Districts and system areas: three case studies

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Districts and system areas three case studies

• Prof. A.Sinatra
  
  a.a. 2011/2012

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Districts

• They are relatively small geographical areas
  where companies are concentrated in the same
  industrial segment.
• In the districts the links between firms are
  horizontal this means that companies operate
  across the entire value chain.
• In addition, the companies specialization in the
  segments where they operate is very entrenched in
  the district.
• The collaborative relationships between companies
  are defined in many functions purchases, sales
  and export as well as the development of
  production processes.

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System areas

• In the "system areas" the links between
  enterprises are vertical because companies are
  specialized in one phase of the value chain.
• Some companies have the specific role of
  coordinating the system (e.g. the converter in
  Como and the impannatore in Prato).
• System areas have developed recently.

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Districts and system areas benefits

• Despite the differences mentioned, we can say
  that being part of a system causes deep changes
  in the company

• It expands the boundaries of the company
• It allows the access to different knowledge
• It offers wider and more articulated
  perspectives
• It stimulates the learning processes
• It makes different development trails
  (vertical/horizontal) possible

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Conditions to be part of the system 1/2

• Working in accordance with the "rules" of the
  system
• Sharing the aspirations and general goals
• Feeling responsible for the system and contribute
  to its development
• Sharing culture and values among the players.

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Conditions to be part of the system 2/2

• The basic skill is knowing how to teach the
  skills ("the socialization of knowledge
  concept)
• The power structure must be well balanced
• The access to the business and the district
  information must be guaranteed to everyone
• The winning mix of cooperation and competition,
  to learn faster
• The purchasing (or acquiring) of licenses of new
  ideas, to respond quickly and effectively to the
  needs of the district.

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Districts and system areas the Darwin metaphor

• The Italian experience fits in very well with the
  Darwinian concept expressed by the metaphor
• the development through the adaptive learning
  of changes in unpredictable environmental
  conditions

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A closer look to the italian district

•  The Genesis process of Italian industrial
  districts
• The model of traditional crafts (1950-1960)
• The subcontracting employee model (1960-1970)
• The flexible specialization model(1975-1990)
• What model? (1990- today)

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To the concept of the industrial district
The flexible specialization model has been
theorised on the basis of the observation of
groups of companies located in defined geographic
areas, where we can find the phenomenon of labor
division and forms of internal cooperation. These
geographic areas have been identified with the
term industrial districts. Some manufacturing
production sectors are replicable on a large
scale when in the same district a large number of
SMES implement a specialized and flexible labor
division. In addition, around this process,
other kinds of industry rise the production of
instrumental goods, the management of the supply
of raw materials, the distribution of products
and so on.
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The evolution of the studies about the italian
industrial districts
How will the districts change?
First studies focused on firms and the
relationships between them
Global financial institutions support the
creation of districts
Marketing and diffusion of the idea of the
district

• Some districts face some problems
• The conception goes far from the classical
  concept
• District policies reveal themselves as inadequate

model
The district a black box of incredible results
The Italian case
The Idea of Alfred Marshall
Towards what kind of model?
Marshallian Industrial District
The model of italian districts
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The origin of the industrial district
The definition of industrial district rises from
the observations of Alfred Marshall, who (in the
end of 1800) observed spatially localized
agglomerations of small firms in the cotton
industry in Lancashire or in the cutlery industry
in Sheffield. From Marshall work we can get the
first definition of industrial district  "The
concentration of specialized industries in
defined regions ".
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The original definition of industrial district

• Small local capital enterprises
• Long lasting relationships
• Few partnerships and relationships outside of the
  district
• The local labour market is highly flexible and
  less willing to leave the district
• The workers are more linked to the the district
  than their own enterprise district (industrial
  atmosphere)
• Stable community
• Strong cultural identity and shared industry
  experience

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The district economies

• In the analysis, that had their focus on the
  industrial districts, are emphasized the economic
  differential benefits provided by the district.
  These beneficts are the basis of the italian SMEs
  success.
• Localization economies
• Agglomeration economies
• Scale economies
• Time economies

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Industrial districts other definitions

• There have been many terms used in literature to
  describe an agglomeration of several companies
  settled in the same industry or in contiguous
  sectors, sometimes creating overlapping and
  confusion.
• Local productive system not specialized (Solinas
  e Baroni, 2001 Bellandi e Sforzi, 2001)
• Industrial Cluster (Porter, 1990, 1998)
• Regional / local industrial system (Saxenian,
  1994)
• Regional cluster (Enright, 1992, 1993)
• Business network (Staber, 1996)
• Hub-and-spoke Distrficts (Markusen, 1996)

But the industrial district is characterized by
specific features ...
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The Becattini definition
Giacomo Becattini wrote that the industrial
district is a social-territorial entity
characterised by an active presence, in a
territorially-limited area, naturalistic and
historically determined, of a community of people
and a population of industrial enterprises
(1990). In this context, the cultural
homogeneity produces an atmosphere of cooperation
and trust in which the economic activity is
regulated by a set of implicit and explicit
standards dictated by both social conventions and
public/private oganizations.
Becattini (2000)
Sforzi (1991)
Becattini (1987)
Marshall (1920)
t
Becattini (1979)
Dei Ottati (1994)
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The Italian industrial districts are
characterized by

• specialization in the production of a particular
  family of products with a high return on
  investment in research and development
• simultaneous presence of competitive and
  cooperative dynamics between enterprises
• productive landscape composed mainly by small and
  medium-sized enterprises able to face
  collectively big commitments"
• strong autonomy and entrepreneurship, manifested
  through creative strategies
• widespread know-how, trust-relationships shared,
  spirit of emulation and confidential channels for
  the circulation of information
• presence of an effective network of public and
  private service activities, directly operating
  with companies of the industry
• interpenetration of economic activities and
  social - cultural life of people living in the
  district
• extraordinary performances in terms of managing,
  marketing and export

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To have an industrial district there must be

• A strong interpenetration between the population
  of SMEs and the local community, which owns the
  social-cultural characteristics (values and
  institutions) for a process of bottom-up
  industrialization
• A strong sense of belonging to thelocal
  community
• Skilled workers availability towards the
  specialization of the district
• A link between the system of small local
  producers and the final market outside the
  district
• The presence of both cooperation and competition
• A sense of imitation and innovation from the
  bottom
• A system of shared visions and values and a work
  ethic
• A system of institutions and policies
• A local credit and financial system

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The path-dependent district
Pre-existing crafts
Italian industrial districts
Path-dependent evolution
t
Born
End 1800 First world war.
Second world war 70s
Today
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Founding-father districts
Founder/s of the district
Italian Industrial districts
Spin off evolution
t
Recent times
Expected evolution
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Artisan districts
Other kinds of districts
Agricolture
Agricoltural industrial districts
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Competitive districts
Other kinds of districts
market
market
market
Oligarchic districts
Market
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Post-industrial districts
Other kinds of districts
maket
Research community
Globalized districts
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Another perspective Markusen (1996)
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Districts and system areas three case studies.

• Carpi
• Benetton
• Aerospace

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System areas the district of knitwear in Carpi

• Knitting main processing carried out in the
  District of Carpi
• Presence of more than 2,000 companies that
  currently employ approximately 10,000 people
• The District of Carpi is also characterised by
• Implied rules in the relations among enetrprises
• High level of collaboration
• Centrality of reputational mechanisms.

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Carpi The role of rules

• The main role of the rules in the District of
  Carpi is to defend (and strengthen) the assets
  held by the enterprises of this area
• In particular, they are designed to safeguard
• the image of the "system-Carpi" in terms of
  quality and reliability
• the technological know-how and local expertise
• the possibility for the District enterprises to
  use sophisticated assistance services, due to the
  presence of highly specialised actors

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Carpi the virtuous circle created by the
compliance
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Carpi rules to avoid the creation of a "vicious
circle"
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System Areas Benetton

• Inside the Benetton case study, you can see
  within its district of references - the
  importance of the following elements
• Critical concept of vertical integration
• Informal agreements importance
• Coexistence of economic and non-economic
  objectives.
• In such a scenario, Benetton should be seen as
  the leading force" of the district.

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Benetton peculiarities of the system area in
which the company operates

• The system area where Benetton plays has always
  paid great attention to the following aspects
• high level of selection of the human resources /
  enterprises to engage in the enterprise network
  of the territory
• selection of the human resources / enterprises
  based on performance criteria
• need to share a common vision and values to face
  the future challenges.

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Benetton the key of success

• Benetton gave a decisive boost to the development
  of its system area. In particular, we can see the
  following items
• Dissemination, within the district, of an
  "innovative" mentality, trial tensed
• Building a system of contractual agreements,
  which have to be at the same time flexible,
  differentiated and reliable
• Ensure the dynamism of the network of companies
  through the creation of new rules.

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Benetton the centrality of business relations.

• At the beginning, Benetton operated through
  800-1000 sub-contractor enterprises and this,
  clearly, made a high managerial effort necessary
  to ensure the continuity of relations with all
  those companies as well as the quality of the
  finished products
• Over time Benetton has identified a small group
  of sub-contractor enterprises characterized by a
  high level of reliability, both in product and in
  relational terms
• Benetton gave these sub-contractors the
  management of the remaining second level
  contractors. This is how Benetton created a
  hierarchical network ".

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Summing Up ...

• Carpi centrality of rules to create a stronger
  and vanguard system of companies
• The rules are used as an instrument for
  strengthening the existing system assets
• Benetton originality of the identified business
  solution (hierarchical network between
  companies), with a strong orientation to the
  product.
• Centrality of contractual arrangements with the
  sub-contractor enterprieses as the basis for the
  development of private and public business.

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System areas the Lombard aerospace district

• The Lombard aerospace district is characterized
  by the following elements
• "Non-explicit" links between enterprises,
  characterized by a high level of stability
• Centrality of interpersonal relations based on
  commonality of previous professional experiences
• High level of cooperation between small and large
  enterprises to compete more effectively on
  wide-ranging projects.

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The strengths of the Lombard aerospace district

• The strenght" of the system area analysis is
  based on the following elements
• strongly positive reputation of some "key
  players"
• high level of confidence between enterprises
  (resulting from the activation of entrepreneurial
  experiences previously shared)
• compliance with the "rules of the game" within
  the aerospace industry.

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Aerospace which are the "rules of the game"?

• The rules that the areospace enterprises must
  respect are
• The possession of "certificated skills
• Positive image and corporate reputation
• Presence in the field for a considerable number
  of years
• Fair competition and cooperation
• Presence at international events (e.g. fairs).

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Aerospace key competences
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Peculiarities of the Lombard aerospace district

• Inside the Lombard aerospace district there are
  companies with very different profiles
• Type 1 suppliers of the "state of the art
  products" based on specific customer needs
• Type 2 co-producers of sub - systems designed
  with the customer enterprise (leader)
• Type 3 "integrating enterprise, able to create
  a system that incorporates the expertise of
  several smaller companies to give life to a
  finished product.

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The evolutionary path of the aerospace industry
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Innovation and Learning in the aerospace industry
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Strategic Issues of Made in Italy
QUESTIONS ?
Prof. Alessandro Sinatra
a.a. 2010/2011