n° 18 - February 2002

THE GOVERNANCE OF THE DISTRICTS

The international economic slowdown, and the recent tension triggered by the devastating terrorist attacks on New York have accentuated symptoms of uneasiness long detected in numerous industrial districts.  This said, together with the awareness of infrastructure deficits and hesitations many territorial systems have in accelerating the information technology innovation, the day of reckoning has come. This is clearly emerging in the conventions that trade associations and chambers of commerce dedicate to local development issues and is documented in the numerous check ups the districts have undergone.

The districts are changing “skin” but they feel helpless in their ability to put things back in place: the threat of international competition is increasing; worries caused by dislocations of manufacturing companies and concentration of distribution network are escalating; fragility in the offer is perceived as a safer route in the agitated seas of global markets cannot be found.

While competitive games are looking tougher, requests to “bull head the local territorial economies” and to supply departmental instruments to the governance of the districts have multiplied.

On this front, more intermediate subjects should be involved: associations, local agencies, service centers, labor unions, chambers of commerce.

Under different trade names and profiles, power-driving agencies for local development have been established in many Regions thanks to law 317/91. The game has just started and we are about to see a flourishing number of cases also because the Italian district phenomenon is rich and articulate.

Regarding governance shapes and instruments, ideas are somewhat confused.  The issue is not if work in progress can be driven but what can be “piloted” and what instruments ought to be used.

Fine-tuning of the customized governance system for the districts must still overcome many obstacles. One of these is the assignment to each institutional agency  (district committee, board of directors, district managers…) duties and responsibilities they are not capable of or should not be managing.  Districts are complex systems, multi-centered and articulated; there is no place for strong guiding roles.  A united team with service spirit is needed; aggressive commands are useless, instead the ability to understand and accompany the districts’ economic and social transformation are required.

Many public statements regarding modality of management dislocation or relations among enterprises imply a temptation to interfere in processes in the enterprises’ sphere of action.

Another obstacle is the definition of governance with orchestration, as if agreements or global initiatives were sufficient to disentangle the knots only enterprises can tackle.  

The problems industrial districts have are many; ranking first is the lack of trained staff, migratory management, delays in information innovation, territorial marketing, and lack of facilities. There is enough to keep the local territory economies busy without useless field invasion!

CONVENTION

INTERNATIONALIZATION OF THE DISTRICTS

Protagonists are discussing  

The Industrial Districts Club and the Ascoli Piceno Chamber of Commerce sponsored by Porto Sant’Elpidio Municipality arranged a convention to discuss the “The paths for industrial district internationalization”.

The meeting was held October 19, 2001 at Porto Sant’Elpidio (Ascoli Piceno), in the convention hall of Villa Barucchello, an elegant mansion restored and transformed into a promotional site for the shoe district extending from the Fermo area to the Province of Macerata.

The topic of the meeting was both the specter of international competitive aggressiveness and the rapid dislocation of manufacturing companies. This has been present in the deepest thoughts of many of the industrial district protagonists for quite some time.

In the background of the Convention works, images of the tragic terrorists attacks of the previous month were still vivid; the sudden stop of the international trade growth previously announced by the research institutions was brought up with even more anxiety. The problems Italian industrial districts have are many; they range from new values residents place when giving up careers in factories (increasingly complicated), to delays in spreading new information technology systems; from the lack of facilities to the fragility many entrepreneurial formulas face when concentrating the distribution network.

With all its implications f systems that have built a competitive edge on a strong rooted space, the internationalization issue is the most argued.

The loud media echo of the boom in Timosoara, Romania; the production in China getting closer to our quality standards; the shifting center of gravity of many productive structures towards distribution; affirmation (“no logo” aside) of large global brands and the prospects of a progressive dismantling of international commerce barrier: one often asks “how far will this go to undermine the bases which up to now have supported the industrial district development?”

The competitiveness and the ability of the district enterprises to adapt owe much to the concentration of the many complementary businesses of the region, the traditional crafts, the state of the art know-how, the unique productive environment, the shorter networking of information exchange, the social relations, density of transactions and a climate of transpired trust.  On this fertile ground the districts have mobilized their resources and started an extraordinary economic and social process.

Globalization and dislocation  

The internationalization façade now taking place (globalization and dislocation phenomena) has brought a series of feelings of uncertainty on how the districts may overcome all the challenges at the dawn of the millennium on their own.

Many, in fact, feel that in order to continue competing with the big armored battleships of the global arenas, the districts will have to review the organizational architecture and act differently on the volume lever; by using an improper metaphor, they are repeating the “spontaneous” growth of an historical period but near the end of its run. At this point, various directions are given on what to be done to overcome any presumed vices of such spontaneity.

Actually, this is not the first time in the district history we wonder how they may hold on; the “sufficiency” attitude of the past has now given place to much greater attention to the competitive dynamics of the territory, but its tune has not yet changed.

Convention Works

Virgilio Bugatti, President of the Club of the Districts opened the works by observing how the “instinctive” reactions of the enterprises to change in the competitive context, may impact the internal organization and their foreign markets forecast.

By internationalization we mean a phenomenon different from dislocation or from a simple tendency to export.

The later is the passage mostly characterizes the history of the industrial districts;

50% of production is actually sold abroad.

Dislocation is tied to choices. Often leading to single enterprises and not to the district as a whole. Therefore, these are literally transferring productive process to countries where costs, especially labor cost, are lower.

It is important to realize that the ratio between headquarters and companies establishing in different countries does not affect, for the time being, the hierarchy among more complex operations still rooted in the district (research and development, prototyping, sales and marketing…), while simpler operations are moved abroad.

The dislocation process seems to be moving quickly: first trials lead to many more until the border of complex and executive operations (even those of simple routine) fades.

The route thus far taken by arrays of small-mid size companies in adventuring abroad has been a long one but gives food for thought on the stress districts must face to internally balance social aspects and strategies.

Reproducing the Districts 

One of the assumptions often present in the debates regarding the internationalization challenge is the positive comparison between the ability to compete in global markets and management stability of these companies; by size dimension (number of employees) but also a direct control on a critical mass of operations tied to information management and utilization system.

What previously said highlights a need to review management positions, company communication systems and the path for growth. Although reservations on the suitability of district systems are increasing, many small and mid-size companies have successfully established abroad investment projects autonomously (“spontaneously” we shall say). This was possible even though they are small sized companies, have limited number of professional managers and chronic lack of financial resources.

The most spectacular cases underline how these companies have moved in groups without explicit coordination (spontaneous), partly recreating the conditions that characterize the development of the Italian districts: a critic mass for the creation of auxiliary services (mechanical, transport, banks, association of categories…), for local markets of unfinished goods, for mobilized by traditional experience of local human resources. Basically, although the choice to dislocate remain a strategy secret jealously kept within each single enterprise, in a short time production operations have been moving and also some parts of the districts with all related characteristics.

Furthermore, if insight is given to regions pursuing this road, no major wounds in the social relations are noticed from outside (obviously this does not mean there are none); rather, the impression we have is that what has been pushing many enterprises of the North East to dislocate is lack of manpower in the districts, which is not secondary.

The convention organizers tried not to be reined in celebrating a new exploit of the entrepreneurs of North East Italy and on going comparison of experiences in the districts added new thoughts.

Exhibition Halls - Cittadellarte, Biella

The Fox and the Hare

There is another phenomenon, perhaps not less treacherous, tied to the internationalization challenge. Beyond the pressure of international competition and “entrepreneurial migration” from our districts, an increasing number of large foreign companies are investing in the districts to benefit from closer access to know-hows and the ability to create prototypes spread throughout the Italian districts.

The two phenomena (a prey while hunting a prey) can be found, perhaps from a different perspective, in the Fermano-Maceratese shoe district.  Popular world players such as Gucci and Prada are interested in the ownership of some small local enterprises to open a window on one of the most dynamic and innovative areas in the shoe-manufacturing sector.

Territorial borders and increasing integration in the advanced service sector are the basis for the proposal to redesign the traditional territorial economic maps of the so-called Meta-districts.

The proposal, recently included in the regulations of the Lombardy Region, originated from the fact that the span of relation of manufacturing companies has stretched; the relations often go beyond the districts traditional borderlines; that a growing part of the general know-how concentrated in the Made in Italy is brought in by companies outside the districts.

As Roberto Cova, from Lombardy Region of the Industrial Department explained drawing back within the districts would not male sense.

 “Meta-districts” may not be enough

Perhaps having Meta-districts may no longer be enough. Broadening the horizons goes beyond the national borders to create true multinational districts. The invasion of the Timisoara Rumanian region by the Veneto companies is an amazing case. It is the reason why the Rumanian region is now renamed “the eighth Veneto province”.

The decision to move production processes to Romania is not a consequence need for factoring advantages. Also the congestion effect is a cause: lack of manpower, saturation of building construction areas, difficulty in transportation.

Adriano Sartor, an entrepreneur of the Montebelluna, Treviso sports-shoes district, illustrated the Veneto case. The district, with 420 shoe factories, totals 8,400 employees and has an output of 31million pairs of sport shoes, and a turnover of Euro1,300 million each year.

What triggered these companies to look for new locations was the competitiveness with the US sports-shoe brands. By moving production to the Far East, these have benefited from low cost production since the ‘70s. 

The answer the companies gave had two directions: firstly, dislocate part of the business to lower cost and focus on the critical operations at the same time: secondly, design and market sports-shoes, and only manufacture shoes for high-end lines domestically.

Presently, it seems that the first thing to detect is a dislocation unhinged from the district connective tissue; one may notice it touring the North East District.

From shoes to water faucets

Montebelluna enterprises’ investing abroad is not an isolated phenomenon.

Another example of business dislocation, or dislocating part of the manufacturing process was illustrated by Giorgio Frattini of the “CusioVal Sesia” district.

The district, comprising about 300 companies with a turnover of approximately Euro1.300M, manufactures chromed water faucets for bathrooms and kitchens.

During the 90s, competition by large German and US companies threatened the

Cusio Val Sesia enterprises which answered using two instruments: marketing a local brand and making new investments to produce in other European (Poland, Portugal, Check Republic, Slovenia) and non-European countries (Thailand).

In some cases dislocation was not set up by single companies but by groups of enterprises which created strong or not so strong agreements.  Soon the process showed new developments: not only a simple dislocation of production but research for new local market opportunities. For example, the Cusio -Val Sesia District enterprises already settled in this country presently control 30% of the faucet business in the Czech Republic.  Therefore, dislocation policies do not exclusively link to depend on cost difference, as only an estimated 25% of the international market considers cost a success-determining factor.

The ability to operate in an international scenario, especially when supported by a good process control and by innovation, opens new opportunities that also small-mid size companies in the district can grasp.

It would be otherwise difficult to reach satisfactory margins by setting up a competitive policy with Chinese production, as they already sell at prices 50% lower.

Governance and Dislocation

Giuseppe Squarcia, director of a service center for the Marche area shoe-manufacturing district, illustrated a quite original case of industrial districts governance.

The SCAM center was created to support shoe-manufacturing companies in their endeavor to become international in the technological innovation.

Their task is to study and diffuse new applications to process and manufacture products; train human resources; coordinate promotions in the international markets. In business for ten years, the center has become a strong benchmark for the local economy; about 400 companies are using their services to consult for technology innovation, quality certification, and marketing.

Particular attention was placed on the technology innovation (automatic cut, design of the last, CAD) and related training. For the further objective to create new sales channels, the first shoe retail store for the Marche shoe companies district was recently opened in Shanghai.

Open Districts, Light Products

An element running parallel with companies dislocating from Fermo, Cusio, and Montebelluna, is “dematerialization” of tasks performed.

The districts are coming up with further ideas and symbolic values but fewer material products. This is why they are eager (with alternating success) to create schools and tools to enhance their knowledge.

The districts open up, widen borders, combine far away factors with closer ones; product processing becomes lighter (dematerialization, shorter lead time, design, brands…) while structural organizations become stronger (fewer transactions and more direct controls on quality, distribution): this seems the main road for the new district metamorphosis. The governance knot here surfaces, and relation between enterprise action and context intervention is noticed.

The speakers at the convention in Villa Barucchello highlighted how globalization, initially feared as an unfair challenge between multinationals and our small and midsize company networks, actually opens up to new perspectives enhancing the know-how and the trade expertise patrimony built by the district with years.

Going in this direction, attitude should count more than large plans to support enterprises: the dimension and openness towards different forms of tighter and targeted cooperation are now more meaningful; service centers, chambers of commerce, trade associations should now intervene in the cracks left by enterprise (technology innovation; local agencies - from regions to provinces, municipalities, and industrial consortiums).

Nicola Tognana, Vice President of Confindustria, underlined the lack of attention various public levels are placing on the districts.

Disappointment in the 1991 laws can speak for themselves.

Marino Finozzi, the Veneto Industries Regional Authority Commissioner, revealed that introduction of management for district policies might become additional bureaucracy in the life of the districts; at first this may be seen an activator of ideas and a resource mover; instead, it may become an obstacle to industrial operators cjoices.

By year 2002, the Veneto Region Authority wants to have a workshop and review this law to include all Veneto districts, without resorting to additional funds: “project plans rather than facilities”. While the enterprises, quietly and without outside directors, are trying to do their best to avoid being wiped out by globalization, the State, Regional Authority, and other local agencies would have difficulty in keeping pace.

The Italian districts are going through great transformation. Major works are in progress and it is hard to foresee where these new roads may lead.

In all this, the most unclear aspect is how the local communities react, how the identities and values of the residents have changed; how all this will affect competitiveness of each single enterprise and district.

Pistoletto Foundation  - Cittadellarte, Biella

(Thanking Gabriella Ruggeri, Pierpaolo Flammini, Lorella Piccioni and  Marco Paoletti for their collaboration) Management Information System Tent - Cittadellarte, Biella

UNIDEE Workshop - Cittadellarte, Biella

CASES                                

The Agribusiness District in San Benedetto del Tronto

The agribusiness district in San Benedetto del Tronto, of Ascoli Piceno province,  was formally recognized in 1998 by a resolution of the Marche Region government.

In its 31 municipalities we find traits which are part of the development path throughout Italy: high concentration of small and mid-size companies as well as family operated businesses, a highly marked sector of specialization affected by a long lasting artisan tradition. In the San Benedetto district all this plays around a productive vocation: fish and agribusiness.

The economy given by the fishery business and its suppliers, (frozen chains, refrigeration transport, cable productions, ropes, services) originate from a sea tradition in San Benedetto del Tronto and related coastline municipalities. The agribusiness started at the wake of the local traditional products: fresh fruits and vegetables form Valdaso and grape and wine making business in Offida and the many neighboring hills of the Piceno area.

The district lies on a 700sqkm with 135,000 inhabitants, representing approximately one third of the total province value.

There are 20,000 active businesses, a countertrend when compared with the province activities risen in the last few years and marking a much higher entrepreneurial vivacity.

The territorial analysis underlines various locally specialized sub-systems; San Benedetto del Tronto with bordering municipalities, Acquaviva, Monteprandone, and Grottammare are dedicated to the fish business.

Campofilone is characterized by a high concentration of pasta producers; Cupra Marittima for ovens and refrigerating equipment; Offida, Ripatransone and Montalto for wine making; Petritoli for meat and meat related products. These businesses are mainly family operated and, in some cases, have given life to enterprises with production also known in international markets.

These quick illustrations are sufficient in highlighting that there is room for horizontal intervention and aggregate the best valences of the territory: a process for integration from inside and among the several productive sectors, may significantly be reflected in the whole district. Information exchange and promotion are fields for intervention using the logic of a district.

This is why, a Policy and Coordination Committee (COICO) has been established to promote and assist the district to form, according to the sector, consortiums or similar among the small and midsize companies in the fish business. This is to manage a common service and increase each company’s competitive growth and to higher market visibility.

The consortiums may provide production costs savings, project planning, product advertising. However, efficacy in defending local production against homologation of global markets must not be underestimated.

G. Ruggieri, P. Flammini, L. Piccioni e M. Paoletti

 UNIDEE Workshop – Cittadellarte, Biella

News and Events

Network Districts

• Club of Districts activities are documented at:

www.clubdistretti.it where previous issues of Italian Districts can be consulted.

• www.tuscanyvalley.net is a portal dedicated to the districts of the Tuscany Region

Voice of the Club

The Club was present during the following meetings:

• Consorzio 21 - Regione Sardegna

Districts Industrial Development in Sardinia

Cagliari, February 8, 2002

• Unione Industriale Biellese, Biella Enterprises Financial and Economy Check up.

A comparison between Biella and Prato

Biella, December 12, 2001

Publications on Districts

Essays on general issues

• VICLI

(Virtual Cluster Identification)

VICLI Project. Identification of virtual districts and diffusion of good strategic territorial planning practices for some countries of the Danube and Southern European Countries

Informest

www.informest.it/vicli

• TICC - Informs

Italian Industrial Districts Business report by the Thai-Italian Chamber of Commerce

Research on districts

• by Domenico Cersosimo

Territory as resource.

Regional Planning:Orchestrations and regional development in Southern Italy

Quaderni Sviluppo Locale - Formez/Donzelli

Rome 2000

Meetings

• Unione Industriali Provincia

Pordenone – Young Entrepreneurs Group

What will the wood-furniture sector future be?

Prata di Pordenone, January 26, 2002

• Datar, OCDE

International Conference on territorial

Development

Paris, 28/29/30 January 2002

Exhibitions – Cittadellarte, Biella

Agenda on Political Issues for the Districts

Without high expectations in presenting these notes as the result of a systematic activity (observatory), we here report useful news to those interested in political updates for the industrial districts.

The Campania Regional Government has proceeded in establishing the Sant’Agata dei Goti and Grumo Nevano district committees. The district committees will see to gather project development and to participate in a general district program.

The Liguria Regional Government is going to acknowledge seven new districts to be added to the slate of Val Fontanabuona. These are electronic and naval repair districts in Genoa, yachting in Tigullio, transport means in Finale Ligure, automotive suppliers in Val Bormida, marine technology in La Spezia and agribusiness in Imperia. The life of each district will depend on the management of an appointed committee.

The Lazio Regional Government has approved the industrial districts law and has allotted Euro 6.2M for the 2001-2003 three-year period.

The Tuscany Regional Government has selected intervention programs to favor local districts and their productive systems. The four projects of the Prato district have been approved (sustainable development, Emas, ecolabel, mobility manager, telecommunication networks), for a total amount of Euro 800,000.

The Piedmont Regional Government will start a contribution of Euro 2,530,000 contribution for projects in the Biella district. Associated enterprise projects and consortiums may have access to financing; the contribution is up to 40% of approved expenses on buildings, plant systems, management information systems, research and consulting.

Annual Club Assembly

LET’S MEET IN BIELLA!

On February 22nd the District Annual Club Assembly will proceed, as per Statute, to renew memberships and introduce the new Presidential Committee.

A new President is elected every two years and, with the new nominations, after having stopped in Biella, Prato, and Lumezzane, the Club’s administrative offices will move the headquarters to the new district.

The appointment of the 22nd gives all members and all actively committed in the local system the opportunity to start again the thread of politics for the districts and compare the industrial districts identity with the changing world.

The assembly works are enriched by Master Michelangelo Pistoletto’s contribution with the essay “art and production”.

Together with the assembly, the committee of the Club and Industrial Union of Biella, has planned a series of events where participants can exchange experiences and projects.

Basically, it will be a somewhat open seminar with guest speakers in Biella and it will offer ideas and stimuli on issues to create a more vivacious district life.

The assembly will also be an opportunity to better know one another and closely observe some of the most significant achievements reached by the district political knowledge of the Biella territory.

Some presentations:

- Città degli Studi di Biella, one of the first most aimed district fertilization project;

- Biella produces: a Biella district promotion plan recently made by the Biella District Committee;

- Cittadellarte, an important workshop by Fondazione Pistoletto.

The members are invited to participate in the assembly by intervening in an open debate during the institutional meetings and the events; the invitation is extended to the numerous friends of the Club fans and, in general those who follow the Italian industrial development paths.

City of Studies

This is a technology pole in the Biella district for staff training, research and technology transfer. Città degli Studi Spa, established in 1971 to detect the needs for training, research and technology transfer of companies in Biella, is an example of the district governance; it coordinates the activity of the agencies and local organizations for synergies.

The Centro Congressi planned by Gae Aulenti, is the benchmark for economic-cultural activities of the district. It is equipped with an auditorium, a seminar room, exhibit hall and library specialized in textile as well as a new university building.

Città degli Studi hosts Istituto Tecnico Quintino Sella, Politecnico of Turin,

Scuola di Amministrazione Aziendale, Institute for wool research “Oreste Rivetti”,

Texilia, Woolmark, Biella Master of Noble Fibres and Medicine and Environment CRAB.

www.cittastudi.biella.it

Cittadellarte

Started in 1991 with the purchase of an old dismissed textile plant along the Cervo torrent. Restoration took place and Fondazione Pistoletto was founded.

Cittadellarte is a workshop, a large forge where creativity melts with the cultural, economic, and productive world. Activities are articulate so to bring art and interaction to the social system, economy, politics, science and education.

Cittadellarte arranges courses, conventions, performances, and conferences.

UNIDEE-Università delle idee is a cultural organization resuming the original meaning of the University by proposing a pole for exchange of knowledge and issues emerging in humanistic, scientific, philosophical and artistic disciplines.

It is a cenacle of meetings where ideas are developed and projects are confronted in a context of civilization. All this is done within the walls of an old textile plant.

UNIDEE in residence is a course hosted at Cittadellarte for students coming from all over the world to participate in projects guided by philosophers, scientists, craftsman, entrepreneurs, and communication experts.

www.cittadellarte.it

Chiostro di San Sebastiano

The secrets of an item collector

The extraordinary collections by Cassiano dal Pozzo - 1588-1657

Museum of territory - Biella

Cassiano dal Pozzo, born in Biella, was an outstanding character of culture and art of the sixteenth century. “Excellency, Knight, Commendatore, and Abbott Cassiano dal Pozzo” was a versatile man, voracious collector, artistic talent scout, editorial consultant, aesthete, philosopher, friend of people like Galileo, pseudo scientific utopian promoter; he spent his life in Biella, Vercelli, Torino, Tuscany, and Rome where he was able to put together a highly valuable collection of paintings by Domenichino, Nicolas Poussin, Pietro daCortona, Simon Vouet, Alessandro Turchi, Rubens and Van Dick, besides twenty-thousand in drawings and prints, as well as an enriched library.

During the centuries, pieces of this extraordinary collection were doomed to various places and are now exhibited at museums, art galleries and private collections.

This exhibition puts 200 pieces together to revive the splendor of Dal Pozzo’s collection.

The Dal Pozzo collection exhibition inaugurates the new Museum in the Biella territory in Chiostro di San Sebastiano, where restoration works have just been completed.

PROGRAM

THURSDAY FEBRUARY 21, 2002

Time 16:00  – Meeting at Città Studi

Visit of Città degli Studi

Presentation “Biella, produces”, a project for district promotion

Time 17:30 - Chiostro di San Sebastiano

Visit of Chiostro and

Exhibition “The secrets of a collector”;

The extraordinary Cassiano dal Pozzo collections

(1588 – 1657)”

FRIDAY FEBRUARY 22, 2002

Time 9:30 Coffee at Cittadellarte – Fondazione Pistoletto

Time 10,00 Visit and illustration of Cittadellarte projects

Time 11,00

District Club Assembly

Report on the activity and election of new appointments

Speaker Michelangelo Pistoletto on Topic“Art and production”

Debate

Time 13,30 - Buffet with “Tasting of Biella”

Up^

Copyright©2002 by Club dei Distretti Industriali