The Role of industrial clusters in Local Economic and Social Development: the Italian Experience Som

1
The Role of industrial clusters in Local Economic
andSocial Developmentthe Italian
ExperienceSome issues from the Marche

• Fabrizio Costa, Director Industry, Handicraft and
  Energy, The Marche Regional Administration

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Summary

• The Marche Region development is often considered
  as a typical Italian cluster driven experience
• The cluster development path main elements and
  a focus on the Marche Region model
• What kind of knowledge and warning may come
  from this experience?
• May a cluster be exported to other areas?

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Framework of this presentation

• 1. A BRIEF PORTRAIT OF A SMALL BUT STRATEGIC
  REGION
• 2. THE MARCHE ECONOMY TODAY STRUCTURE AND
  COMPARISON
• 3. FIRMS AND CLUSTERS IN THE MARCHE REGIONS
  DEVELOPMENT
• 4. AN OPEN ECONOMY EXPORT AND FOREIGN
  INVESTMENTS AS A RESULT OF CLUSTERS
• 5. PORTABILITY OF THE CLUSTER DEVELOPMENT PATH
• 6. AN EXAMPLE OF COOPERATION Projects in course
  in Brazil

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1. A BRIEF PORTRAIT OF A SMALL
BUTSTRATEGIC REGION

• In Central Italy
• On the Adriatic Sea
• A gate to South and
• Eastern Europe
• An ancient link to
• Mediterranean Sea

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1.1 The Marche Region a few data

• Area 9,700 km2
• Population 1.48 million
• Capital town Ancona
• (100,000 inhabitants)
• 4 Provinces
• (Pesaro e Urbino, Ancona, Macerata,
• Ascoli Piceno)
• 246 Municipalities

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1.2 The Marche Region the present situation

• Regional GDP US 40 billion
• GDP per person US 27,200
• Life expectancy at birth 81 years
• (male 78 female 84, the higher in Italy)

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2. THE MARCHE REGIONAL ECONOMY TODAY

• Low agriculture
• employment rate
• and GDP share
• Competitive
• manufacturing
• industries sector
• (the regional rate is
• higher than the
• national one)
• Extensive services
• and trade share

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2.2 A Region focused on Europe
EU 25
Source European Commission (2004), Third Report
on Economic and Social Cohesion
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2.3 Welfare and economic performance

• The Welfare index rank performs better than the
  economic index rank!

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3. FIRMS AND CLUSTERS IN THE MARCHEREGIONS
DEVELOPMENT MODEL.

• As shown in the previous slides, TODAY the Marche
  may be considered as a developed and rather well
  balanced Italian area, with a good population
  welfare.
• But UP TO WW2, the situation was very, very
  different
• The Region was one among the least developed
  areas in Italy
• Underfeeding caused infant mortality
• Thousand of young people emigrated to Latin
  Americas pampas and North Europe mines.

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3.1 Which reason for such a change?

• Basically, two main reasons have been singled out
• to explain this development path
• 1. an original blending of creativity and
  entrepreneurial skill,
• often provided by the share-cropper (métayer
  or
• mezzadro) who firstly transformed himself into a
• craftsman and later into a small business-man,
  thanks to
• community values focused on
• aid exchange among families
• emphasis on savings and on hard work
• 2. many diffused local systems of Small and
  Medium
• Enterprises (SMEs) the clusters or
  industrial/productive districts

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3.2 The first character a very
entrepreneurial region

• Number of Firms (December 2005) 175,413 (1.06
  vs. 2004)

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3.3 COERENCE OF REGIONAL PLANNING TO SUPPORT
SMEs the Three Year Productive Activities
Regional Plan
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3.4 the Three Year Productive Activities
Regional Plan

• the Three Year Productive Activities Regional
  Plan
• The Plan, moving from an assessment of the local
  development perspectives (and difficulties) and
  the consequent analysis of enterprises need, is
  centred on identifying
• Same strategic objectives of the regional policy,
  to be addresses by all specific measures
• Productive system competitiveness
• Sustainable development
• Local GNP increase
• Stable and better quality of job
• As well as same specific objectives which
  represent the relevant factors for local
  competitiveness
• Productive development
• RD, quality and innovation
• Environmental innovation, energy saving, energy
  efficiency and renewable energy
• Promotion of local production, internationalizatio
  n and external investment attraction
• SME Financial equilibrium and innovative finance
• Better relation with PA, simplification,
  liberalization and one store shop
• An finally, operational objectives, both to
  better assess the SME support instruments
  efficiency and to facilitate the establishment
  of relations among companies (in particular
  policy related to productive clusters, networks
  and chain in connection with the new strategy
  adopted by the central government)

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3.3 The share-crop or mezzadriawhy is it so
important in regional history?

• The share-crop (métayage or mezzadria) is a job
  contract
• between the land owner and the head of a family
  (often a large
• family) providing the labour. All the products
  coming from the
• labour had to be shared on a fifty-fifty basis
  between the two
• partners
• The farmer house was on the land property (not in
  the village)
• and it was provided with a stable, a small
  machinery and a
• joinery shop
• As a result, in order to increase his own half
  gain from
• agriculture and other rural activities, the
  farmer was
• stimulated to improve the yield

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3.4 The second character the cluster of SMEs

• The cluster (or industrial district) is an area
  where the
• scale economies (typical of bigger industries)
  are efficiently
• replaced by external economies
• Costs are cut down, thanks to a peculiar social
  and
• economical situation (such as workers
  availability, context
• knowledge, a diffuse entrepreneurship, frequent
  spin off,
• enhanced competition but also co-operation among
  firms,
• wide process innovation, wide imitation and
  emulation
• effects)
• This way of production allows to make up for
  vertical
• integration of bigger industries keeping safe
  the quality of life

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3.5 The cluster impact

• A cluster involves a distribution of production
  phases among
• many firms, highly specialized in every step
• The firm specialization is usually linked to
  either a
• technological or an operating area
• Many industries are traditional and not hi-tech
  this situation
• involves low entrance barriers, due to low plant
  costs
• The innovation jump is often allowed by a plant
  renewal
• The firm dimension remains small, but the high
  specialization
• allows good earnings

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3.5 The cluster impact

• The rationale behind the rapid growth of the
  districts is that of bottom-up development
  logic, which constitutes the strategic component
  of this quality improvement local environment
  greatly facilitated the possibility of
  establishing new enterprises, business ideas
  which have over the years contributed to the
  success of the Region, generating a virtual
  multiplier effect, which in turn has broadened
  the district development system.
• Moreover, companies in the districts may remain
  small as the environment provides the various
  resources, competences and services needed. While
  entrepreneurs only had to concentrate on their
  core business, being small (but often thinking
  great) for many years necessitated only a limited
  working capital while the income produced
  generated extra welfare. In the end, the many
  criticisms raised on the small business attitude
  of Italian enterprises underestimated this
  important feature the industrial district is
  basically a nursery which not only feeds the
  companies in respect of their business needs but
  also constitutes a laboratory (the right or
  enabling environment.) for testing new schemes
  of social cohesion as well as innovative ideas in
  terms of labour organization especially with
  reference to succeeding generations.

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3.7 Cluster and development routesa valley
model ?

• URBINO

The Comb

• CIVITANOVA
• MARCHE

• FABRIANO

Wood - Furniture

• S.BENEDETTO
• DEL TRONTO

Mechanics
Footwear - Clothing
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3.8 Main clusters in the Marche Region
Local Economic Systems ? Mechanics ? Footwear
and leather ? Wood-furniture ?
Textile-clothing ? Food-processing ? Others
(electronics, plastics, etc.)
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4. AN OPEN ECONOMY EXPORT AND
FOREIGNINVESTMENTS AS A RESULT OF CLUSTERS

• An open economy is a policy target for a Region
• focused on high production clusters
• The Marche economy is today very open, thanks to
  her manufacturing industries mostly involved in
  the made in Italy production
• An open economy may be a great opportunity, but
  it
• may also be a risk, if there isnt a control
  on the
• foreign capital used in the national territory

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4.1 Foreign Direct Investment in regional
development path

• In 60s and 70s, many firms came and settled in
  the Marche
• Region from other Italian regions or foreign
  countries, because of low labor costs
• The know-how acquired over time, the capability
  to set out small
• but incremental innovation, the relationship
  among local
• businesses (clusters) made a real new model,
  often named with the regions name the Marche
  Region model
• In 90s many regional firms began participating
  in foreign
• businesses, most of all in their own
  manufacturing sectors, such
• as metal-mechanics industry, agricultural and
  industrial
• machinery, clothing and footwear, electrical
  material and supplies

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5. PORTABILITY OF THE CLUSTERDEVELOPMENT PATH

• The Marche Region development path, in the last
  60
• years, appears to show some similarities with
  the
• present situation of many other geographical
  areas
• A post-war situation
• Rural territory
• Large labor forces percentage in the agricultural
  sector
• Manufacturing and hand labor capability
• BUT
• What kind of knowledge and warning may come
• from this regional experience?
• May a cluster be exported to other areas?

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5.1 Some policy remarks (1, specific and, may be,
exclusive, features)

• The cluster is mainly based on a cultural
  approach
• creativity and entrepreneurship are the ground
  skills for the spin-off
• imitation and emulation effects push the
  newcomers
• competition cooperation allow distribution of
  production phases among many firms
• traditional and not hi-tech industries involve
  low entrance barriers
• high specialization in each production step needs
  a low plant cost

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5.2 Some policy remarks (2, a case of
public-private partnership!)

• The cluster is an endogenous and self-governing
  phenomenon
• the public role is rarely a decisive start-up
  factor
• Nevertheless, the policy maker may offer a strong
  support to
• strengthen the external economies (the core of a
  cluster!)
• External economies change continuously
  establishment areas,
• basic services, workers availability and
  suitable education,
• material and immaterial infrastructures, quality
  and environment certificates
• As the cluster grows, the governance becomes more
  and more
• relevant in the Marche Region the
  Technological Center System as well as the
  District Council are composed by all local
  stakeholders (such as representatives of Public
  Boards and social and economic actors)

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5.3 May an Italian-type industrial cluster be
exported to other areas?

• Not likely!
• The cultural effects are strong no public policy
  is able to change it in a short period
• A cluster is a typical local and bottom-up
  phenomenon
• The production sharing in many specialized steps
  depends on local
• needs
• Probably some policies!
• While we believe it is unlikely to export a
  cluster based on Marche Region experience we had
  several positive experiences in helping partner
  regions to build up industrial policy program,
  focused on qualified clusters of Micro, Small and
  Medium enterprises (SMEs) and based on the
  transfer of knowledge and associated policies,
  related to technological services
• The basic presumption is that, if the economic
  environment presents clusters of SMEs, organized
  to produce goods or services to be marketed
  outside the district, it is feasible to
  generate or accelerate the creation of
  externalities essential to the productivity or
  the value aggregation process method on which
  Marche has an extensive experiencel.

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5.3 A case of industrial cluster policy to be
exported to other areas
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A case of industrial cluster policy to be
exported to other areas

• The strategic repositioning of the Centres really
  took place in light of backdrop changes in the
  last few years (globalization and growing
  integration of technological innovation
  processes the development of the immaterial
  economy and of ICT services etc.).

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An open economy export and foreign investments
as a result of clusters

• An open economy is a policy target for a Region
• focused on high production clusters
• The Marche economy is today very open, thanks to
  its manufacturing industries mostly involved in
  Made in Italy production
• An open economy may offer great opportunity, but
  it may also hold a risk, if there isnt
  control on the foreign capital used in the
  national territory

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From General Servicesto Technology Transfer

• Market transformation resulting from
  globalization.
• Move from local development of a defined
  territorial area to trans-local development in
  order to consolidate or create new conditions of
  competitiveness .
• Move from an inward looking production and added
  value chain network to an outward looking
  network.
• The Region of Marche and the Technological
  Centre System.

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The Rational

• The Technological Centre System intervenes to
• analyse needs
• propose solutions
• in complex socio-economic situations, which
• present difficulties in the development of local
• industries with otherwise strong potential for
• growth at a national and international level
  linked
• to the locally available resources.

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An External Economy

• The role of the Technological Centre System in
• the development of local industry
• to be an operative local point of reference
• Facilitate the process of internationalisation of
  firms
• Offer firms experience and advanced competence.

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The Methodology

• The Technological Centre System is actively
• involved in
• coordinated processes for broaching
  entrepreneurial and managerial development in
  firms.
• development of new products/processes through
  investment in technology, quality,
  organisation/management, design, and human
  resources.
• development and organisation of permanent
  specialized structures aimed at offering firms
  continuity, stability and adaptability for
  initiatives of economic and local industrial
  development

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Example of Cooperation Projects in course in
Brazil

• Quality, technological innovation, specialized
  training, design for the Amazonian wood-furniture
  industry
• Research, technological innovation, quality and
  specialized training for the mechanic industry in
  the state of Sao Paolo

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Projects in course in Brazil

• These projects were founded in an environment of
• initiative and collaboration between the
  Brazilian
• government and the four regions of Central Italy
• Emilia Romagna, Marche, Tuscany, and Umbria.
• The initiative provides for social and economic
• cooperation aimed at transferring new models of
• local development.
• The Marche Region has launched under different
  national laws of cooperation (L. 212/92, L.
  84/01, UE interregional Programme such as
  Interregg, TACIS IBPP etc.) several projects of
  cooperation and technical assistance with
  emerging and former command economies in Europe,
  North Africa and South America based on the
  transfer of some of the tools of industrial
  policy relative to the regional productive
  clusters (industrial district) experience.

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Context of the project

• A complex socio-economic situation with relative
• difficulty for the development of local industry
  due
• to various factors
• cultural
• technological
• infrastructure
• financing
• logistic
• with otherwise strong potential for growth at a
• national and international level linked to the
• availability of an immense natural resource.

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Strategy

• Increase the added value chain for local SMEs
• production within an environmentally sustainable
• situation, extending it to include the
• transformation phase, both of semi-manufactured
• products destined for a world scale market as
  well
• as final product, destined primarily for the
  Brazilian
• market and more generally the Central and South
• American market.

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Guiding policies

• Promote and sustain development (technological,
  productive, commercial, organisational-managerial)
  of the wood-furniture firms in the Amazonian
  region, considering however the differentiation
  and specific conditions of departure relative to
  the area of Manaus in respect to that of Belém.

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Guiding policies

• Undertake interventions of a structural nature to
  activate and reinforce the endogenous factors of
  development to ensure continuity of the processes
  of economic, cultural and social growth apart
  from completion of the intervention
• Involve all significant elements of the
  socio-economic and institutional systems on the
  basis of sharing objectives and strategies for
  the attainment thereof within a vision of the
  medium long-term evolution of the territory
  itself.

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Line of Action

• Coordinated processes for broaching
  entrepreneurial and managerial development in the
  wood-furniture sector
• Differentiate the actions in Manaus (where
  fundamentally the objective is to create a local
  industry for semi-manufactured goods) and Belém
  (where fundamentally the objective is to
  reinforce the local furniture industry), within a
  commodity chain starting with the Amazonian
  resource wood and including machinery producers
  and working systems in the area of Sao Paolo

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Line of Action

• Construct permanent structures for specialised
  services (Technological Centres for Quality and
  Innovation), differentiated for the areas of
  Manaus and Belém, to provide continuity,
  stability and adaptability for initiatives and to
  support economic development and local industry.

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Project proposals

• Composed of a set of project lines, each
• interrelated and synergetic in a system logic
• these lines are
• Technology
• Quality
• Organization/company management
• Human Resources
• Design
• Entrepreneurship

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Project proposals

• Alongside a project line dedicated to
• Social situation/Sustainability.
• Each project line is in turn divided into a
  series of
• actions that, distributed in various ways, over
  time
• culminate in the realisation of permanent
• structures (Technological Centres for Quality and
• Innovation) dedicated to giving continuity to the
• actions for sustaining development of the wood
• furniture production systems in the Amazon.

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Direct and Indirect Beneficiaries Time Planning

• Local Entrepreneurial System with particular
  reference to small businesses in the Amazon
  wood-furniture commodity chain
• Local Public Administration
• Education System at high school and university
  level
• Small businesses in the Italian wood-furniture
  commodity chain
• The duration of the project is 48 months.

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Research, technological innovation, quality and
specialized training for the mechanic industry in
the state of Sao Paolo
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Context of the project

• An interesting process guided by a few leading
• companies (international brands) in the
• automotive and electrical domestic appliance
• sectors, who serve as the motor in the local
• production system inducing technologically
• complex production processes.
• The demand for parts and components, often not
• met by the businesses in the local territorial
• system, is addressed elsewhere (foreign
  suppliers).

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Context of the project

• The need to project local mechanic businesses
• into long relational networks (trans-local
• cooperation) in order to extend the production
• and added value chains so as to face the new
• conditions imposed by the international market.

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Strategy

• Increase the local added value production chain,
• in part through the creation of stable
  relationships
• of collaboration with Italian companies, within a
• situation of environmental sustainability in
  order to
• increase the critical volumes in terms of
  turnover,
• production specialization and organisational and
• managerial attention, capable of projecting the
• firms into the most ample and ambitious markets
• directly or indirectly (the large production
• companies for goods destined to the market)
• present in Sao Paolo or other states in Latin
• America.

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Guiding policies

• Promote and sustain development (technological,
  productive, commercial, organisational-managerial)
  of business in the (extended) mechanic sector in
  the State of Sao Paolo.
• Undertake structural interventions to activate
  and reinforce the endogenous factors of
  development so as to ensure continuity of the
  processes of economic, cultural and social growth
  apart from completion of the intervention.

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Guiding policies

• Involve all significant elements of the
  socio-economic and institutional systems on the
  basis of sharing objectives and strategies for
  the attainment thereof within a vision of the
  medium long-term evolution of the territory
  itself.

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Line of Action

• Coordinated processes for broaching
  entrepreneurial and managerial development in the
  enlarged mechanic sector aimed at three principal
  categories (integrated businesses, specialized
  businesses, small and medium businesses with a
  technological base), acting primarily with
  specific initiatives.
• Construct permanent structures for specialised
  services (Technological Centres for Quality and
  Innovation), capable of translating basic
  research into applied research and
  pre-competitive development,

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Line of Action

• supplying rapid and efficient innovative service
  on specific themes and technology in order to
  guarantee effective initiative to support
  economic development and local industry.
• The Centre operates as a technological translator
  on a twofold level and between different actors
  between the large specialised companies with
  heavy technological needs and the embedded
  network of autogenous or localised foreign small
  and medium sized businesses between the basic
  research undertaken in universities and the
  technological requirements expressed by the firms.

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Project proposals

• The areas for intervention
• Technological innovation, Engineering and Design
• Research and development
• Quality
• Organization/company management
• Human Resources
• Internationalisation
• Social Situation/environmental sustainability

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Project proposals

• The centre is to serve as a referent for rapid
  and
• cost effective responses based on the following
• factors
• possibility of rapidly and efficiently drawing on
  basic research sources
• possibility of utilising instrumentation and
  laboratory equipment already present in the
  territory
• possibility of acquiring instrumentation that is
  either inadequate or not present in the territory

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Project proposals

• presence of highly capable technological staff
  capable of elaborating technical responses
  immediately utilisable
• relational capacity with local/national
  institutions aimed at promoting specific programs
  of intervention for sustaining the diffusion of
  research and technological innovation in the
  small and medium businesses of the state

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Direct and Indirect Beneficiaries Time Planning

• Small, medium and large mechanic businesses in
  the State of Sao Paolo
• Local Public Administration
• Local system of research, technological
  development and specialized training
• Small and medium sized Italian businesses of the
  sub-supply chain in mechanics electrics and
  electronics instrumental machinery moulds and
  pressing agricultural machinery lighting
  technology industrial fridges etc.
• The duration of the project is 30 months.