What's Gone Wrong with the Third Italy

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Introduction p. 3

Early glitches of the SMEs within the industrial districts p. 5 Analysis of two of the regional clusters at stake p.6
What went wrong? p. 7
Concluding remarks p. 9

References p. 10

The purpose of this paper is to determine to which extent the economic areas known as ’Third Italy’ have not managed to achieve the well-desired status. The local development model has been presented as the perfect small-scale flexible capitalist type that has adopted a post-Fordist mode of production (Grancelli, 2007).

The economic cluster referred to as Third Italy, was founded in the post-war period (1950s and 1960s) when the global economy was going through hard times of recovery. In the north-east part of Italy a new type of firms was developed. The question may be put why didn’t the other two important industrialized districts known as First Italy (the industrial heartland of the North) and the Second Italy (the backward South) have become the regions of wealth and economic growth. The answer lies primarily in the cultural values: the local culture of entrepreneurship and cooperation (Boschma, 1998) that to some extent doesn’t apply for other Italian regions. The following figure displays accurately the industrial zone of Italy:

According to Bagnasco (1977) from a economic point of view Italy was divided into the ’Three Italies’: the North-west, the big companies, was tagged as ’central economy’, the shallow regions of the South seen as ’marginal economy’ and the central-North-eastern regions- known as Third Italy- characterized by the presence of small firms that are defined as ’peripheral economy’. Nonetheless, the way in which the Third Italy region was defined didn’t hide the real facts; when compared to the North-west typology, productivity per worker and work unit-costs were sensibly lower. But this didn’t disable the central-north-east cluster to have a significant development process that is confirmed by: a reduction of agricultural employees, an increase in manufacturing workers, growth in resident population, and an upward trend in Italy’s industrial national product (Bianchi, 1998). The “Third Italy” region, also referred to as Emilia-Romagna, forms a north-eastern group of counties that propelled themselves to a position of prosperity between the relatively wealthy north-western triangle of Italy and the relatively impoverished Mezzagiorno region south of Rome (Walcott, 2007). Localized production centres utilize export-oriented niche specializations to create place-based economies supporting local firms. Related residents supply both low labour costs and endogenously accumulated capital. Light industrial products include foods, clothing, shoes, furniture, and metal work for a craft-based market. Building on a textiles and leather goods specialization, that demands rapid responses to a notoriously fickle fashion market, familial and other locally forged trust-based ties enabled local star “Benetton” to become an international fashion retail chain. Knowledge of the local market was so finely tuned that offerings were famously differentiated even within the same city (Walcott, 2007).

External economies of place propelled tightly organized local regions to maximize returns based on clearly defined sectoral specialization. In one example clearly defying physical topography, Silicon Valley imitators sprang up around the globe as hopeful high technology havens. A real estate set-aside does not an industrial district make, however (Walcott, 2007).

Early glitches of the SMEs within the industrial districts

In the early 1990s the one of the menacing forces against the Italian industrial clusters was the post-industrial transition. The internationalization of the economy endangers the developing process...
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