Boschma R. (1998) What caused the rise of new industrial clusters in Italy after WWII?

Boschma, Ron A. (1998) “The industrial rise of the Third Italy: open window of locational opportunity?”, paper presented at the 38th Congress of European Regional Science Association, Vienna, 33p.

This article is available online

Introduction

The Window of Locational Opportunity- (WLO-) concept “accounts for dynamic and accidental dimensions of new industrial development in space (… which) tend to open up in the event of new techno-industrial developments”. Can this concept explain why the post WWII wave of urbanization in Italy happened in the so-called Third Italy [1] and not in the Northwest, the traditional industrial core or the South (p.3)?

The rise of a new Italy

Before WWII, the central region had managed to avoid falling in the South’s backwardness but had not reached the level of development of the Northwest (p.5). But it did manage to secure the fastest growth rate of the post-war period by following a model mainly defined by the following features: 1/small firms, 2/ specialization in traditional craft-based industries and 3/ spatially concentrated production (i.e. Marshallian industrial districts).

This development disproved the then commonly shared view that without significant advantages coming from low transport costs and large economies of scale Western industries would not be able to sustain the competition from low-wage countries (p.7). The concentration of 75% of the Italian Marshallian industrial districts in the Central Regions (p.10) was initially explained by external factors: the Northwestern large firms decentralized their production in order to “circumvent the restrictions imposed by trade unions”. But – although plausible – this explanation can only be limited since “ trade and capital flows between the Northwest and the Center have hardly been registered” (p.12).

The causes of the Third Italy

More recently, the rise of the Third Italy has been explained by an endogenous virtuous circle based on a dynamic system of “intangible assets”. This system can be defined as follow:

“built on interaction and co-operation based on localness in highly dynamic local production systems. In short, the efficiency of these local networks is mainly the result of a combination of competition, specialisation and co-operation between the local (actors)”.

This flexible “propitious environment” came from “the particular social structure in the Third Italy in terms of common background of employers and employees, absence of class polarisation, strong family ties, common values, etc” (p.13). The rise of the Third Italy was made possible by 1/ the constitution of a domestic market thanks to the “Italian miracle” which boosted demand and 2/ the differentiation of demand (varied and customised goods) which gave an advantage to short series (p.14).

The hypothesis

The WLO-concept explains the rather erratic geographic dispersion of new industries by the fact that these industries lack location-specific conditions due to three factors: 1/ older industries are unlikely to provide any meaningful location advantage, 2/ their dynamism enables them to overcome the issues attached with less favourable places and 3/ the conditions necessary for their initial development are generic (warehouses) and only grow specific with time.

Of course, the Third Italy’s development was mostly based on traditional craft-based industries and thus the WLO-concept which addressed the questions posed by industrialization driven by new-technologies is only partially relevant (p.15). But part of the system remains relevant. In short, many parts of Italy shared the same features as the Third Italy, so why didn’t they develop instead?

Testing the preconditions

Some elements can already be eliminated from the equation:

  • Capital: most was from local origin and the benefits were ploughed back.
  • Technology: rather simple and gradually spread through learning-by-doing.
  • Networks: the supplier-user relationships only developed over time.
  • Government: the investment in infrastructure also came later.
  • Market: mostly national so Central Italy had no obvious advantages.

Only three possibilities remain: culture, specialization and labour costs.

Culture

Entrepreneurship and co-operation based on trust are usually assumed to be specific to Central Italy. Co-operation is thought to be particularly important since it solved the ‘dilemma of collective action’, as social networking is more efficient than explicit contracting, monitoring and enforcement (p.20).

Central Italy scores high for entrepreneurship in the 1950s, but so does the Northwestern region. The estimates for the co-operative form economic organisation don’t fit into regional divisions. Culture provides a poor explanation for the development of the Third Italy (p.22).

Industrial specialisation

Small-scale manufactures and artisanal sectors may have fostered the development of the Marshallian industrial districts. The lack of industrial specialization (i.e. small-scale traditional manufacturing ) explains the inability of the NW region to develop industrial districts after WWII. But in this regard, the Mezzogiorno was just as likely as Central Italy to experience a wave of industrialization (p.23).

Labour

The lack of labour militancy, the limited class polarisation, the importance of family business and the significance of part-time and home-work can guarantee a social compromise, a potential social ascension and the rapid flow of information about new job opportunities which in turn ensures low-cost, flexible and experienced labour (p.25).

The workforce of the Centre in the 1950s was cheaper and less militant than those of the rest of the country but less experienced than in the Northwest (p.26).

Conclusion

“We noticed that the Center did not distinguish itself from the Northwest and the South of Italy on any of the three main indicators we analysed. However, the Center is the only part of Italy (as opposed to the Northwest and the South) which, broadly speaking, demonstrates relatively high scores on all three indicators. In fact, the Northwest was only a likely candidate to develop this type of industrial development in the 1950s when the cultural dimension is taken into account. However, it lacked a tradition of small-scale, traditional industry while it performed rather poorly in terms of flexible, low-cost labour. The South of Italy, however, did well on both of these latter dimensions, but its socio-cultural structure did not provide a stimulus for this particular form of industrialisation” (p.28).

[1] Third Italy or Central Region includes: Veneto, Friuli-Venezia-Giulia, Trentino-Alto-Adige, Emilia Romagna, Tuscany, Marche and Umbria.

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