The Case of the Formalized Italian Network Contracts: Evidence on Business Models and Performance Effects

Abstract

In 2010 with Law 30.07.2010 n. 122, the Italian legislator has formalized networks, through the recognition of a specific contract called “network contract”. This network contracts widespread rapidly in Italy with more than 600 contracts signed, between more than 3.300 firms, in two years. These contracts have to include specific contents and provide some performance measures aimed to verify the ability in reaching network objectives. Our research aims to identify, describe and analyze the characteristics of networks based on this flexible contract between firms. Through the analysis of the Universe of network firms (NF) signing a network contract between 2009 and 2012 we have identified their sectorial, territorial or dimensional peculiarity. In particular, firms in a network contract are small enterprises (data show that 77% of NF are small firms with revenues lower than 5 million euros) characterized by territorial proximity. Nevertheless, we observed an evolution of these contracts (in the three years of observation) in the direction of enlarging the network both horizontally and vertically in terms of number of firms and sectors involved, also in presence of 80% of NF operating in two sectors: manufacturing and service. The analysis of a sample of contracts showed that their organizational models are coherent with some of the models identified by the theory in business networks and mainly based on the “constellation model” depicted by Ornati and Lorenzoni (1988). Finally, we conclude that firms in a network contract “network firms (NF)” have better performance of firms out of a network contract (“no network firm (NNF”). This is the result of a regression analysis and of the comparison of NF ROI to the average and median ROI of their sub-sector.