior supply of material and immaterial resources. Nunzia Carbonara (extract from Ph.D. thesis in Engineering of Advanced Production Systems: New models of inter-organisational relations in the industrial districts: the role of the leader company) The tanning district of SolofraThe Studies Service and Regional Offices for economic research of the Bank of Italy are sounding out the industrial districts. These notes are taken from a study conducted in Spring 1998 by the Regional Office of Campania. The tanning district of Solofra is in the Avellino province and also includes the municipal territories of Montoro Inferiore and Montoro Superiore; 60 square kilometres with about 28,000 inhabitants. There are about 1,900 local units operating in the district with 7,600 workers, 60% of which are in the tanning sector. In the sample examined, the most diffused legal form of company (67%) is the S.r.l. (limited company) and enterprises, even those of medium dimensions, are family concerns. Management is concentrated (the owners taking care of everything) and delegation of power is rare: all this, even if presenting a flexible nature, ties the company to individuals although risks connected with alternating vital cycles have been contained thanks to the high company turnovers. The change is, in fact, quite rapid: although the tanning industry in this area has deep roots in the past, the average age of the companies is only 20 years. The degree of self-containment is very high, given that 99% of skilled workers and more than 90% of the unskilled labour comes from the district, while the average figure for skilled workers in Italian districts is 80%. With regard to sub-contracting, the small area covered by the district and its production network cause a strong reciprocal dependence between customers and suppliers. The degree of sub-contractors' autonomy is particularly low: relations with customers are exclusive (the quota of turnover of the first three customers is more than 70%, against a district average of 43%) and stable (the average length of relations with the first customer is 10 years, against the 8.5 years district average). The hides arrive semi-finished from Africa an the Middle East; in the past few years these countries have made policies to develop tanning on home ground and this has had some repercussion on the dynamics of Solofra companies' competitiveness. To face these challenges, some entrepreneurs are making joint venture agreements or buying shares in extra-community companies. There is a strong propension for export (77% of the turnover); the products are destined mostly towards the Far East which absorbs more than 66%. The drop in orders that hit the district between 1997 and 1999 was in fact generated by the weight of the Asian markets. Many companies show some weak aspects in trading their products: sales are mostly made through their own sales networks or exclusive salesmen. With respect to other districts, less use is made of specialised intermediaries and there are no agreements between companies for the selling of local products. The lever of promotion is little used and the participation in exhibitions and trade fairs remains one of the few occasions for the entrepreneurs to get an up date on the market. In export activities, the only support services used regularly are those linked with payments, shipments, customs and insurance. Most of the transactions with foreign countries is regulated by letters of credit, either knowledge is insufficient or there is simply no interest in receiving special credit for financing the operations (as we know, this has more appeal when exporting machinery) or insurance cover to support export activities for which ample use is made of ordinary credit. Self-financing is the prevalent source for fixed investments: enterprises in Solofra recur less to credit with respect to other districts, perhaps because there is no "district bank" which, especially in central Italy, often has an important role in supporting local development. From 1993 to 1998 the trend of company profits has varied greatly, but overall it is on the fall: this fall can maybe be justified by the peculiar offer structure with a high company turnover, low company size, prevalence of competition based on the selling price, which can act as a negative lever on profitability during bad economic periods. Events and newsSites dedicated to the industrial districts:
The Club
voice
Publications regarding the districts Districts and innovation Il
distretto industriale di Lecco di fronte alle sfide dell'innovazione e
della globalizzazione Osservatorio Economico Provinciale - Quaderno
monografico n.3 Quantitative research Club dei
Distretti industriali P. Ganugi (edited
by) District case studies G.
Becattini Prato:
una storia esemplare dell'Italia dei distretti Future events Prato,
Villa Medicea di Artimino, 11-15 September 2000
Copyright©2000 by Club dei Distretti Industriali
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