Industrial districts, district effect and firm size: the Italian evidence

Abstract

The paper analyses the transformations that occurred in the Italian industrial districts (IDs) by empirically estimating the role of the ‘district effect’ on firm performance over recent decades. Given their ability to manage upper-level and size-related business practices, medium-sized firms emerge as local players best able to exploit their embeddedness in the districtual system and leverage districtual assets. However, these effects are only present in firms belonging to the industrial specialization of the district. An additional result of the empirical analysis shows that the leading role of medium-sized firms is critical in younger districts, where medium-sized firms lead the renewal of the ID and its adaptation to the changes of the competitive environment. As most Italian IDs are specialized in traditional sectors, this evidence contributes to understanding the mechanisms connecting the competitiveness of the traditional industry and its localised organizational structure. The paper also provides a discussion of the future of IDs—including the relevance of the evolutionary stage of the district on the performance of affiliated firms—and their reproducibility over time.