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Industrial Districts in Europe: Policy Lessons for Developing Countries?

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Industrial Districts in History and the Developing World

Part of the book series: Studies in Economic History ((SEH))

Abstract

In the 1970s and 1980s, industrial districts in Europe achieved international competitiveness and attained high employment standards, even though they were based on local small- and medium-sized firms and concentrated on traditional sectors. This makes them of special interest to less-developed countries in the South and East. This paper examines what policy lessons can be drawn from this European experience. It does so by focusing on the role of public and private institutions in four fields: (a) the provision of credit, (b) the training of workers and entrepreneurs, (c) the provision of real services, and (d) wage negotiations. The paper suggests that institutions played more of a role in later than earlier phases of growth. It points toward a new model of industrial policy based on local institutions but emphasizes that there is as yet little systematic assessment of the role of such institutions.

This chapter is a reproduction of Hubert Schmitz and Bernard Musyck (1994), “Industrial Districts in Europe: Policy Lessons for Developing Countries?” World Development 22(6):889–910.

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Notes

  1. 1.

    The concept of the “NEC model” (North East and Central Italy) was also introduced (Fuà 1983).

  2. 2.

    The inclusion of South-West Flanders along with the other three well-known cases of European industrial districts may surprise some readers. This region in Belgium is a particularly clear case of autonomous industrialization, as documented in detail by Musyck (1992, 1993, 1995). While sharing many features with the other regions, its inter-firm division of labor is less deep and in this respect its inclusion as an industrial district can be questioned.

  3. 3.

    The evidence is scattered over many references used in the remainder of this paper.

  4. 4.

    For example there seems to be a relative slowdown of economic performance in the Third Italy (Bianchi 1992) and in Baden-Württemberg (Wirtschaftswoche, January 15, 1993). Cooke and Morgan (1993) call them “growth regions under duress.”

  5. 5.

    For a useful discussion on the replicability of industrial districts see Zeitlin (1992).

  6. 6.

    According to Brusco, “… the person who receives a loan from the cooperative will stay up at night thinking of ways of repaying his loan; whereas the person who receives a bank loan will stay up at night thinking of ways of not repaying his loan” (1985, p. 25).

  7. 7.

    Zacchia (1984) suggests that low-cost credit made available to small- and medium-scale industry through regional banks, was relatively easy to obtain in Italy in the 1960s and first half of the 1970s, but the data are not sufficiently disaggregated to analyze the uptake in the industrial districts of the Third Italy.

  8. 8.

    In addition, this organization acts as a conduit for venture capital of up to DM 1 million from federal sources.

  9. 9.

    The Steinbeis Foundation, which can draw on extensive sector-specific expertise, participates in the assessment of applications. The loans are channeled to the firms through their local commercial banks whose role is thus further heightened.

  10. 10.

    Like the case of the cooperative banks in Baden-Württemberg, South-West Flemish industrialists are members of the board of the Bank van Roeselare (Martens 1990). It is interesting to note that the bank is also involved in an important informal activity. It holds two file-card boxes, one with details of entrepreneurs who wish to sell their business, the other with details of those entrepreneurs interested in acquiring a new business. By doing so, the bank has created a network where information circulates by word of mouth.

  11. 11.

    In the South-West Flemish case, survey results indicate that 76 % of entrepreneurs financed the growth of their business mainly by their own means. A comparable figure for the rest of Belgium was 65 %. Other survey results in South-West Flanders indicate that over 90 % relied entirely on family capital when they started their business (Musyck 1993).

  12. 12.

    The difficulty of using or creating local financial institutions for the purpose of distributing funds on behalf of donor agencies is underlined by Canullo (1990) who suggests that in Southern Italy it has reinforced the existing clientèle system.

  13. 13.

    On the discussion of training for small-scale industry in LDCs see, for example, Boehm and Kappel (1990); Fluitman (1989).

  14. 14.

    An experiment is currently being conducted with the collaboration of Enea (a public agency operating in the technology diffusion area). The aim of the project is the creation of an image data bank for the textile clothing industry. The system is based on a personal computer, a video disk unit and a CAD system. According to Camagni and Rabellotti (1992), this user-friendly “off-the-shelf” technology is offered at a competitive price, and can therefore also be used by small-and medium-sized enterprises.

  15. 15.

    In another paper, Brusco (1989) asks how an assessment can be made of the effectiveness of public money involved in the provision of real services. Although the possible costs and benefits are identified, it is not an empirical evaluation of the actual effectiveness of real service centres.

  16. 16.

    For a more detailed examination of regional technology policy in Baden-Württemberg, see Schmitz (1992).

  17. 17.

    The Landesgewerbeamt used to play an important role in Baden-Württemberg’s regional innovation policy (Reuss 1986) but its functions in this respect are now largely carried out by the Steinbeis Foundation.

  18. 18.

    For details on the activities of this institute, particularly its network program in various parts of Denmark, see Pyke (1992c).

  19. 19.

    This was practiced, for example, by Robin Murray of IDS. He led an Industrial Strategy Mission to Cyprus (funded by UNIDO/UNDP) which was greatly influenced by the experience of the Third Italy (Murray et al. 1988). As a follow-up of this mission he took a Cypriot delegation (consisting of private and public representatives) to Italy for visits to real service centres and firms.

  20. 20.

    Unlike in the Third Italy, other institutions such as the church, local government and political parties have little influence over wages and labor standards, but it should be mentioned that Lothar Späth, conservative Prime Minister of Baden-Württemberg until 1991, consistently argued against low wages (Schmid 1988, p. 31).

  21. 21.

    Ironically enough, unions in the textile sector in South-West Flanders are now confronted with the fact that many of their members prefer not to follow strictly the national guidelines on shorter working times. Instead of 38 h per week, they prefer to work 40 h for an increased hourly salary. There has been a serious shortage of labor in the region for a few years. For a comprehensive review of labor relations in South-West Flanders, see Musyck (1993).

  22. 22.

    The association, called Charter 99, set out its priorities to intervene in the fields of telecommunication, product development and design, export to Euro-region Northern France, training, environment and infrastructure, regional marketing and representation in Brussels (Musyck 1993).

  23. 23.

    These notions of minimal density and critical duration are used by Pecqueur and Silva (1992) in their work on diffuse industrialization.

  24. 24.

    Macro economic regulation is discussed by Piore and Sabel (1984) but is only considered essential for mass production.

  25. 25.

    An in-depth study of local institutions in Germany carries the title “Economic Policy from Below” (Nassmacher 1987).

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Authors and Affiliations

  1. Institute of Development Studies, University of Sussex, Brighton, UK

    Hubert Schmitz

  2. School of Economic Sciences and Administration, Frederick University, Nicosia, Cyprus

    Bernard Musyck

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  1. Kobe University, Kobe, Japan

    Tomoko Hashino

  2. Kobe University, Kobe, Japan

    Keijiro Otsuka

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Schmitz, H., Musyck, B. (2016). Industrial Districts in Europe: Policy Lessons for Developing Countries?. In: Hashino, T., Otsuka, K. (eds) Industrial Districts in History and the Developing World. Studies in Economic History. Springer, Singapore. https://doi.org/10.1007/978-981-10-0182-6_8

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